-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EURejMZCSB5jBdD1rMErqecuhPHsZBE+Zf3lekXxrjqr3KbAZCOQAnic0kKeikyG 2izonQOuNTJoH+H+KkTwZQ== 0000950123-98-001426.txt : 19980218 0000950123-98-001426.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950123-98-001426 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURLINGTON RESOURCES INC CENTRAL INDEX KEY: 0000833320 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 911413284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09971 FILM NUMBER: 98537256 BUSINESS ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: SUITE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136249500 MAIL ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: STE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 10-K 1 BURLINGTON RESOURCES, INC. - DATED 12/31/97 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-9971 BURLINGTON RESOURCES INC. 5051 WESTHEIMER, SUITE 1400, HOUSTON, TEXAS 77056 TELEPHONE: (713) 624-9500 INCORPORATED IN THE STATE OF DELAWARE EMPLOYER IDENTIFICATION NO. 91-1413284
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE PREFERRED STOCK PURCHASE RIGHTS THE ABOVE SECURITIES ARE REGISTERED ON THE NEW YORK STOCK EXCHANGE. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant: Common Stock aggregate market value as of December 31, 1997: $7,918,749,701 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class: Common Stock, par value $.01 per share, on December 31, 1997, Shares Outstanding: 176,708,501 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: Burlington Resources Inc. definitive proxy statement, to be filed not later than 120 days after the end of the fiscal year covered by this report, is incorporated by reference into Part III. ================================================================================ 2 BURLINGTON RESOURCES INC. TABLE OF CONTENTS
PAGE PART I Items One and Two Business and Properties................................ 1 Employees.............................................. 10 Item Three Legal Proceedings...................................... 11 Item Four Submission of Matters to a Vote of Security Holders.... 11 Executive Officers of the Registrant................... 12 PART II Item Five Market for Registrant's Common Equity and Related Stockholder Matters................................... 13 Item Six Selected Financial Data................................ 13 Item Seven Management's Discussion and Analysis of Financial Condition and Results of Operations................... 14 Item Eight Financial Statements and Supplementary Financial Information........................................... 21 Item Nine Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 44 PART III Items Ten and Eleven Directors and Executive Officers of the Registrant and Executive Compensation................................ 44 Item Twelve Security Ownership of Certain Beneficial Owners and Management............................................ 44 Item Thirteen Certain Relationships and Related Transactions......... 44 PART IV Item Fourteen Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 44
3 PART I ITEMS ONE AND TWO BUSINESS AND PROPERTIES Burlington Resources Inc. ("BR") is a holding company engaged, through its principal subsidiaries, Burlington Resources Oil & Gas Company and The Louisiana Land and Exploration Company ("LL&E") and their affiliated companies (collectively the "Company"), in the exploration, development, production and marketing of oil and gas. The Company is the largest independent oil and gas company in the United States ("U.S.") based on total proved domestic reserves, and the second largest U.S. based independent oil and gas company based on total proved worldwide reserves which were estimated at 7.9 TCFE at December 31, 1997. On July 17, 1997, BR and LL&E announced that they had entered into an Agreement and Plan of Merger (the "Merger"). On October 22, 1997, the Merger was completed and LL&E became a wholly-owned subsidiary of the Company. Pursuant to the Merger, BR issued 52,795,635 shares of its Common Stock based on an exchange ratio of 1.525 for each outstanding share of LL&E stock. The Merger was accounted for as a pooling of interests and qualified as a tax-free reorganization. The transaction was valued at approximately $3 billion based on BR's closing stock price on October 22, 1997. All operational and financial information contained herein includes the combined business activities for BR and LL&E for all periods presented. The Company's operations are conducted by five divisions from four offices located in Farmington, New Mexico, Midland, Texas and two locations in Houston, Texas. The majority of the Company's oil and gas production is from properties located in the United States. Following is a description of the Company's major areas of activity in each division. For definitions of certain oil and gas terms used herein, see "Certain Definitions" on page 10. SAN JUAN DIVISION The San Juan Division ("San Juan"), located in Farmington, New Mexico, exploits and produces oil and gas primarily in the San Juan Basin, which is located in northwest New Mexico and southwest Colorado. In 1997, San Juan capital expenditures, excluding proved property acquisitions, were $93 million which included investments for over 140 wells and approximately 300 mechanical workovers. Over 110 of the wells and 200 of the workovers were Company operated. Net production from San Juan averaged 809 MMCF of gas per day and 1.4 MBbls of oil per day. San Juan provided 49 percent of the Company's net gas production and one percent of the Company's net oil production. As of December 31, 1997, San Juan controlled 44 percent of the Company's reserves. The four major gas producing horizons in the San Juan Basin are the Fruitland Coal, the Pictured Cliffs, the Mesaverde, and the Dakota Formations. These horizons range in depth from approximately 1,000 feet to 8,500 feet. The Fruitland Coal is the primary producing horizon for San Juan, and the Company continues to be an industry leader in coal bed methane production. Net production from the Fruitland Coal averaged a record 430 MMCF of gas per day during 1997 from approximately 1,200 wells. A significant portion of the gas production growth in 1997 is associated with the optimization of the Val Verde gathering system including the activation of the Antler and Jackrabbit plants and the processing of volumes by third party processors. The Company owns and operates the Val Verde plant and gathering system which includes approximately 420 miles of gathering lines and 13 compressor stations. The Val Verde plant continues to operate at full capacity. The Antler and Jackrabbit plants allow the Company to process and sell additional volumes which would otherwise be curtailed. This, along with the processing of volumes by third party processors, enables the Company to optimize its coal seam gas volumes. Fifty well optimization projects in the Fruitland Coal, primarily recavitations and wellsite compression, have added to the growth in coal seam gas volumes during 1997. 1 4 Development of the Mesaverde Formation continues to be a major focus for San Juan. Net production from the Mesaverde Formation in 1997 averaged 200 MMCF of gas per day from 3,300 wells. Capital investments in over 100 new wells in 1997 contributed to incremental gas volumes in San Juan. During 1997, an eight well pilot project was initiated to determine the effect of increasing the well density in the Mesaverde Formation. MID-CONTINENT DIVISION The Mid-Continent Division ("Mid-Continent"), located in Midland, Texas, explores for and produces oil and gas primarily in the Permian Basin in west Texas, the Anadarko Basin in western Oklahoma, the Wind River Basin in central Wyoming and the Williston Basin in western North Dakota, northwest South Dakota and northeast Montana. In 1997, Mid-Continent capital expenditures, excluding proved property acquisitions, were $252 million which included investments for approximately 300 wells and over 320 mechanical workovers. Approximately 200 of the wells and 275 of the workovers were Company operated. Net production from Mid-Continent averaged 258 MMCF of gas per day and 34.7 MBbls of oil per day. Mid-Continent represented 15 percent of the Company's net gas production and 40 percent of the Company's net oil production. As of December 31, 1997, Mid-Continent controlled 31 percent of the Company's reserves. In the Permian Basin, the Company's average net production for 1997 was approximately 13 MBbls of oil per day and 90 MMCF of gas per day. The Company invested $60 million for 145 new wells in the basin during 1997. The most productive structural feature in the Permian Basin is the Central Basin Platform on which the Company controls over 140,000 net acres of mineral interests. Over 20 different formations, ranging in depth from 2,000 feet to over 12,000 feet, produce oil and gas in the Central Basin Platform. A key component of Mid-Continent's Permian Basin operations is enhanced oil recovery projects. The Company operates several waterflood projects on the Waddell Ranch, located 40 miles west of Midland, Texas. The Company operates over 1,500 wells on the Waddell Ranch with combined average net production of 4.8 MBbls of oil per day and 22 MMCF of gas per day in 1997 and continues to acquire three dimensional ("3-D") seismic which has proven to be an effective tool for exploration and development. In 1997, approximately 800 square miles of 3-D seismic data were acquired in this area. In the Anadarko Basin, the Company's average net gas production for 1997 was 110 MMCF of gas per day. This basin encompasses over 30,000 square miles and contains some of the deepest producing formations in the world. The basin produces from multiple horizons ranging in depth from less than 1,000 feet to over 26,000 feet. The Company controls over 250,000 net acres principally located in western Oklahoma. The Company has been concentrating its Anadarko Basin activity in the Elk City and Strong City Fields where the application of 3-D seismic, computerized modeling and advanced reservoir stimulation continue to enhance the value of these assets. The primary producing horizons in these fields are the Morrow, Springer and Cherokee Red Fork Formations. During 1997, the Company invested $34 million for 54 new wells in this basin. In the Wind River Basin, the Company's average net gas production for 1997 was 31 MMCF of gas per day. This basin encompasses approximately 4,000 square miles and produces from multiple horizons ranging in depth from 1,000 feet to over 25,000 feet. All of the Company's Wind River Basin production comes from the Madden Field. During 1997, the Company completed the Big Horn 4-36 in the Madison Formation at a measured depth of 24,600 feet. This well tested 44 gross MMCF of gas per day and was the third well in the Madison Formation. A 10 percent working interest in the Madden Deep Unit was purchased by the Company in 1997 which resulted in a 45 percent working interest in the Deep Madden Unit in the Madison Formation. All of the sour gas that is produced from the Madison Formation is processed at the Lost Cabin Gas Plant, which currently has a constrained inlet capacity of 55 MMCF of gas per day. The plant is currently being modified to increase its inlet capacity to approximately 65 MMCF of gas per day later this year. BR recently began an expansion of this facility to double its inlet capacity to 130 MMCF of gas per day in the second half of 1999. The three Madison wells will fully utilize this expanded processing capacity. BR owns a 47 percent working interest in the plant. Additionally, two wells are currently testing on the 950,000 gross acre Wind River 2 5 Indian Reservation exploration license area. This license area includes a highly prospective, undeveloped portion of the Wind River Basin, which with the use of seismic could offer significant growth potential for Mid-Continent. In the Williston Basin, the Company's average net oil production for 1997 was 20 MBbls of oil per day. This basin encompasses approximately 225,000 square miles and has 18 producing horizons ranging in depth from 4,500 feet to over 15,000 feet. The Company controls over 3.6 million net acres in the basin through both mineral and leasehold interests. Mid-Continent's activities have been focused on the use of advanced technologies such as 3-D seismic and horizontal drilling to continue increasing the value of its assets. The Company invested over $50 million in the drilling of over 70 horizontal wells in this basin during 1997. Large waterflood projects in the Eland Unit and East Lookout Butte Unit are currently being fully implemented. The Cedar Hills Field should be fully delineated in 1998 and is planned for initial waterflood operations in 1999. The Company acquired over 800 square miles of 3-D seismic data in this area during 1997. GULF OF MEXICO DIVISION The Gulf of Mexico Division ("Gulf of Mexico"), located in Houston, Texas, explores for and produces oil and gas in the Gulf of Mexico. In 1997, Gulf of Mexico capital expenditures, excluding proved property acquisitions, were $442 million which included investments for approximately 70 wells and 22 mechanical workovers. Thirty-seven of the wells and nine of the workovers were Company operated. Net production from Gulf of Mexico averaged 362 MMCF of gas per day and 16.6 MBbls of oil per day. Gulf of Mexico represented 22 percent of the Company's net gas production and 19 percent of the Company's net oil production. As of December 31, 1997, Gulf of Mexico controlled 10 percent of the Company's reserves. Gulf of Mexico produces hydrocarbons from multiple horizons ranging from 2,000 feet to over 17,000 feet. The Company currently has interests in over 370 offshore federal lease blocks with over 145 of these in water depths greater than 600 feet ("deep water"). The Company continued to strategically increase its acreage position in the Gulf of Mexico in 1997 by acquiring, through federal lease sales, 15 blocks on the Outer Continental Shelf (the "Shelf") and approximately 100 blocks in deep water. Deep water prospects expose the Company to high potential and high risk prospects which complement the moderate potential and lower risk prospects being pursued on the Shelf. The complex geologic conditions and multiple horizons make the Gulf of Mexico an attractive area for the application of advanced technologies such as 3-D seismic. The application of 3-D seismic will continue to be instrumental in the exploration and development of Gulf of Mexico's assets with approximately 9,500 square miles of data acquired in 1997. A key component of the Company's overall Gulf of Mexico Shelf strategy is to fully exploit areas around existing fields using 3-D seismic technology. This strategy yields beneficial results because the cost to drill these wells is lower and existing infrastructure can be used to immediately produce the hydrocarbons discovered. This has resulted in significant discoveries, such as in the Eugene Island 205 and the South Timbalier 148 Fields. Undeveloped potential in the non-operated South Timbalier 148 Field was recognized by the Company in late 1995 after acquiring 3-D seismic data over the area. Prior to drilling, the Company acquired an additional working interest of 15 percent resulting in a 40 percent working interest in the block. A total of four successful wells have been drilled and completed subsequent to this acquisition, increasing the Company's net production from 2 MMCF of gas per day to a peak production of 34 MMCF of gas per day. Capital investments are currently being made to increase the pipeline capacity for this increased deliverability. In 1996, the Company acquired a 100 percent working interest in the Eugene Island 205 Field. In December 1996, the Company began an aggressive development drilling program which resulted in the drilling of eleven wells and the recompletion of three wells. Prior to the initiation of this development program, the Company's net production from this field was 5 MMCF of gas per day. By year-end 1997, the net production had increased to nearly 50 MMCF of gas per day. 3 6 During 1996, the Company participated in a deep water discovery, known as the Cinnamon Discovery, which was drilled at Green Canyon 45/89. Located in 690 feet of water, the well encountered high quality reservoirs and pay zones between 9,500 feet and 10,225 feet. During the first quarter of 1997, the first delineation well, the Green Canyon 89 No. 2, was drilled which verified the commercial potential of the prospect. Facility design and fabrication have been initiated. GULF COAST DIVISION The Gulf Coast Division ("Gulf Coast"), located in Houston, Texas, explores for and produces oil and gas primarily in south Louisiana, south and east Texas and the panhandle of Florida. In 1997, Gulf Coast capital expenditures, excluding proved property acquisitions, were $126 million which included investments for 45 wells and 26 mechanical workovers. Seventeen of the wells and six of the workovers were Company operated. Net production from Gulf Coast averaged 167 MMCF of gas per day and 15.5 MBbls of oil per day. Gulf Coast represented 10 percent of the Company's net gas production and 18 percent of the Company's net oil production. As of December 31, 1997, Gulf Coast controlled seven percent of the Company's reserves. In south Louisiana, the Company's average net production was approximately 130 MMCF of gas per day and 8 MBbls of oil per day. Production is from multiple zones ranging in depth from less than 2,900 feet to over 18,000 feet. The Company owns approximately 600,000 acres of fee land in this area. Gulf Coast actively pursued the acquisition of 3-D seismic surveys over these fee lands and the surrounding areas in 1997 with the acquisition of over 1,100 square miles. At present, the Company has 50 different south Louisiana 3-D seismic surveys in varying stages of acquisition, processing or interpretation. The Company owns in excess of 20 percent of all 3-D seismic acquired by the industry in south Louisiana. Approximately 80 percent of the Louisiana fee lands have been covered by 3-D seismic surveys. In south Louisiana, the Company invested over $100 million in 19 operated wells. INTERNATIONAL DIVISION The International Division ("International"), headquartered in Houston, Texas, explores for and produces oil and gas in areas outside the United States. In addition to Houston, divisional offices are located in London, England and Caracas, Venezuela. International operates primarily in the East Irish Sea, Algeria and Venezuela. In addition, the Company owns non-operated interests in the United Kingdom ("U.K.") and Dutch sectors of the North Sea, Colombia, Tunisia, Papua New Guinea and Indonesia. In 1997, International capital expenditures, excluding proved property acquisitions, were $78 million which included investments for 26 wells, of which five were operated by the Company. Net production from International averaged 73 MMCF of gas per day and 19 MBbls of oil per day. International represented 4 percent of the Company's net gas production and 22 percent of the Company's net oil production. International controlled eight percent of the Company's reserves. In the North Sea, the Company's average net production was 73 MMCF of gas per day and 14.5 MBbls of oil per day. This production comes from two primary areas in the North Sea, the U.K. sector and the Dutch sector. In the U.K. sector, production was initiated from the Thelma Field in the T-Block complex in late 1996. The field is a subsea tie-back to the Tiffany platform. At the Brae complex, the Plan of Development for the West Brae Field was approved by the U.K. government in 1996. This sixth development in the field was placed on production in late 1997 using subsea completions tied-back to the South Brae platform. In the Dutch sector of the North Sea, the Company participates in natural gas exploration and production. Net production averaged 42 MMCF of gas per day in the Dutch sector of the North Sea. In December 1997, the Company acquired acreage in the East Irish Sea for $159 million. These properties are located 25 miles off the coast of England in approximately 100 feet of water. This acquisition included a 99 percent working interest in seven operated undeveloped natural gas fields. The timing of the field development will depend on a number of factors, including the receipt of appropriate regulatory approvals for the development plan and negotiation of gas sales contracts and 4 7 processing agreements. Ten licenses encompass approximately 460 square miles and are covered by high quality 3-D seismic surveys. The Company contemplates development opportunities on the acquired acreage that will utilize the latest offshore technology. Development is expected to commence in 1998. In Algeria, the Company's primary focus has been exploration for hydrocarbons in Blocks 405 and 215. The Company owns a 65 percent working interest in these blocks and is the operator. Block 405 comprises nearly 713,000 gross acres and is located in the Berkine Basin of eastern Algeria. Block 215 comprises nearly 840,000 gross acres and is located 65 miles west of Block 405. As required by the Production Sharing Agreement, the Company will relinquish a portion of its acreage in 1998. To date, the Company has drilled eight wells and all but one have been successful. In late 1997, the delineation well MLN-4 successfully tested with the highest flow rate on Block 405. The well flowed at a gross rate of 22.7 MBbls of oil per day and 58 MMCF of gas per day from two Triassic TAG intervals and from a newly discovered reservoir in a deeper Devonian interval. No formation water was recovered during any of these tests. In 1997, the Company drilled its second successful well to confirm the extension of the Qoubba Field onto the northeastern portion of Block 405. The Company will participate in the development of this field, of which approximately six percent extends onto Block 405. In 1998, the Company's drilling focus will be the delineation of the MLN Field, participation in the development of the Qoubba Field and exploration for new structures. In addition to this drilling activity, a 270 square mile 3-D seismic survey is currently being acquired in Block 405. Information derived from this survey will assist in the further appraisal of the Triassic TAG reservoir, provide the basis for additional Devonian delineation drilling and firm-up additional exploration prospects for drilling during 1998. An Exploitation License Application, providing for the development of the MLN Field, will be submitted during 1998. Sonatrach, the national oil and gas enterprise of Algeria, has the option to participate in the development of commercial discoveries. The Company is entitled to recover exploration costs out of production during the exploitation phase. In Venezuela, the Company completed an acquisition of 217 square miles of 3-D and 230 miles of 2-D seismic data over the 526,000 gross acre Delta Centro Block in eastern Venezuela in 1997. This highly prospective exploration block is located in Venezuela's Orinoco River Delta and is on geologic trend with oil discoveries in surrounding blocks. Early analysis of the 3-D seismic data has revealed promising leads and preparations are underway to drill the first exploration well during 1998. Under the terms of its work commitment, the Company will drill three exploratory wells over a primary term ending in the year 2001 with the option to extend the exploratory period for an additional four years. The Company owns a 35 percent working interest in the block and is the operator. In Colombia, the Company's average net production was 1.4 MBbls of oil per day. The Company has a non-operated working interest in 36 wells in the Casanare Association Contract Area. The Company also holds a 25 percent working interest in a 280,000 gross acre association contract located in the San Jacinto Association Contract Area. The contract is located in the Upper Magdalena Valley Basin. A recent discovery to the north, in the Guadauas Field, lies in a similar setting with the same reservoir targets which are the Guadalupe and Caballos Formations. The acquisition of 93 miles of 2-D seismic is planned for 1998. In Indonesia, the Company's average net production was 3.1 MBbls of oil per day. The Company has a 15 percent working interest in the KAKAP Production Sharing Contract. In 1997, the Company completed the tie-back of three subsea completions. In addition to the activity in the KAKAP Field, exploration success at Nelayan proved an exploration concept which has led to a renewed exploration effort for 1998. The Company and its partners in the KAKAP Field are in the process of negotiating gas sales agreements to sell gas to Singapore. The gas will be sold via a pipeline that is scheduled to be completed in the year 2000. 5 8 SECTION 29 TAX CREDITS A number of formations located within the Company's producing areas have wells that qualify for tax credits under Section 29 of the Internal Revenue Code of 1954, as amended ("IRC"). IRC Section 29 provides for a tax credit from non-conventional fuel sources such as oil produced from shale and tar sands and natural gas produced from geopressured brine, Devonian shale, coal seams and tight sands formations. The Company estimates that the tax credit rate will range from $.52 to $1.04 per MMBTU depending on fuel source. The Company earned approximately $51 million of Section 29 tax credits in 1997. CAPITAL EXPENDITURES AND MAJOR PROJECTS Following are the Company's capital expenditures.
YEAR ENDED DECEMBER 31, -------------------------- 1997 1996 1995 ------ ---- ---- (IN MILLIONS) Oil and Gas Activities.................................. $1,155 $738 $686 Plants and Pipelines.................................... 50 54 79 Administrative.......................................... 40 12 22 ------ ---- ---- Total......................................... $1,245 $804 $787 ====== ==== ====
Capital expenditures for oil and gas activities in 1997 of $1,155 million include 19 percent for proved property acquisitions, 48 percent for development and 33 percent for exploration. Included in capital expenditures for oil and gas activities are exploration costs expensed under the successful efforts method of accounting and capitalized interest. Drilling Activity. Drilling activity in 1997 was principally in the San Juan, Gulf Coast, Permian, Anadarko and Williston Basins. Increased net drilling activity levels, as seen in the table below, are a result of the Company's expanded development and exploration programs. The following table sets forth the Company's net productive and dry wells.
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 ---- ---- ---- Productive wells Exploratory..................................... 31.4 25.3 26.4 Development..................................... 248.8 191.7 297.5 ---- ---- ---- 280.2 217.0 323.9 ---- ---- ---- Dry wells Exploratory..................................... 27.8 18.1 20.0 Development..................................... 8.6 5.9 37.8 ---- ---- ---- 36.4 24.0 57.8 ---- ---- ---- Total net wells......................... 316.6 241.0 381.7 ==== ==== ====
As of December 31, 1997, 55 gross wells, representing approximately 29 net wells, were being drilled. Asset Rationalization. The Company focuses its acquisition activity in areas where it has production in order to maximize the efficiencies gained in combining operations or in new areas where the Company can transfer its technological expertise or take advantage of premium markets. In addition, the Company uses a selective acquisition process that emphasizes the purchase of reserves as well as properties having upside potential that can be developed by using both conventional and advanced technologies. 6 9 In December 1997, the Company acquired working interests in the East Irish Sea of the U.K. for $159 million. The Company will continue to pursue transactions which enable the consolidation of assets and increase operating efficiencies. In June 1997, the Company completed its non-strategic divestiture program which was announced in July 1996. As planned, the Company sold approximately 27,000 wells and related facilities. Before closing adjustments, gross proceeds for 1997 from sales of oil and gas properties related to this divestiture program were approximately $450 million (approximately $418 million, net of closing adjustments). A portion of the net proceeds from asset divestitures were reinvested in domestic and international oil and gas properties. On July 31, 1996, the Company completed the sale of its crude oil refinery and terminal, including crude oil and refined product inventories, for approximately $70 million. The net book value of refinery property, plant and equipment and inventory at that date was approximately $68 million. PRODUCTIVE WELLS, DEVELOPED AND UNDEVELOPED ACREAGE Working interests in productive wells, developed acreage and undeveloped acreage at December 31, 1997 follow.
PRODUCTIVE WELLS - ---------------------------- OIL GAS DEVELOPED ACRES UNDEVELOPED ACRES - ------------- ------------- --------------------- ---------------------- GROSS NET GROSS NET GROSS NET GROSS NET - ------ ----- ------ ----- --------- ---------- ---------- ---------- 5,791 2,857 10,829 6,026 5,314,000 2,580,000 16,674,000 11,870,000
Included in the acreage data are approximately 7.5 million undeveloped acres of Company-owned oil and gas mineral rights, of which approximately 4 million acres are considered to have potential for oil and gas exploration. OIL AND GAS PRODUCTION, PRICES AND PRODUCTION COSTS The Company's average daily production represents its net ownership after deduction of all royalty interests held by others but includes royalty interests and net profits interests owned by the Company. The Company's average natural gas price includes amounts from the sale of NGLs, less the actual costs incurred to gather, treat, process and transport the hydrocarbons to market. Following are production and prices.
YEAR ENDED DECEMBER 31, --------------------------------------------- 1997 1996 1995 ---- ---- ---- Production Gas (MMCF per day)................................. 1,669 1,603 1,496 Oil (MBbls per day)................................ 87.2 91.1 90.9 Average sales prices Gas per MCF........................................ $ 2.18 $ 2.05 $ 1.40 Oil per barrel..................................... 19.24 20.39 17.04 Average production costs per MCFE.................... .51 .54 .54 Depreciation, depletion and amortization rates per MCFE........................................... $ .62 $ .62 $ .67
In 1997, 1996 and 1995, approximately 41 percent, 43 percent and 47 percent, respectively, of the Company's gas production was transported to direct sale customers through El Paso Natural Gas Company's ("EPNG") pipeline systems. These transportation arrangements are pursuant to EPNG's approved Federal Energy Regulatory Commission ("FERC") tariffs applicable to all shippers. The Company expects to continue to transport a substantial portion of its future gas production through EPNG's pipeline systems. 7 10 RESERVES The following table sets forth estimates by the Company's petroleum engineers of proved oil and gas reserves at December 31, 1997. These reserves have been reduced for royalty interests owned by others.
GAS OIL TOTAL (BCF) (MMBBLS) (BCFE) ----- -------- ------ Proved Developed Reserves...................... 4,874 219.5 6,191 Proved Undeveloped Reserves.................... 1,544 34.2 1,749 ----- ----- ----- Total Proved Reserves................ 6,418 253.7 7,940 ===== ===== =====
For further information on reserves, including information on future net cash flows and the standardized measure of discounted future net cash flows, see "Financial Statements and Supplementary Financial Information--Supplemental Oil and Gas Disclosures." MARKETING Natural Gas. In pursuit of the Company's mission to build long-term shareholder value, the Company's marketing strategy is to maximize the value of its production by developing marketing flexibility from the wellhead to the burnertip. The Company's gas production is gathered, processed, exchanged and transported utilizing various firm and interruptible contracts and routes to access the highest value market hubs. The Company's customers include local distribution companies, electric utilities and a diverse portfolio of industrial users. The Company maintains the capacity to ensure its production can be marketed either at the wellhead or downstream at market sensitive prices. Crude Oil and NGLs. All of the Company's crude oil production is sold to third parties at the wellhead or transported to market hubs where it is sold or exchanged. NGLs are typically transported to market hubs, primarily in the Houston area, and sold to third parties. International. The Company's international oil and gas is produced from non-operated properties. These products are sold to third party markets either directly by the Company or by the operator of the property. OTHER MATTERS Competition. The Company actively competes for reserve acquisitions, exploration leases and sales of oil and gas, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for the sale of oil, gas and NGLs. Competitive factors in the Company's business include price, contract terms, quality of service, pipeline access, transportation discounts and distribution efficiencies. Regulation of Oil and Gas Production, Sales and Transportation. The oil and gas industry is subject to regulation by numerous national, state and local governmental agencies and departments in the countries in which the Company operates, compliance with which is often difficult and costly and some of which carry substantial noncompliance penalties and risks. Statutes, rules, regulations or guidelines require drilling permits, drilling bonds and operating reports. Most jurisdictions in which the Company operates also have statutes, rules, regulations or guidelines governing conservation matters, including the unitization or pooling of oil and gas properties and the establishment of maximum rates of production from oil and gas wells. Many jurisdictions also limit production to the market demand for oil and gas. Such statutes, rules, regulations or guidelines may limit the rate at which oil and gas could otherwise be produced from the Company's properties. All of the Company's sales of its domestic gas are deregulated. The Company operates various gathering systems. The United States Department of Transportation and certain state agencies regulate, under various statutes, rules or regulations, the safety and 8 11 operating aspects of the transportation and storage activities of these facilities by prescribing standards. The FERC has implemented policies, subject to court review, allowing interstate pipeline companies to negotiate their rates with individual shippers. The FERC is also considering allowing the interstate pipeline companies to negotiate tariffed terms and conditions of service. The Company will monitor the effects of these programs on its marketing efforts but does not expect that these actions will have a materially adverse effect on the consolidated financial position or results of operations of the Company. Environmental Regulation. Various federal, state and local laws and regulations relating to the protection of the environment, including the discharge of materials into the environment, may affect the Company's domestic operations and costs as a result of their effect on oil and gas exploration, development and production operations. In addition, certain of the Company's international operations are subject to environmental regulations administered by foreign governments, including political subdivisions thereof, or by international organizations. U.S. offshore oil and gas operations are subject to regulations of the U.S. Department of the Interior which currently imposes absolute liability upon the lessee under a federal lease for the cost of pollution cleanup resulting from the lessee's operations and could subject the lessee to possible liability for pollution damages. In the event of a serious incident of pollution, the U.S. Department of the Interior may require a lessee under a federal lease to suspend or cease operations in the affected area. The Company believes it is in substantial compliance with applicable environmental laws and regulations. The Company does not anticipate that it will be required under current environmental laws and regulations to expend amounts that will have a materially adverse effect on the consolidated financial position or results of operations of the Company. Filings of Reserve Estimates With Other Agencies. During 1997, the Company filed estimates of oil and gas reserves for the year 1996 with the Department of Energy. These estimates were not materially different from the reserve data presented herein. 9 12 CERTAIN DEFINITIONS Below are certain definitions of key terms used in this Form 10-K. BCF means billion cubic feet. BCFE means billion cubic feet of gas equivalent. MBbls means thousands of barrels. MCF means thousand cubic feet. MCFE means thousand cubic feet of gas equivalent. MMBbls means millions of barrels. MMBTU means million British Thermal units. MMCF means million cubic feet. MMCFE means million cubic feet of gas equivalent. NGLs mean natural gas liquids. TCFE means trillion cubic feet of gas equivalent. Proved reserves represent estimated quantities of oil and gas which geological and engineering data demonstrate, with reasonable certainty, can be recovered in future years from known reservoirs under existing economic and operating conditions. Reservoirs are considered proved if shown to be economically producible by either actual production or conclusive formation tests. Proved developed reserves are the portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are the portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for completion. Net acreage and net oil and gas wells are obtained by multiplying "gross" acreage and "gross" oil and gas wells by the Company's working interest percentage in the properties. Oil is converted into cubic feet of gas equivalent based on 6 MCF of gas to one barrel of oil. - --------------- EMPLOYEES The Company had 1,819 and 2,004 employees at December 31, 1997 and 1996, respectively. Currently, the Company has no union employees. 10 13 ITEM THREE LEGAL PROCEEDINGS On May 25, 1995, the 270th Judicial District Court of Harris County, Texas entered an order in a lawsuit styled Caroline Altheide, et al. v. Meridian Oil Inc. (now known as Burlington Resources Oil & Gas Company), et al., which allowed the suit to be maintained as a class action on behalf of all royalty and overriding royalty interest owners in all Burlington Resources Oil & Gas Company ("BROG") properties and all working interest owners in properties operated by BROG who received payments from BROG at any time from and after December 1, 1986 based upon wellhead sales of natural gas to Burlington Resources Trading Inc. The lawsuit involves claims for unspecified actual and punitive damages based upon alleged breaches of duties owed to interest owners because of the use of corporate affiliates to gather, treat and market natural gas. The plaintiffs allege that BROG's gas producing affiliates have sold natural gas to marketing affiliates at lower inter-affiliate settlement prices which were then used as the basis for accounting to interest owners. Plaintiffs also allege that BROG's pricing includes inappropriate deductions of inflated gathering and transportation costs. BROG has consistently denied liability and perfected an interlocutory appeal of the class certification order on May 30, 1995. Oral argument on the interlocutory appeal of the class certification order was heard February 28, 1996. Following the argument, but in advance of a decision by the appellate court, the parties executed a settlement agreement dated August 6, 1996, which the trial court preliminarily approved on August 12, 1996. After notice to the class members, the court conducted a hearing on November 8, 1996, and gave final approval to the terms of the parties' settlement agreement in its Judgment signed on November 12, 1996. Four class members who appeared through counsel at the November 8, 1996 hearing to object to the settlement filed a motion for a new trial or, in the alternative, to modify, alter or amend judgment, which motion was denied by Order signed December 16, 1996. The objectors purported to perfect an appeal of the Judgment on February 7, 1997. On July 24, 1997, the Fourteenth Court of Appeals dismissed the appeal. On October 17, 1997, the objectors filed a Petition for Review with The Supreme Court of Texas. The Company and the Plaintiffs intend to defend this appeal vigorously. The Company and its subsidiaries are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits and other proceedings cannot be predicted with certainty, management expects these matters, including the above-described Altheide litigation, will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. ITEM FOUR SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At a special meeting of stockholders of the Company held on October 22, 1997, the stockholders voted to approve the issuance of the Company's Common Stock pursuant to the Agreement and Plan of Merger dated July 16, 1997 among the Company, BR Acquisition Corporation (a wholly-owned subsidiary of the Company) and LL&E. Approval of the issuance of shares of the Company's Common Stock pursuant to the Merger was as follows.
FOR AGAINST ABSTENTIONS - ---------- ------- ----------- 94,752,530 308,225 517,354
11 14 EXECUTIVE OFFICERS OF THE REGISTRANT BOBBY S. SHACKOULS, 47 H. LEIGHTON STEWARD, 63 Chairman of the Board, President and Chief Vice Chairman of the Board Executive Officer Burlington Resources Inc. Burlington Resources Inc. October 1997 to Present July 1997 to Present Chairman of the Board, President and Chief Ex- President and Chief Executive Officer, ecutive Officer, The Louisiana Land and Burlington Resources Inc., December 1995 to July Exploration Company, November 1996 to October 1997; President and Chief Executive Officer, 1997; Chairman of the Board and Chief Executive Burlington Resources Oil & Gas Company, October Officer, The Louisiana Land and Exploration 1994 to Present; Executive Vice President and Company, September 1995 to November 1996; and Chief Operating Officer, Burlington Resources Chairman of the Board, President and Chief Oil & Gas Company, June 1993 to October 1994; Executive Officer, The Louisiana Land and President and Chief Operating Officer, Torch Exploration Company, January 1989 to September Energy Advisors, Inc., July 1991 to May 1993. 1995. JOHN E. HAGALE, 41 RANDOLPH P. MUNDT, 47 Executive Vice President and Chief Executive Vice President, Marketing Financial Burlington Resources Inc. Officer April 1997 to Present Burlington Resources Inc. December 1995 to Present Executive Vice President, Marketing, Burlington Resources Oil & Gas Company, March 1995 to Pres- Executive Vice President and Chief ent; Senior Vice President, Operations, Financial Officer, Burlington Resources Oil & Burlington Resources Oil & Gas Company, October Gas Company, March 1993 to Present; Senior 1994 to March 1995; Senior Vice President, Vice President and Chief Financial Officer, Acquisitions and Land, Burlington Resources Oil Burlington Resources Inc., April 1994 to & Gas Company, July 1993 to October 1994; Senior December 1995; Vice President, Finance, Vice President, Strategic Planning and Asset Burlington Resources Inc., March 1992 to Management, Burlington Resources Oil & Gas February 1993. Company, December 1990 to July 1993. C. RAY OWEN, 52 LOUIS A. RASPINO, 45 Executive Vice President and Chief Senior Vice President, Strategic Planning Operating Officer and Business Development Burlington Resources Inc. Burlington Resources Inc. April 1997 to Present October 1997 to Present Executive Vice President and Chief Senior Vice President, Chief Financial Officer, Operating Officer, Burlington Resources Oil & The Louisiana Land and Exploration Company, Sep- Gas Company, October 1994 to Present; Senior tember 1995 to October 1997; Treasurer, The Vice President, Operations, Burlington Louisiana Land and Exploration Company, May 1992 Resources Oil & Gas Company, March 1993 to to September 1995. October 1994; Vice President, Regional Operations, Burlington Resources Oil & Gas Company, December 1990 to March 1993. GERALD J. SCHISSLER, 53 JOHN A. WILLIAMS, 53 Executive Vice President, Law Senior Vice President, Exploration and Administration Burlington Resources Inc. Burlington Resources Inc. October 1997 to Present April 1997 to Present Senior Vice President, Exploration and Executive Vice President, Law and Production, The Louisiana Land and Exploration Corporate Affairs, Burlington Resources Inc. Company, September 1995 to October 1997; Vice December 1995 to April 1997; Senior Vice President, The Louisiana Land and Exploration President, Law, Burlington Resources Inc., Company, March 1988 to September 1995. December 1993 to December 1995; Consultant, June 1991 to July 1993.
12 15 PART II ITEM FIVE MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange under the symbol "BR." At December 31, 1997, the number of common stockholders was 23,695. Information on common stock prices and quarterly dividends is shown on page 43. ITEM SIX SELECTED FINANCIAL DATA The selected financial data for the Company set forth below for the five years ended December 31, 1997 should be read in conjunction with the consolidated financial statements. Prior year amounts have been restated to combine BR and LL&E.
1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Revenues.................................... $2,000 $2,200 $1,734 $1,871 $1,865 Operating Income (Loss)..................... 503 580 (397) (159) 298 Net Income (Loss)........................... 319 335 (261) (73) 266 Basic Earnings (Loss) per Common Share...... 1.80 1.89 (1.47) (.41) 1.52 Diluted Earnings (Loss) per Common Share.... 1.79 1.88 (1.47) (.41) 1.51 BALANCE SHEET DATA Total Assets................................ 5,821 5,683 5,608 6,285 6,285 Long-term Debt.............................. 1,748 1,853 2,042 2,049 1,554 Stockholders' Equity........................ 3,016 2,808 2,591 2,920 3,208 Cash Dividends Declared per Common Share.... $ .46 $ .44 $ .44 $ .58 $ .58 Common Shares Outstanding................... 177 177 178 177 180
13 16 ITEM SEVEN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE MERGER On July 17, 1997, Burlington Resources Inc. ("BR") and The Louisiana Land and Exploration Company ("LL&E") announced that they had entered into an Agreement and Plan of Merger (the "Merger"). On October 22, 1997, the Merger was completed and LL&E became a wholly-owned subsidiary of the Company. Pursuant to the Merger, BR issued 52,795,635 shares of its Common Stock based on an exchange ratio of 1.525 for each outstanding share of LL&E stock. The Merger was accounted for as a pooling of interests and qualified as a tax-free reorganization. The transaction was valued at approximately $3 billion based on BR's closing stock price on October 22, 1997. All operational and financial information contained herein includes the combined business activities for BR and LL&E for all periods presented. FINANCIAL CONDITION AND LIQUIDITY The Company's total long-term debt to capital (long-term debt and stockholders' equity) ratio at December 31, 1997 and 1996 was 37 percent and 40 percent, respectively. The Company's credit facilities are comprised of a $600 million revolving credit agreement that expires in July 2001 and a $300 million revolving credit agreement that expires in July 1998. The $300 million revolving credit agreement is renewable annually by mutual consent and was renewed in July 1997. In June 1997, LL&E refinanced its existing $350 million revolving credit facility with a revolving credit facility of a like amount. However, as a result of the Merger of LL&E and BR, the revolving credit facility was terminated on October 23, 1997. Further, LL&E's commercial paper program was also terminated on that date and outstanding commercial paper totaling approximately $83 million was retired by the Company. As of December 31, 1997, there were no borrowings outstanding under the credit facilities. In April 1997, the Company increased the capacity under its shelf registration statements from $200 million to $500 million. Effective November 7, 1997, LL&E withdrew its shelf registration statement of $500 million. Effective July 16, 1997, the Company rescinded its stock repurchase program. From January 1, 1997 through May 31, 1997, the Company repurchased approximately 1.3 million shares of its Common Stock for $58 million. Since December 1988, the Company has repurchased approximately 31 million shares. In conjunction with the Company's stock repurchase program, the Company sold put options ("options") during the first quarter of 1997. The options entitled the holders, upon exercise of the options 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. In total, options on 500 thousand shares were issued with an average strike price of $44.50 per share. An average premium of $2.63 per option was received for the option sales. All options expired without being exercised. Net cash provided by operating activities for 1997 was $1,122 million compared to $995 million and $687 million in 1996 and 1995, respectively. The increase in 1997 compared to 1996 was primarily due to higher operating income, excluding non-cash items, and working capital changes. Net cash provided by operating activities in 1996 also included proceeds of $108 million relating to an obligation to deliver gas from certain coal seam wells through December 31, 2002. The increase in 1996 compared to 1995 was primarily due to significantly higher operating income and $108 million in proceeds received relating to an obligation to deliver gas from certain coal seam wells through December 31, 2002. These increases were partially offset by other working capital changes. Net cash provided by operating activities in 1995 included the sale of a receivable related to a claim resulting from the breach of a take-or-pay gas contract and the sale of gas-in-storage inventory for approximately $39 million and $20 million, respectively. 14 17 In June 1997, the Company completed its non-strategic divestiture program which was announced in July 1996. As planned, the Company sold approximately 27,000 wells and related facilities. Before closing adjustments, gross proceeds for 1997 from the sales of oil and gas properties related to this divestiture program were approximately $450 million (approximately $418 million, net of closing adjustments). On July 31, 1996, the Company completed the sale of its crude oil refinery and terminal, including crude oil and refined product inventories, for approximately $70 million. The net book value of refinery property, plant and equipment and inventory at that date was approximately $68 million. The Company is involved in certain legal and environmental proceedings as well as other related matters. Although it is possible that new information or future developments could require the Company to reassess its potential exposure related to these matters, the Company believes, based upon available information, the resolution of these issues will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. The Company has certain commitments and uncertainties related to its normal operations. Management believes that there are no commitments, uncertainties or contingent liabilities that will have a materially adverse effect on the consolidated financial position or results of operations of the Company. CAPITAL EXPENDITURES AND RESOURCES Capital expenditures during 1997 totaled $1,245 million compared to $804 million and $787 million in 1996 and 1995, respectively. The Company invested $214 million for proved property acquisitions in 1997 compared to $92 million and $103 million in 1996 and 1995, respectively. The Company invested $941 million on internal development and exploration during 1997 compared to $646 million and $583 million in 1996 and 1995, respectively. Capital expenditures for 1998, excluding proved property acquisitions, are projected to be approximately $1.15 billion. Capital expenditures are expected to be primarily for internal development and exploration of oil and gas properties and plant and pipeline expenditures. Capital expenditures will be funded from existing cash balances and cash flows, supplemented, if needed, by external financing. The Company anticipates continued increases in gas production. The increased gas production is expected to be a result of the continuing development of the Company's gas reserves, exploration of undeveloped acreage and the Company's producing property acquisition program. The Company expects to market its additional gas production in the Gulf Coast, the Midwest, the East Coast and the traditional California markets. MARKETING Natural gas. In pursuit of the Company's mission to build long-term shareholder value, the Company's marketing strategy is to maximize the value of its production by developing marketing flexibility from the wellhead to the burnertip. The Company's gas production is gathered, processed, exchanged and transported utilizing various firm and interruptible contracts and routes to access the highest value market hubs. The Company's customers include local distribution companies, electric utilities and a diverse portfolio of industrial users. The Company maintains the capacity to ensure its production can be marketed either at the wellhead or downstream at market sensitive prices. Crude Oil and NGLs. All of the Company's crude oil production is sold to third parties at the wellhead or transported to market hubs where it is sold or exchanged. NGLs are typically transported to market hubs, primarily in the Houston area, and sold to third parties. 15 18 International. The Company's international oil and gas is produced from non-operated properties. These products are sold to third party markets either directly by the Company or by the operator of the property. DIVIDENDS On January 14, 1998, the Board of Directors declared a common stock quarterly dividend of $.1375 per share, payable April 1, 1998. Dividend levels are determined by the Board of Directors based on profitability, capital expenditures, financing and other factors. The Company declared cash dividends on Common Stock totaling approximately $82 million during 1997. RESULTS OF OPERATIONS Year Ended December 31, 1997 Compared With Year Ended December 31, 1996 The Company reported net income of $319 million or $1.80 basic earnings per share in 1997 compared to net income of $335 million or $1.89 basic earnings per share in 1996. The 1997 results include a $.40 per share charge related to the Merger for severance and related exit costs and transaction costs. The results also include an $.18 per share gain related to the sales of oil and gas properties. The 1996 results include an $.11 per share charge related to the divestiture program and reorganization for severance and other related exit costs. Revenues were $2,000 million in 1997 compared to $2,200 million in 1996. Revenues decreased $264 million as a result of the sale of the refinery on July 31, 1996. Oil sales volumes decreased 4 percent to 87.2 MBbls per day and average oil prices decreased 6 percent to $19.24 per barrel which decreased revenues $31 million and $37 million, respectively. These decreases were partially offset by increases in gas sales volumes of 4 percent to 1,669 MMCF per day and an average gas price increase of 6 percent to $2.18 per MCF which increased revenues $46 million and $82 million, respectively. Gas volumes increased due to continued development of gas properties. Oil volumes were down primarily due to the divestiture program. Costs and Expenses were $1,497 million in 1997 compared to $1,620 million in 1996. Costs and expenses in 1997 included an $80 million charge related to the Merger for severance and related exit costs and transaction costs. Costs and expenses in 1996 included a $30 million reorganization charge for severance and other related exit costs. Excluding the $80 million charge in 1997 and the $30 million charge in 1996, costs and expenses in 1997 decreased $173 million from 1996. The decrease is primarily due to a $254 million decrease in refinery costs resulting from the sale of the refinery and a $23 million decrease in production and processing expenses. These decreases were partially offset by a $100 million increase in exploration costs and a $5 million increase in depreciation, depletion and amortization. Interest Expense was $142 million in 1997 compared to $147 million in 1996. The decrease was primarily due to lower outstanding commercial paper balances during 1997. Other Income -- Net was $50 million in 1997 due to a gain related to the sales of oil and gas properties associated with the divestiture program. Year Ended December 31, 1996 Compared With Year Ended December 31, 1995 The Company reported net income of $335 million or $1.89 basic earnings per share in 1996 compared to a net loss of $261 million or $1.47 basic loss per share in 1995. The 1996 results include an $.11 per share charge related to the divestiture program and reorganization for severance and other related exit costs. The 1995 results include a $1.71 per share non-cash charge resulting from the Company's adoption of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of ("SFAS No. 121"). Revenues were $2,200 million in 1996 compared to $1,734 million in 1995. Average gas sales prices increased 46 percent in 1996 to $2.05 per MCF and average oil prices increased 20 percent to $20.39 per barrel which increased revenues $381 million and $112 million, respectively. Oil and gas 16 19 sales volumes increased primarily due to continued development and exploration of the Company's oil and gas properties and producing property acquisitions. Gas sales volumes improved 7 percent to 1,603 MMCF per day and oil sales volumes increased slightly to 91.1 MBbls per day which increased revenues $57 million and $2 million, respectively. The increases in oil and gas revenue were partially offset by a $92 million decrease in refinery revenue due to the sale of the Company's crude oil refinery on July 31, 1996. Costs and Expenses were $1,620 million in 1996 compared to $2,131 million in 1995. Costs and expenses in 1995 included a $490 million non-cash charge related to the impairment of oil and gas properties which resulted from the Company's adoption of SFAS No. 121, effective September 30, 1995. Excluding the $490 million non-cash charge, costs and expenses in 1996 decreased $21 million compared to 1995. The decrease was primarily due to a $91 million decrease in refinery costs as a result of the sale of the Company's crude oil refinery and a $9 million decrease in depreciation, depletion and amortization. These decreases were partially offset by a $48 million increase in exploration costs, a $20 million increase in administrative expenses and a $14 million increase in production and processing expenses resulting from a 5 percent increase in 1996 production levels. Administrative expenses increased due to a $30 million reorganization charge for severance and other related exit costs partially offset by a $9 million decrease in salary expense resulting from employee reductions. The effective income tax rate was an expense of 22.5 percent in 1996 compared to a benefit of 51.9 percent in 1995. The higher effective tax rate in 1996 was primarily due to pretax income in 1996 versus a pretax loss in 1995. Each year includes a beneficial rate of approximately 15 percent due to the effect of non-conventional fuel tax credits. OTHER MATTERS Since 1996, the Company has been in the process of implementing new financial and operating computer systems. The first phase of implementation was completed in the first quarter of 1997 for certain operating areas within the Company. The remaining operating and financial systems are scheduled for implementation in phases, with project completion scheduled for the fourth quarter of 1998. These new systems are year 2000 compliant. Additionally, the Company is in the process of identifying suppliers and business partners who are not prepared to offer assurance that their systems will be year 2000 compliant. The cost of achieving year 2000 compliance is not expected to have a materially adverse effect on the consolidated financial position or results of operations of the Company. In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, which is effective for fiscal years beginning after December 15, 1997. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. It requires (a) classification of items of other comprehensive income by their nature in a financial statement and (b) display of the accumulated balance of other comprehensive income separate from retained earnings and additional paid-in capital in the equity section of a statement of financial position. The Company plans to adopt SFAS No. 130 for the quarter ended March 31, 1998. In June 1997, the FASB also issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which is effective for fiscal years beginning after December 15, 1997. SFAS No. 131 establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This Statement supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise, but retains the requirement to report information about major customers. The Company plans to adopt SFAS No. 131 for the year ended December 31, 1998. 17 20 FORWARD-LOOKING STATEMENTS The Company may, in discussions of its future plans, objectives and expected performance in periodic reports filed by the Company with the Securities and Exchange Commission (or documents incorporated by reference therein) and in written and oral presentations made by the Company, include projections or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, as amended. Such projections and forward-looking statements are based on assumptions which the Company believes are reasonable, but are by their nature inherently uncertain. In all cases, there can be no assurance that such assumptions will prove correct or that projected events will occur, and actual results could differ materially from those projected. Some of the important factors that could cause actual results to differ from any such projections or other forward-looking statements follow. Commodity Pricing and Demand. 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 markets, including among others, the New York Mercantile Exchange ("NYMEX"), because of seasonal weather patterns, national supply and demand factors and general economic conditions. Crude oil prices are also affected by quality differentials, by worldwide political developments and by actions of the Organization of Petroleum Exporting Countries. Although the futures markets provide some indication of crude oil and natural gas prices for the subsequent 12 to 18 months, prices in the futures markets are subject to substantial changes in relatively short periods of time. 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." Basis differentials, like the underlying commodity prices, can be volatile because of regional supply and demand factors, including seasonal factors and the availability and price of transportation to consuming areas. In the ordinary course and conduct of its business, the Company utilizes futures contracts traded on the NYMEX and the Kansas City Board of Trade, and over-the-counter price and basis swaps and options with major crude oil and natural gas merchants and financial institutions to hedge its price risk exposure related to the Company's U.S. production. The gains and losses realized as a result of these derivatives transactions are substantially offset in the cash market when the hedged commodity is delivered. In order to accommodate the needs of its customers, the Company also uses price swaps to convert 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 December 31, 1997, the potential decrease in fair value of commodity derivative instruments assuming a 10 percent adverse movement in the underlying commodities prices does not have a materially adverse effect on the consolidated financial position or results of operations of the Company. For purposes of calculating the hypothetical change in fair value, the relevant variables are the type of commodity (crude oil or natural gas), the commodity futures prices, the volatility of commodity prices and the basis and quality differentials. Due to the short duration of the derivative contracts, time value of money is ignored. 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. Changes in crude oil and natural gas prices (including basis differentials) from those assumed in preparing projections and forward-looking statements could cause the Company's actual financial results to differ materially from projected financial results and can also impact the Company's determination of proved reserves and the standardized measure of discounted future net cash flows relative to crude oil and natural gas reserves. In addition, periods of sharply lower commodity prices 18 21 could affect the Company's production levels and/or cause it to curtail capital spending projects and delay or defer exploration, exploitation or development projects. Projections relating to the price received by the Company for natural gas also rely on assumptions regarding the availability and pricing of transportation to the Company's key markets. In particular, the Company has contractual arrangements for the transportation of natural gas from the San Juan Basin eastward to Eastern and Midwestern markets or to market hubs in Texas, Oklahoma and Louisiana. The natural gas price received by the Company could be adversely affected by any constraints in pipeline capacity to serve these markets. Exploration and Production Risks. The Company's business is subject to all of the risks and uncertainties normally associated with the exploration for and development and production of crude oil and natural gas. Reserves which require the use of improved recovery techniques for production are included in proved reserves if supported by a successful pilot project or the operation of an installed program. The process of estimating quantities of proved reserves is inherently uncertain and involves subjective engineering and economic determinations. In this regard, changes in the economic conditions (including commodity prices) or operating conditions (including, without limitation, exploration, development and production costs and expenses and drilling results from exploration and development activity) could cause the Company's estimated proved reserves or production to differ from those included in any such forward-looking statements or projections. Projecting future crude oil and natural gas production is imprecise. Producing oil and gas reservoirs eventually have declining production rates. Projections of production rates rely on certain assumptions regarding historical production patterns in the area or formation tests for a particular producing horizon. Actual production rates could differ materially from such projections. Production rates depend on a number of additional factors, including commodity prices, market demand and the political, economic and regulatory climate. Another major factor affecting the Company's production is its ability to replace depleting reservoirs with new reserves through acquisition, exploration or development programs. Exploration success is extremely difficult to predict with certainty, particularly over the short term where the timing and extent of successful results vary widely. Over the long term, the ability to replace reserves depends not only on the Company's ability to locate crude oil and natural gas reserves, but on the cost of finding and developing such reserves. Moreover, development of any particular exploration or development project may not be justified because of the commodity price environment at the time or because of the Company's finding and development costs for such project. No assurances can be given as to the level or timing of success that the Company will be able to achieve in acquiring or finding and developing additional reserves. Projections relating to the Company's production and financial results rely on certain assumptions about the Company's continued success in its acquisition and asset rationalization programs and in its cost management efforts. The Company's drilling operations are subject to various hazards common to the oil and gas industry, including explosions, fires, and blowouts, which could result in damage to or destruction of oil and gas wells or formations, production facilities and other property and injury to people. They are also subject to the additional hazards of marine operations, such as capsizing, collision and damage or loss from severe weather conditions. Development Risk. A significant portion of the Company's development plans involve large projects in the Gulf of Mexico and other areas. A variety of factors affect the timing and outcome of such projects including, without limitation, approval by the other parties owning working interests in the project, receipt of necessary permits and approvals by applicable governmental agencies, the availability of the necessary drilling equipment, delivery schedules for critical equipment and arrangements for the gathering and transportation of the produced hydrocarbons. 19 22 Foreign Operations Risk. The Company's operations outside of the U.S. are subject to risks inherent in foreign operations, including, without limitation, the loss of revenue, property and equipment from hazards such as expropriation, nationalization, war, insurrection and other political risks, increases in taxes and governmental royalties, renegotiation of contracts with governmental entities, changes in laws and policies governing operations of foreign-based companies, currency restrictions and exchange rate fluctuations and other uncertainties arising out of foreign government sovereignty over the Company's international operations. Laws and policies of the U.S. affecting foreign trade and taxation may also adversely affect the Company's international operations. The Company's ability to market oil and natural gas discovered or produced in its foreign operations, and the price the Company could obtain for such production, depends on many factors beyond the Company's control, including ready markets for oil and natural gas, the proximity and capacity of pipelines and other transportation facilities, fluctuating demand for oil and natural gas, the availability and cost of competing fuels, and the effects of foreign governmental regulation of oil and gas production and sales. Pipeline and processing facilities do not exist in certain areas of exploration and, therefore, any actual sales of the Company's production could be delayed for extended periods of time until such facilities are constructed. Competition. The Company actively competes for property acquisitions, exploration leases and sales of crude oil and natural gas, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for gas purchasing and processing contracts and for natural gas and natural gas liquids at several steps in the distribution chain. Competitive factors in the Company's business include price, contract terms, quality of service, pipeline access, transportation discounts and distribution efficiencies. Political and Regulatory Risk. The Company's operations are affected by national, state and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls and environmental protection regulations. Changes in such laws and regulations, or interpretations thereof, could have a significant effect on the Company's operations or financial results. Potential Environmental Liabilities. The Company's operations are subject to various national, state and local laws and regulations covering the discharge of material into, and protection of, the environment. Such regulations affect the costs of planning, designing, operating and abandoning facilities. The Company expends considerable resources, both financial and managerial, to comply with environmental regulations and permitting requirements. Although the Company believes that its operations and facilities are in general compliance with applicable environmental laws and regulations, risks of substantial costs and liabilities are inherent in crude oil and natural gas operations. Moreover, it is possible that other developments, such as increasingly strict environmental laws, regulations and enforcement, and claims for damage to property or persons resulting from the Company's current or discontinued operations, could result in substantial costs and liabilities in the future. 20 23 ITEM EIGHT FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, -------------------------------------- 1997 1996 1995 -------- -------- -------- Revenues................................................... $2,000 $2,200 $1,734 Costs and Expenses......................................... 1,497 1,620 2,131 ------ ------ ------ Operating Income (Loss).................................... 503 580 (397) Interest Expense........................................... 142 147 147 Other Income -- Net........................................ 50 - 1 ------ ------ ------ Income (Loss) Before Income Taxes.......................... 411 433 (543) Income Tax Expense (Benefit)............................... 92 98 (282) ------ ------ ------ Net Income (Loss).......................................... $ 319 $ 335 $ (261) ====== ====== ====== Basic Earnings (Loss) per Common Share..................... $ 1.80 $ 1.89 $(1.47) ====== ====== ====== Diluted Earnings (Loss) per Common Share................... $ 1.79 $ 1.88 $(1.47) ====== ====== ======
See accompanying Notes to Consolidated Financial Statements. 21 24 BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET (IN MILLIONS, EXCEPT SHARE DATA)
DECEMBER 31, ---------------------- 1997 1996 -------- -------- ASSETS Current Assets Cash and Cash Equivalents................................. $ 152 $ 77 Short-term Investments.................................... 83 - Accounts Receivable....................................... 376 484 Inventories............................................... 39 35 Other Current Assets...................................... 28 28 ------ ------ 678 624 ------ ------ Oil and Gas Properties (Successful Efforts Method).......... 8,740 8,863 Other Properties............................................ 615 554 ------ ------ 9,355 9,417 Accumulated Depreciation, Depletion and Amortization...... 4,315 4,489 ------ ------ Properties -- Net...................................... 5,040 4,928 ------ ------ Other Assets................................................ 103 131 ------ ------ Total Assets...................................... $5,821 $5,683 ====== ====== LIABILITIES Current Liabilities Accounts Payable.......................................... $ 395 $ 348 Taxes Payable............................................. 71 74 Accrued Interest.......................................... 28 28 Dividends Payable......................................... 24 17 Deferred Revenue.......................................... 19 20 Other Current Liabilities................................. 1 29 ------ ------ 538 516 ------ ------ Long-term Debt.............................................. 1,748 1,853 ------ ------ Deferred Income Taxes....................................... 203 162 ------ ------ Deferred Revenue............................................ 56 75 ------ ------ Other Liabilities and Deferred Credits...................... 260 269 ------ ------ Commitments and Contingent Liabilities STOCKHOLDERS' EQUITY Preferred Stock, Par Value $.01 Per Share (Authorized 75,000,000 Shares; No Shares Issued)......................................... - - Common Stock, Par Value $.01 Per Share (Authorized 325,000,000 Shares; Issued 202,795,635 and 202,202,891 Shares for 1997 and 1996, respectively)................... 2 2 Paid-in Capital............................................. 3,001 2,982 Retained Earnings........................................... 1,051 813 ------ ------ 4,054 3,797 Cost of Treasury Stock (26,087,134 and 25,081,301 Shares for 1997 and 1996, respectively).............................. 1,038 989 ------ ------ Stockholders' Equity........................................ 3,016 2,808 ------ ------ Total Liabilities and Stockholders' Equity........ $5,821 $5,683 ====== ======
See accompanying Notes to Consolidated Financial Statements. 22 25 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF CASH FLOWS (IN MILLIONS)
YEAR ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 -------- -------- -------- Cash Flows From Operating Activities Net Income (Loss)......................................... $ 319 $ 335 $(261) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities Depreciation, Depletion and Amortization............... 538 534 545 Deferred Income Taxes.................................. 36 32 (359) Exploration Costs...................................... 259 159 111 Gain on Sales of Oil and Gas Properties................ (50) - - Impairment of Oil and Gas Properties................... - - 490 Working Capital Changes Accounts Receivable.................................... 108 (135) (28) Inventories............................................ (4) 39 5 Other Current Assets................................... - 1 (5) Accounts Payable....................................... 47 (57) 45 Taxes Payable.......................................... (3) 11 12 Accrued Interest....................................... - 2 - Other Current Liabilities.............................. (22) 37 8 Other..................................................... (106) 37 124 ------- ----- ----- Net Cash Provided By Operating Activities......... 1,122 995 687 ------- ----- ----- Cash Flows From Investing Activities Additions to Properties................................... (1,245) (804) (787) Short-term Investments.................................... (83) - - Proceeds from Sales and Other............................. 494 193 192 ------- ----- ----- Net Cash Used In Investing Activities............. (834) (611) (595) ------- ----- ----- Cash Flows From Financing Activities Proceeds from Long-term Debt.............................. - 150 178 Reduction in Long-term Debt............................... (105) (337) (184) Dividends Paid............................................ (74) (77) (78) Common Stock Purchases.................................... (58) (112) (5) Other..................................................... 24 38 (4) ------- ----- ----- Net Cash Used In Financing Activities............. (213) (338) (93) ------- ----- ----- Increase (Decrease) in Cash and Cash Equivalents............ 75 46 (1) Cash and Cash Equivalents Beginning of Year......................................... 77 31 32 ------- ----- ----- End of Year............................................... $ 152 $ 77 $ 31 ======= ===== =====
See accompanying Notes to Consolidated Financial Statements. 23 26 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN MILLIONS, EXCEPT SHARE DATA)
COST OF COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS' STOCK CAPITAL EARNINGS OTHER STOCK EQUITY ------ ------- -------- ----- -------- ------------- Balance, December 31, 1994................... $2 $2,951 $ 893 $(5) $ (921) $2,920 Net Loss................................... (261) (261) Cash Dividends ($.44 per Share)............ (77) (77) Stock Purchases (132,900 Shares)........... (5) (5) Stock Option Activity and Other............ 4 3 7 14 -- ------ ------ --- ------- ------ Balance, December 31, 1995................... 2 2,955 555 (2) (919) 2,591 Net Income................................. 335 335 Cash Dividends ($.44 per Share)............ (77) (77) Stock Purchases (2,706,000 Shares)......... (112) (112) Stock Option Activity and Other............ 27 2 42 71 -- ------ ------ --- ------- ------ Balance, December 31, 1996................... 2 2,982 813 - (989) 2,808 Net Income................................. 319 319 Cash Dividends ($.46 per Share)............ (82) (82) Stock Purchases (1,312,500 Shares)......... (58) (58) Stock Option Activity and Other............ 19 1 9 29 -- ------ ------ --- ------- ------ Balance, December 31, 1997................... $2 $3,001 $1,051 $ - $(1,038) $3,016 == ====== ====== === ======= ======
See accompanying Notes to Consolidated Financial Statements. 24 27 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Principles of Consolidation and Reporting The consolidated financial statements include the accounts of Burlington Resources Inc. ("BR") and its majority-owned subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. Due to the nature of financial reporting, management makes estimates and assumptions in preparing the consolidated financial statements. Actual results could differ from estimates. The consolidated financial statements include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on net income or stockholders' equity. All operational and financial information contained herein includes the combined business activities for BR and LL&E for all periods presented. Cash and Cash Equivalents All short-term investments purchased with a maturity of three months or less are considered cash equivalents. Cash equivalents are stated at cost, which approximates market value. Short-term Investments Short-term investments consist of highly-liquid debt securities with a maturity of more than three months. The securities are available for sale and are carried at fair value based on quoted market prices. As of December 31, 1997, the fair value of these investments approximated amortized cost. Unrealized gains and losses, net of tax, are included as a component of stockholders' equity until realized. Realized gains and losses are based on specific identification of the securities sold. Inventories Inventories of materials, supplies and products are valued at the lower of average cost or market. Properties Oil and gas properties are accounted for using the successful efforts method. Under this method, all development costs and acquisition costs of proved properties are capitalized and amortized on a units-of-production basis over the remaining life of proved developed reserves and proved reserves, respectively. Costs of drilling exploratory wells are initially capitalized, but charged to expense if and when a well is determined to be unsuccessful. In addition, unamortized capital costs at a field level are reduced to fair value if the sum of expected undiscounted future cash flows is less than net book value. Costs of retired, sold or abandoned properties that constitute a part of an amortization base are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization. Gains or losses from the disposal of other properties are recognized currently. Expenditures for maintenance, repairs and minor renewals necessary to maintain properties in operating condition are expensed as incurred. Major replacements and renewals are capitalized. All properties are stated at cost. Revenue Recognition Gas revenues are recorded on the entitlement method. Under the entitlement method, revenue is recorded based on the Company's net interest. Functional Currency Foreign exploration and production operations are considered an extension of the Company's operations. The assets, liabilities and operations of foreign locations are therefore measured using the 25 28 United States dollar as the functional currency. Foreign currency transaction adjustments, which were not material, are included in net income. Hedging and Related Activities In order to mitigate the risk of market price fluctuations, oil and gas futures, swaps and options contracts may be entered into as hedges of the Company's production. Changes in the market value of these contracts are deferred until the gain or loss is recognized on the hedged commodity. 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. The Company also enters into swap agreements to convert fixed price gas sales contracts to market-sensitive contracts. Gains or losses resulting from these transactions are included in revenue as the related physical production is delivered. These 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. Credit and Market Risks The Company manages and controls market and counterparty credit risk through established formal internal control procedures which are reviewed on an ongoing basis. The Company attempts to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures and through establishment of valuation reserves related to counterparty credit risk. In the normal course of business, collateral is not required for financial instruments with credit risk. Income Taxes Income taxes are provided based on earnings reported for tax return purposes in addition to a provision for deferred income taxes. Deferred income taxes are provided to reflect the tax consequences in future years of differences between the financial statement and tax basis of assets and liabilities. Tax credits are accounted for under the flow-through method, which reduces the provision for income taxes in the year the tax credits are earned. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. Stock-Based Compensation The Company uses the intrinsic value based method of accounting for stock-based compensation. Under this method, the Company records no compensation expense for stock options granted when the exercise price for options granted is equal to the fair market value of the Company's stock on the date of the grant. Earnings per Common Share 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 177 million, 177 million and 178 million for the years ended December 31, 1997, 1996 and 1995, 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 178 million for the years ended December 31, 1997, 1996 and 1995. No adjustments were made to reported net income (loss) in the computation of EPS. 26 29 2. MERGER On July 17, 1997, Burlington Resources Inc. and The Louisiana Land and Exploration Company announced that they had entered into an Agreement and Plan of Merger (the "Merger"). On October 22, 1997, the Merger was completed and LL&E became a wholly-owned subsidiary of the Company. Pursuant to the Merger, BR issued 52,795,635 shares of its Common Stock based on an exchange ratio of 1.525 for each outstanding share of LL&E stock. The Merger was accounted for as a pooling of interests and qualified as a tax-free reorganization. The transaction was valued at approximately $3 billion based on BR's closing stock price on October 22, 1997. During the fourth quarter of 1997, the Company recorded a pretax charge of $80 million ($71 million after tax) for direct costs associated with the Merger. These costs primarily consist of $44 million for severance and related exit costs and $36 million for direct transaction costs. Approximately $44 million of accrued unpaid costs remained on the consolidated balance sheet as of December 31, 1997. The separate results of operations of BR and LL&E are as follows. Certain reclassifications were made to the results of LL&E to conform to the presentation used by BR.
(UNAUDITED) NINE MONTHS YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30, ----------------- 1997 1996 1995 ------------- ------- ------- (IN MILLIONS) Revenues BR...................................................... $ 987 $ 1,293 $ 873 LL&E.................................................... 441 863 822 Conforming reclassifications............................ 31 44 39 ------ ------- ------- Combined................................................ $1,459 $ 2,200 $ 1,734 ====== ======= ======= Net Income (Loss) BR...................................................... $ 249 $ 255 $ (280) LL&E.................................................... 33 80 19 ------ ------- ------- Combined................................................ $ 282 $ 335 $ (261) ====== ======= =======
3. HEDGING ACTIVITIES Gas Swaps The Company enters into gas swap agreements to offset the effects of long-term fixed-price contracts for natural gas. The Company also enters into gas swap agreements to fix the price of natural gas in the short-term. The Company is a fixed-price payor on approximately 2.9 BCF (which is less than 1 percent of the Company's 1997 gas production) at prices ranging from $2.02 to $2.21 per MMBTU for production through March 31, 1999. These transactions convert fixed-price contracts to market-sensitive contracts. The Company is a fixed-price receivor on approximately 18.5 BCF (which approximates 3 percent of the Company's 1997 gas production) at prices ranging from $1.82 to $3.36 per MMBTU for production through October 31, 1998. These transactions are a hedge of the Company's underlying production. The deferred gain on these types of transactions as of December 31, 1997 was approximately $7 million. Futures Contracts The Company sells crude oil and natural gas futures contracts on the New York Mercantile Exchange ("NYMEX") and sells natural gas futures contracts on the Kansas City Board of Trade ("KBOT"). These contracts allow the Company to sell crude oil and natural gas at a future date for a specified price. Outstanding crude oil futures contracts as of December 31, 1997 totaled 1.7 MMBbls (which approximates 5 percent of the Company's 1997 oil production) at NYMEX prices ranging from $20.50 to $22.00 per bbl for production through November 30, 1998. Outstanding natural gas futures contracts as of December 31, 1997 totaled 16.4 BCF (which approximates 3 percent of the Company's 27 30 1997 gas production) at NYMEX and KBOT prices ranging from $1.95 to $3.73 per MMBTU for production through October 31, 1998. The deferred gain on crude oil and natural gas futures contracts as of December 31, 1997 was approximately $11 million. Options Contracts The Company utilizes options and swaps which set a floor price for anticipated future crude oil and natural gas production and allow the Company to participate in market price increases which exceed specific non-participation ranges and floor prices. At December 31, 1997, the Company had approximately 57 BCF of 1998 gas production (which approximates 9 percent of the Company's 1997 gas production) hedged at an average floor price of $1.80 per MMBTU and a non-participation range in market price increases limited to $.24 per MMBTU. At December 31, 1997, the Company had approximately 38 BCF of 1999 gas production (which approximates 6 percent of the Company's 1997 gas production) hedged at an average floor price of $1.79 per MMBTU and non-participation range in market price increases limited to $.23 per MMBTU. At December 31, 1997, these transactions had a deferred loss of approximately $3 million for 1998 gas production and a deferred gain of $300 thousand for 1999 gas production. At December 31, 1997, the Company had approximately 2 MMBbls of 1998 oil production (which approximates 6 percent of 1997 oil production) hedged at an average floor price of $19.38 per barrel and a non-participation range in market price increases limited to $2.25 per barrel. The deferred gain on these transactions, as of December 31, 1997, was approximately $4 million. 4. INCOME TAXES The jurisdictional components of income (loss) before income taxes follow.
YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 1995 ---- ---- ----- (IN MILLIONS) Domestic.................................................... $369 $400 $(594) Foreign..................................................... 42 33 51 ---- ---- ----- Total............................................. $411 $433 $(543) ==== ==== =====
The provision (benefit) for income taxes follows.
YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 1995 ---- ---- ----- (IN MILLIONS) Current Federal................................................... $44 $53 $ 62 State..................................................... 2 11 12 Foreign................................................... 10 2 3 --- --- ----- 56 66 77 --- --- ----- Deferred Federal................................................... 30 18 (321) State..................................................... 11 9 (39) Foreign................................................... (5) 5 1 --- --- ----- 36 32 (359) --- --- ----- Total............................................. $92 $98 $(282) === === =====
28 31 Reconciliation of the federal statutory income tax rate to the effective income tax rate follows.
YEAR ENDED DECEMBER 31, --------------------------- 1997 1996 1995 ----- ----- ----- Statutory rate.............................................. 35.0% 35.0% (35.0)% State income taxes net of federal tax benefit............... 2.1 3.0 (3.2) Foreign income taxes net of federal tax benefit............. 2.1 .2 .6 Tax credits................................................. (18.5) (15.0) (15.4) Merger costs................................................ 4.6 -- -- Other....................................................... (2.8) (.7) 1.1 ----- ----- ----- Effective rate.................................... 22.5% 22.5% (51.9)% ===== ===== =====
Deferred income tax liabilities (assets) follow.
DECEMBER 31, ---------------- 1997 1996 ----- ----- (IN MILLIONS) Deferred income tax liabilities Excess of book over tax basis of properties............... $ 548 $ 426 ----- ----- Deferred income tax assets AMT credit carryforward................................... (255) (213) Deferred foreign tax credits.............................. (66) (61) Net operating loss carryforward........................... (4) (14) Foreign tax credit carryforward........................... (2) (4) Financial accruals and other.............................. (51) (6) ----- ----- (378) (298) Less valuation allowance.......................... 33 34 ----- ----- Net deferred income tax liabilities....................... $ 203 $ 162 ===== =====
The above net deferred tax liabilities as of December 31, 1997 and 1996, include deferred state income tax liabilities of approximately $39 million and $28 million, respectively. The Alternative Minimum Tax ("AMT") credit carryforward, related primarily to nonconventional fuel tax credits, is available to offset future federal income tax liabilities. The AMT credit carryforward has no expiration. The benefit of these tax credits is recognized in net income for accounting purposes. The benefit is reflected in the current tax provision to the extent the Company is able to utilize the credits for tax return purposes. The foreign tax credit carryforward is available through the year 2001 to offset future federal income taxes. The federal income tax net operating loss carryforward is available through the year 2009 to offset future federal taxable income, subject to the separate return limitation provisions of the federal income tax regulations. A valuation allowance is provided for uncertainties surrounding the realization of certain foreign tax credit carryforwards and certain deferred foreign tax credits. 29 32 5. LONG-TERM DEBT Long-term Debt follows.
DECEMBER 31, ------------------ 1997 1996 ------ ------ (IN MILLIONS) Commercial Paper............................................ $ - $ 105 Notes, 7.15%, due 1999...................................... 300 300 Notes, 6 7/8%, due 1999..................................... 150 150 Notes, 9 5/8%, due 2000..................................... 150 150 Notes, 8 1/2%, due 2001..................................... 150 150 Notes, 8 1/4%, due 2002..................................... 100 100 Debentures, 9 7/8%, due 2010................................ 150 150 Debentures, 7 5/8%, due 2013................................ 100 100 Debentures, 9 1/8%, due 2021................................ 150 150 Debentures, 7.65%, due 2023................................. 200 200 Debentures, 8.20%, due 2025................................. 150 150 Debentures, 6 7/8%, due 2026................................ 150 150 Other, including discounts -- net........................... (2) (2) ------ ------ Total............................................. $1,748 $1,853 ====== ======
The Company has debt maturities of $450 million, $150 million, $150 and $100 million, due in 1999, 2000, 2001 and 2002, respectively. The Company's credit facilities are comprised of a $600 million revolving credit agreement that expires in July 2001 and a $300 million revolving credit agreement that expires in July 1998. The $300 million revolving credit agreement is renewable annually by mutual consent and was renewed in July 1997. Annual fees are .10 and .06 percent, respectively, of the commitments. At the Company's option, interest on borrowings is based on the Prime rate or Eurodollar rates. The unused commitment under these agreements is available to cover certain debt due within one year; therefore, commercial paper is classified as long-term debt. Under the covenants of these agreements, debt cannot exceed 52.5 percent of the sum of debt and tangible net worth (as defined in the agreements). Additionally, tangible net worth cannot be less than $1.3 billion. As of December 31, 1997, there were no borrowings outstanding under these credit facilities. In addition, the Company has the capacity to issue $500 million of debt securities under shelf registration statements filed with the Securities and Exchange Commission. 6. TRANSPORTATION ARRANGEMENTS WITH EL PASO NATURAL GAS COMPANY In 1997, 1996 and 1995, approximately 41 percent, 43 percent and 47 percent, respectively, of the Company's gas production was transported to direct sale customers through El Paso Natural Gas Company's ("EPNG") pipeline systems. These transportation arrangements are pursuant to EPNG's approved Federal Energy Regulatory Commission tariffs applicable to all shippers. The Company expects to continue to transport a substantial portion of its future gas production through EPNG's pipeline system. See Note 9 for demand charges paid to EPNG which provide the Company with firm and interruptible transportation capacity rights on interstate and intrastate pipeline systems. 7. CAPITAL STOCK Stock Options The Company's 1993 Stock Incentive Plan (the "1993 Plan") succeeds its 1988 Stock Option Plan which expired by its terms in May 1993 but remains in effect for options granted prior to May 1993. The 30 33 1993 Plan provides for the grant of stock options, restricted stock, stock purchase rights and stock appreciation rights or limited stock appreciation rights (together "SARs"). Under the 1993 Plan, options may be granted to officers and key employees at fair market value on the date of grant, exercisable in whole or part by the optionee after completion of at least one year of continuous employment from the grant date and have a term of ten years. At December 31, 1997, 5,711,034 shares of options were available for grant under the 1993 Plan. Under the 1997 Employee Stock Incentive Plan (the "1997 Plan"), stock options and restricted stock ("Awards") may be granted to employees who are not eligible to participate in the 1993 Plan. The options are granted at fair market value on the grant date, become exercisable in whole after the completion of at least one year of continuous employment and have a term of ten years. The 1997 Plan limits Awards, in aggregate, to a maximum of one million annually. Activity in the Company's stock option plans follows.
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE ------- ---------------- Balance, December 31, 1994.................................. 5,503,248 $28.85 Granted................................................... 1,128,843 29.47 Exercised................................................. (298,984) 26.31 Cancelled................................................. (49,448) 30.88 ---------- Balance, December 31, 1995.................................. 6,283,659 29.07 Granted................................................... 2,896,483 47.35 Exercised................................................. (2,288,458) 26.91 Cancelled................................................. (105,615) 34.74 ---------- Balance, December 31, 1996.................................. 6,786,069 37.51 Granted................................................... 2,253,627 40.99 Exercised................................................. (886,009) 27.09 Cancelled................................................. (210,613) 47.82 ---------- Balance, December 31, 1997.................................. 7,943,074 $39.39 ==========
The following table summarizes information related to stock options outstanding and exercisable at December 31, 1997.
WEIGHTED WEIGHTED AVERAGE WEIGHTED AVERAGE REMAINING AVERAGE SHARES RANGE OF EXERCISE EXERCISE CONTRACTUAL SHARES EXERCISE OUTSTANDING PRICES PRICE LIFE EXERCISABLE PRICE - ----------- ----------------- -------- ----------- ----------- -------- 3,328,674 $19.51 to $38.00 $28.95 5.9 years 2,683,181 $28.25 4,614,400 39.93 to 52.03 46.92 9.1 years 1,234,150 46.27 --------- --------- 7,943,074 $19.51 to $52.03 $39.39 7.7 years 3,917,331 $33.93 ========= =========
Exercisable stock options and weighted average exercise prices at December 31, 1996 and 1995 follow.
WEIGHTED AVERAGE SHARES EXERCISE EXERCISABLE PRICE ----------- -------- December 31, 1996........................................... 3,593,423 $30.79 ========= ====== December 31, 1995........................................... 5,021,203 $29.13 ========= ======
31 34 The weighted average fair values of options granted during the years 1997, 1996 and 1995 were $10.45, $12.45 and $8.24, respectively. The fair values of employee stock options were calculated using a variation of the Black-Scholes stock option valuation model with the following weighted average assumptions for grants in 1997, 1996 and 1995: stock price volatility of 18.35 percent, 18.62 percent and 20.63 percent, respectively; risk free rate of return ranging from 5.91 percent to 6.53 percent; dividend yield of 1.07 percent, 1 percent and .93 percent, respectively; and an expected term of 5 years. If the fair value based method of accounting had been applied, the Company's net income and EPS would have been reduced to the pro forma amounts indicated below. The fair value of stock options included in the pro forma amounts is not necessarily indicative of future effects on net income and EPS.
YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 1995 ------ ------ ------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Net Income (Loss) -- as reported............................ $ 319 $ 335 $ (261) Net Income (Loss) -- pro forma.............................. 308 329 (262) Basic Earnings (Loss) per Common Share -- as reported....... 1.80 1.89 (1.47) Basic Earnings (Loss) per Common Share -- pro forma......... 1.74 1.86 (1.47) Diluted Earnings (Loss) per Common Share -- as reported..... 1.79 1.88 (1.47) Diluted Earnings (Loss) per Common Share -- pro forma....... $1.73 $1.85 $(1.47)
Stock Appreciation Rights The Company has granted SARs in connection with certain outstanding options under the 1988 Stock Option Plan. SARs are subject to the same terms and conditions as the related options. A SAR entitles an option holder, in lieu of exercise of an option, to receive a cash payment equal to the difference between the option price and the fair market value of the Company's common stock based upon the plan provisions. To the extent the SAR is exercised, the related option is cancelled and to the extent the option is exercised the related SAR is cancelled. The outstanding SARs are exercisable only under certain circumstances related to significant changes in the ownership of the Company or its holdings, or certain changes in the constitution of its Board of Directors. At December 31, 1997, there were 391,267 SARs outstanding related to stock options with a weighted average exercise price of $27.09 per share. Preferred Stock and Preferred Stock Purchase Rights The Company is authorized to issue 75,000,000 shares of preferred stock, par value $.01 per share, and as of December 31, 1997 there were no shares issued. On December 15, 1988, the Company's Board of Directors designated 3,250,000 of the authorized preferred shares as Series A Preferred Stock. Upon issuance each one-hundredth of a share of Series A Preferred Stock will have dividend and voting rights approximately equal to those of one share of Common Stock of the Company. In addition, on December 15, 1988, the Board of Directors declared a dividend distribution of one Right for each outstanding share of Common Stock of the Company. The Rights were amended on February 23, 1989. The Rights become exercisable if, without the Company's prior consent, a person or group acquires securities having 15 percent or more of the voting power of all of the Company's voting securities (an "Acquiring Person") or ten days following the announcement of a tender offer which would result in such ownership. Each Right, when exercisable, entitles the registered holder to purchase from the Company one-hundredth of a share of Series A Preferred Stock at a price of $95 per one-hundredth of a share, subject to adjustment. If, after the Rights become exercisable, the Company were to be involved in a merger or other business combination in which its Common Stock was exchanged or changed or 50% or more of the Company's assets or earning power were sold, each Right would permit the holder to purchase, for the exercise price, stock of the acquiring company having a value of twice the exercise price (the "Merger Right"). In addition, except for certain permitted offers, if any person 32 35 or group becomes an Acquiring Person, each Right would permit the purchase, for the exercise price, of Common Stock of the Company having a value of twice the exercise price (the "Subscription Right"). Rights owned by an Acquiring Person are void as they relate to the Subscription Right or the Merger Right. The Rights may be redeemed by the Company under certain circumstances until their expiration date for $.05 per Right. 8. RETIREMENT BENEFITS Pension The Company's pension plans are non-contributory defined benefit plans covering substantially all employees. The benefits are based on years of credited service and final average compensation. Contributions to the plans are limited to amounts that are currently deductible for tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. The following tables set forth the amounts recognized in the Consolidated Balance Sheet and Statement of Income.
DECEMBER 31, ---------------------- 1997 1996 -------- -------- (IN MILLIONS) Actuarial present value of benefit obligations Accumulated benefit obligation, including vested benefits of $127 and $120.............................. $ 131 $ 124 ======== ======== Projected benefit obligation for service to date.......... $ 178 $ 161 Plan assets, primarily marketable equity and debt securities, at fair value................................. (161) (144) -------- -------- Funded status of projected benefit obligation............... 17 17 Unrecognized net loss....................................... (26) (27) Unamortized net transition obligation....................... (2) (2) -------- -------- Net prepaid pension asset................................... $ (11) $ (12) ======== ========
YEAR ENDED DECEMBER 31, ------------------------ 1997 1996 1995 ---- ---- ---- (IN MILLIONS) Pension cost for the plans includes the following components Service cost -- benefits earned during the period......... $ 9 $ 9 $ 8 Interest cost on projected benefit obligation............. 12 12 11 Actual return on plan assets.............................. (28) (19) (23) Net amortization and deferred amounts..................... 18 12 16 ---- ---- ---- Net pension cost.......................................... $ 11 $ 14 $ 12 ==== ==== ====
The projected benefit obligation was determined using a weighted average discount rate of 7.25 percent in 1997 and 7.75 percent in 1996, and a rate of increase in future compensation levels of 5 percent. The expected long-term rate of return on plan assets was 9 percent in both 1997 and 1996. Postretirement The Company has postretirement medical and dental care plans for a closed group of retirees and their dependents and certain employees who retire by the end of 1999. The Company also maintains a 33 36 Medicare Part B reimbursement plan and life insurance coverage for a closed group of retirees of a former subsidiary. The postretirement benefit plans are unfunded and the Company funds claims on a cash basis. The following tables set forth the amounts recognized in the Consolidated Balance Sheet and Statement of Income.
DECEMBER 31, -------------- 1997 1996 ---- ---- (IN MILLIONS) Accumulated postretirement benefit obligation Retirees.................................................. $22 $22 Employees eligible to retire.............................. 4 4 Other employees........................................... 7 5 --- --- 33 31 Unrecognized net loss....................................... (3) (2) --- --- Accrued postretirement benefit cost......................... $30 $29 === ===
YEAR ENDED DECEMBER 31, ------------------------ 1997 1996 1995 ---- ---- ---- (IN MILLIONS) Service cost................................................ $1 $1 $1 Interest cost............................................... 3 3 2 -- -- -- Net postretirement benefit cost............................. $4 $4 $3 == == ==
Assumptions utilized to measure the accumulated postretirement obligation at December 31, 1997 and 1996 were: discount rates of 7.25 percent and 7.5 percent, respectively; health care cost trend rates of: 1997 -- 5 percent declining to 4 percent in the year 2002; 1996 -- 8 percent declining to 4 percent in the year 2002 and held constant thereafter. A one percent increase in the assumed trend rates would have resulted in increases in the accumulated postretirement benefit obligation at December 31, 1997 and 1996 of approximately $3 million for both years. The aggregate of service cost and interest cost for the years ended December 31, 1997 and 1996 would have increased by $400 thousand and $500 thousand, respectively. 9. COMMITMENTS AND CONTINGENT LIABILITIES Demand Charges The Company has entered into contracts which provide firm transportation capacity rights on interstate and intrastate pipeline systems. The remaining terms on these contracts range from 1 to 10 years and require the Company to pay transportation demand charges regardless of the amount of pipeline capacity utilized by the Company. The Company paid $49 million, $61 million and $53 million of demand charges of which $34 million, $47 million and $40 million was paid to EPNG for the years ended December 31, 1997, 1996 and 1995, respectively. 34 37 Future transportation demand charge commitments at December 31, 1997 follow.
YEAR ENDED DECEMBER 31, ------------ (IN MILLIONS) 1998........................................................ $ 60 1999........................................................ 61 2000........................................................ 49 2001........................................................ 43 2002........................................................ 43 Thereafter.................................................. 168 ---- Total.................................................. $424 ====
Lease Obligations The Company has operating leases for office space and other property and equipment. The Company incurred lease rental expense of $18 million, $20 million and $19 million for the years ended December 31, 1997, 1996 and 1995, respectively. Future minimum annual rental commitments at December 31, 1997 follow.
YEAR ENDED DECEMBER 31, ------------ (IN MILLIONS) 1998........................................................ $ 18 1999........................................................ 18 2000........................................................ 15 2001........................................................ 14 2002........................................................ 14 Thereafter.................................................. 79 ---- Total.................................................. $158 ====
Legal Proceedings On May 25, 1995, the 270th Judicial District Court of Harris County, Texas entered an order in a lawsuit styled Caroline Altheide, et al. v. Meridian Oil Inc. (now known as Burlington Resources Oil & Gas Company), et al., which allowed the suit to be maintained as a class action on behalf of all royalty and overriding royalty interest owners in all Burlington Resources Oil & Gas Company ("BROG") properties and all working interest owners in properties operated by BROG who received payments from BROG at any time from and after December 1, 1986 based upon wellhead sales of natural gas to Burlington Resources Trading Inc. The lawsuit involves claims for unspecified actual and punitive damages based upon alleged breaches of duties owed to interest owners because of the use of corporate affiliates to gather, treat and market natural gas. The plaintiffs allege that BROG's gas producing affiliates have sold natural gas to marketing affiliates at lower inter-affiliate settlement prices which were then used as the basis for accounting to interest owners. Plaintiffs also allege that BROG's pricing includes inappropriate deductions of inflated gathering and transportation costs. BROG has consistently denied liability and perfected an interlocutory appeal of the class certification order on May 30, 1995. Oral argument on the interlocutory appeal of the class certification order was heard February 28, 1996. Following the argument, but in advance of a decision by the appellate court, the parties executed a settlement agreement dated August 6, 1996, which the trial court preliminarily approved on August 12, 1996. After notice to the class members, the court conducted a hearing on November 8, 1996, and gave final approval to the terms of the parties' settlement agreement in its Judgment signed on November 12, 1996. Four class members who appeared through counsel at the November 8, 1996 hearing to object to the settlement filed a motion for a new trial or, in the 35 38 alternative, to modify, alter or amend judgment, which motion was denied by Order signed December 16, 1996. The objectors purported to perfect an appeal of the Judgment on February 7, 1997. On July 24, 1997, the Fourteenth Court of Appeals dismissed the appeal. On October 17, 1997, the objectors filed a Petition for Review with The Supreme Court of Texas. The Company and the Plaintiffs intend to defend this appeal vigorously. The Company and its subsidiaries are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits and other proceedings cannot be predicted with certainty, management expects these matters, including the above-described Altheide litigation, will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. 10. DIVESTITURE PROGRAM AND REORGANIZATION In June 1997, the Company completed its non-strategic divestiture program which was announced in July 1996. As planned, the Company sold approximately 27,000 wells and related facilities. Before closing adjustments, gross proceeds for 1997 from the sales of oil and gas properties related to this divestiture program were approximately $450 million (approximately $418 million, net of closing adjustments). During the second quarter of 1997, the Company recorded a pretax gain of approximately $50 million related to the sales of oil and gas properties. This program allowed the Company to reorganize and resulted in a reduction of 456 employees. As of December 31, 1997, this program was complete. On July 31, 1996, the Company completed the sale of its crude oil refinery and terminal, including crude oil and refined product inventories, for approximately $70 million. The net book value of refinery property, plant and equipment and inventory at that date was approximately $68 million. 11. DEFERRED REVENUE In September 1996, the Company received cash proceeds of $108 million for a transaction in which it is obligated to deliver gas through December 31, 2002. The proceeds were recorded as deferred revenue and are being amortized into revenues as the gas is delivered. Approximately $20 million and $13 million of deferred revenue was recognized in 1997 and 1996, respectively. 12. IMPAIRMENT OF OIL AND GAS PROPERTIES Effective September 30, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121 which requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes indicate that the net book value of the asset may not be recoverable. An impairment loss is recognized if the sum of expected undiscounted future cash flows from the use of the asset is less than the net book value of the asset. Under SFAS No. 121, the Company evaluates impairment of its oil and gas properties on a field-by-field basis rather than in the aggregate. Based upon this evaluation, in 1995, certain properties were deemed to be impaired. For those properties, the Company adjusted the net book value of the properties to their fair value based upon expected future discounted cash flows. As a result of the Company's adoption of SFAS No. 121 in September 1995, combined with a weak gas market, the Company recognized a non-cash, pretax charge of $490 million ($304 million after tax) related to its oil and gas properties. 13. RECENT ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, Reporting Comprehensive Income, which is effective for fiscal years beginning after December 15, 1997. 36 39 SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. It requires (a) classification of items of other comprehensive income by their nature in a financial statement and (b) display of the accumulated balance of other comprehensive income separate from retained earnings and additional paid-in capital in the equity section of a statement of financial position. The Company plans to adopt SFAS No. 130 for the quarter ended March 31, 1998. In June 1997, the FASB also issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which is effective for fiscal years beginning after December 15, 1997. SFAS No. 131 establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This Statement supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise, but retains the requirement to report information about major customers. The Company plans to adopt SFAS No. 131 for the year ended December 31, 1998. 14. SUPPLEMENTAL CASH FLOW INFORMATION The following is additional information concerning supplemental disclosures of cash flow activities.
YEAR ENDED DECEMBER 31, ------------------------ 1997 1996 1995 ---- ---- ---- (IN MILLIONS) Interest Paid..................................... $149 $154 $158 Income Taxes Paid--Net............................ $ 56 $ 60 $ 62
15. SEGMENT INFORMATION The Company's operations are primarily related to oil and gas exploration and production. Accordingly, such operations are classified as one business segment. Financial information by geographic area follows.
YEAR ENDED DECEMBER 31, ------------------------------ 1997 1996 1995 ------ ------ ------ (IN MILLIONS) Revenues Domestic................................ $1,795 $1,989 $1,532 Foreign................................. 205 211 202 ------ ------ ------ Total Revenues..................... $2,000 $2,200 $1,734 ====== ====== ====== Operating Income (Loss) Domestic................................ $ 450 $ 526 $ (428) Foreign................................. 53 54 31 ------ ------ ------ Total Operating Income (Loss)...... $ 503 $ 580 $ (397) ====== ====== ======
DECEMBER 31, ------------------ 1997 1996 ------ ------ (IN MILLIONS) Total Assets Domestic............................................ $5,184 $5,129 Foreign............................................. 637 554 ------ ------ $5,821 $5,683 ====== ======
37 40 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Burlington Resources Inc. We have audited the accompanying consolidated balance sheet of Burlington Resources Inc. as of December 31, 1997 and 1996, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Burlington Resources Inc. at December 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. As discussed in Note 12 to the consolidated financial statements, the Company changed its method of accounting for the impairment of long-lived assets in 1995. Coopers & Lybrand L.L.P. Houston, Texas January 14, 1998 38 41 BURLINGTON RESOURCES INC. SUPPLEMENTARY FINANCIAL INFORMATION SUPPLEMENTAL OIL AND GAS DISCLOSURES--UNAUDITED The supplemental data presented herein reflects information for all of the Company's oil and gas producing activities. Capitalized costs for oil and gas producing activities follow.
DECEMBER 31, ------------------ 1997 1996 ------ ------ (IN MILLIONS) Proved properties........................................... $8,590 $8,678 Unproved properties......................................... 150 185 ------ ------ 8,740 8,863 Accumulated depreciation, depletion and amortization........ 4,003 4,300 ------ ------ Net capitalized costs............................. $4,737 $4,563 ====== ======
Costs incurred for oil and gas property acquisition, exploration and development activities follow.
YEAR ENDED DECEMBER 31, 1997 ----------------------------- DOMESTIC FOREIGN TOTAL -------- ------- ------ (IN MILLIONS) Property acquisition Unproved................................................. $ 93 $ 5 $ 98 Proved................................................... 54 160 214 Exploration................................................ 241 48 289 Development................................................ 539 15 554 ---- ---- ------ Total costs incurred............................. $927 $228 $1,155 ==== ==== ======
YEAR ENDED DECEMBER 31, 1996 ---------------------------- DOMESTIC FOREIGN TOTAL -------- ------- ----- (IN MILLIONS) Property acquisition Unproved.................................................. $ 48 $ 9 $ 57 Proved.................................................... 92 - 92 Exploration................................................. 134 29 163 Development................................................. 402 24 426 ---- --- ---- Total costs incurred.............................. $676 $62 $738 ==== === ====
YEAR ENDED DECEMBER 31, 1995 ---------------------------- DOMESTIC FOREIGN TOTAL -------- ------- ----- (IN MILLIONS) Property acquisition Unproved.................................................. $ 49 $11 $ 60 Proved.................................................... 103 - 103 Exploration................................................. 119 20 139 Development................................................. 356 28 384 ---- --- ---- Total costs incurred.............................. $627 $59 $686 ==== === ====
39 42 Results of operations for oil and gas producing activities follow.
YEAR ENDED DECEMBER 31, 1997 ---------------------------- DOMESTIC FOREIGN TOTAL -------- ------- ------ (IN MILLIONS) Net revenues................................................ $1,747 $ 205 $1,952 ------ ------ ------ Production costs............................................ 363 42 405 Exploration and leasehold impairment costs.................. 234 25 259 Operating expenses.......................................... 220 10 230 Depreciation, depletion and amortization.................... 422 75 497 ------ ------ ------ 1,239 152 1,391 ------ ------ ------ Operating income............................................ 508 53 561 Income tax provision........................................ 103 27 130 ------ ------ ------ Results of operations for oil and gas producing activities................................................ $ 405 $ 26 $ 431 ====== ====== ======
YEAR ENDED DECEMBER 31, 1996 ---------------------------- DOMESTIC FOREIGN TOTAL -------- ------- ------ (IN MILLIONS) Net revenues................................................ $1,682 $ 211 $1,893 ------ ------ ------ Production costs............................................ 372 51 423 Exploration and leasehold impairment costs.................. 145 14 159 Operating expenses.......................................... 224 11 235 Depreciation, depletion and amortization.................... 408 81 489 ------ ------ ------ 1,149 157 1,306 ------ ------ ------ Operating income............................................ 533 54 587 Income tax provision........................................ 131 20 151 ------ ------ ------ Results of operations for oil and gas producing activities................................................ $ 402 $ 34 $ 436 ====== ====== ======
YEAR ENDED DECEMBER 31, 1995 ---------------------------- DOMESTIC FOREIGN TOTAL -------- ------- ------ (IN MILLIONS) Net revenues................................................ $1,129 $ 201 $1,330 ------ ------ ------ Production costs............................................ 351 53 404 Exploration and leasehold impairment costs.................. 89 22 111 Operating expenses.......................................... 224 14 238 Depreciation, depletion and amortization.................... 415 81 496 Impairment of oil and gas properties........................ 490 - 490 ------ ------ ------ 1,569 170 1,739 ------ ------ ------ Operating income (loss)..................................... (440) 31 (409) Income tax provision (benefit).............................. (253) 14 (239) ------ ------ ------ Results of operations for oil and gas producing activities................................................ $ (187) $ 17 $ (170) ====== ====== ======
40 43 The following table reflects estimated quantities of proved oil and gas reserves. These reserves have been reduced for royalty interests owned by others. These reserves have been estimated by the Company's petroleum engineers. The Company considers such estimates to be reasonable, however, due to inherent uncertainties, estimates of underground reserves are imprecise and subject to change over time as additional information becomes available.
OIL (MMBBLS) GAS (BCF) -------------------------- -------------------------- DOMESTIC FOREIGN TOTAL DOMESTIC FOREIGN TOTAL -------- ------- ----- -------- ------- ----- PROVED DEVELOPED AND UNDEVELOPED RESERVES December 31, 1994............................ 236.6 44.6 281.2 6,175 310 6,485 Revision of previous estimates............ 4.9 (3.8) 1.1 18 8 26 Extensions, discoveries and other additions............................... 36.2 5.3 41.5 582 15 597 Production................................ (24.8) (8.4) (33.2) (520) (26) (546) Purchases of reserves in place............ 9.5 - 9.5 147 - 147 Sales of reserves in place................ (4.8) (1.6) (6.4) (205) (18) (223) ----- ---- ----- ----- --- ----- December 31, 1995............................ 257.6 36.1 293.7 6,197 289 6,486 Revision of previous estimates............ 6.6 (.4) 6.2 (8) 28 20 Extensions, discoveries and other additions............................... 33.1 2.3 35.4 474 34 508 Production................................ (26.1) (7.2) (33.3) (559) (28) (587) Purchases of reserves in place............ 8.0 - 8.0 78 - 78 Sales of reserves in place................ (4.2) - (4.2) (274) - (274) ----- ---- ----- ----- --- ----- December 31, 1996............................ 275.0 30.8 305.8 5,908 323 6,231 Revisions of previous estimates........... (15.6) (2.6) (18.2) 68 (4) 64 Extensions, discoveries and other additions............................... 44.9 .3 45.2 913 1 914 Production................................ (24.6) (7.2) (31.8) (583) (26) (609) Purchases of reserves in place............ 1.4 - 1.4 116 240 356 Sales of reserves in place................ (48.7) - (48.7) (538) - (538) ----- ---- ----- ----- --- ----- December 31, 1997............................ 232.4 21.3 253.7 5,884 534 6,418 ===== ==== ===== ===== === ===== PROVED DEVELOPED RESERVES January 1, 1995.............................. 210.0 37.3 247.3 5,078 272 5,350 December 31, 1995............................ 224.8 30.3 255.1 5,064 271 5,335 December 31, 1996............................ 242.0 25.4 267.4 4,870 265 5,135 December 31, 1997............................ 203.9 15.6 219.5 4,641 233 4,874
41 44 A summary of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves is shown below. Future net cash flows are computed using year end sales prices, costs and statutory tax rates (adjusted for tax credits and other items) that relate to the Company's existing proved oil and gas reserves.
DECEMBER 31, 1997 ------------------------------ DOMESTIC FOREIGN TOTAL -------- ------- ----- (IN MILLIONS) Future cash inflows......................................... $15,934 $ 1,800 $17,734 Less related future Production costs....................................... 4,076 702 4,778 Development costs...................................... 736 214 950 Income taxes........................................... 2,767 200 2,967 ------- ------- ------- Future net cash flows............................. 8,355 684 9,039 10% annual discount for estimated timing of cash flows.... 3,960 234 4,194 ------- ------- ------- Standardized measure of discounted future net cash flows................................................ $ 4,395 $ 450 $ 4,845 ======= ======= =======
DECEMBER 31, 1996 ------------------------------ DOMESTIC FOREIGN TOTAL -------- ------- ----- (IN MILLIONS) Future cash inflows......................................... $25,089 $ 1,261 $26,350 Less related future Production costs....................................... 5,514 216 5,730 Development costs...................................... 702 74 776 Income taxes........................................... 5,295 319 5,614 ------- ------- ------- Future net cash flows............................. 13,578 652 14,230 10% annual discount for estimated timing of cash flows.... 6,513 212 6,725 ------- ------- ------- Standardized measure of discounted future net cash flows................................................ $ 7,065 $ 440 $ 7,505 ======= ======= =======
A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and gas reserves follows.
YEAR ENDED DECEMBER 31, ----------------------------- 1997 1996 1995 ------- ------- ------- (IN MILLIONS) January 1................................................... $ 7,505 $ 4,393 $ 3,967 ------- ------- ------- Revisions of previous estimates Changes in prices and costs............................... (4,167) 4,981 284 Changes in quantities..................................... (23) 119 16 Changes in rate of production............................. (436) (77) 189 Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs..... 655 782 461 Purchases of reserves in place.............................. 246 148 120 Sales of reserves in place.................................. (667) (177) (162) Accretion of discount....................................... 1,048 529 471 Sales of oil and gas, net of production costs............... (1,547) (1,470) (926) Net change in income taxes.................................. 1,697 (1,652) (128) Other....................................................... 534 (71) 101 ------- ------- ------- Net change.................................................. (2,660) 3,112 426 ------- ------- ------- December 31................................................. $ 4,845 $ 7,505 $ 4,393 ======= ======= =======
42 45 BURLINGTON RESOURCES INC. QUARTERLY FINANCIAL DATA--UNAUDITED
1997(C) 1996(C) ------------------------------------ ------------------------------------ 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST ------ ------ ------ ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues................... $ 541 $ 464 $ 427 $ 568 $ 589 $ 526 $ 552 $ 533 Operating Income(a)........ 87 116 93 207 222 116 133 109 Net Income(a)(b)........... 37 65 86 131 139 73 65 58 Basic Earnings per Common Share.................... .20 .37 .49 .74 .78 .41 .37 .33 Diluted Earnings per Common Share.................... .20 .37 .49 .73 .78 .41 .36 .33 Dividends Declared per Common Share............. .14 .10 .11 .11 .11 .11 .11 .11 Common Stock Price Range High..................... 53 5/8 53 3/16 48 5/8 54 1/2 53 1/2 47 1/8 43 1/4 40 1/4 Low...................... $42 1/2 $43 5/8 $39 3/4 $42 5/8 $44 1/8 $41 5/8 $35 1/8 $35 5/8
- --------------- (a) During the fourth quarter of 1997, as a result of the Merger, the Company recorded a pretax charge of $80 million($71 million after tax). During the third quarter of 1996, as a result of the divestiture program and reorganization, the Company recorded a pretax charge of approximately $30 million($19 million after tax). (b) During the second quarter of 1997, as a result of the divestiture program, the Company recorded a pretax gain of $50 million($31 million after tax). (c) Amounts in periods prior to the Merger have been restated to combine BR and LL&E. 43 46 ITEM NINE CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEMS TEN AND ELEVEN DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND EXECUTIVE COMPENSATION A definitive proxy statement for the 1998 Annual Meeting of Stockholders of Burlington Resources Inc. will be filed no later than 120 days after the end of the fiscal year with the Securities and Exchange Commission. The information set forth therein under "Election of Directors" and "Executive Compensation" is incorporated herein by reference. Executive Officers of the Company are listed on page 12 of this Form 10-K. ITEM TWELVE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required is set forth under the caption "Election of Directors" in the Proxy Statement for the 1998 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM THIRTEEN CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required is set forth under the caption "Election of Directors" in the Proxy Statement for the 1998 Annual Meeting of Stockholders and is incorporated herein by reference. PART IV ITEM FOURTEEN EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE ---- FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION Consolidated Statement of Income.......................... 21 Consolidated Balance Sheet................................ 22 Consolidated Statement of Cash Flows...................... 23 Consolidated Statement of Stockholders' Equity............ 24 Notes to Consolidated Financial Statements................ 25 Report of Independent Accountants......................... 38 Supplemental Oil and Gas Disclosures -- Unaudited......... 39 Quarterly Financial Data -- Unaudited..................... 43 AMENDED EXHIBIT INDEX....................................... *
REPORTS ON FORM 8-K The Company filed a Form 8-K dated November 6, 1997, which included as an exhibit a Press Release dated October 22, 1997, announcing that an Agreement and Plan of Merger with The Louisiana Land and Exploration Company was consummated following the favorable votes of each company's stockholders. - --------------- * Included in Form 10-K filed with the Securities and Exchange Commission. 44 47 SIGNATURES REQUIRED FOR FORM 10-K Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Burlington Resources Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BURLINGTON RESOURCES INC. By BOBBY S. SHACKOULS ------------------------------------ Bobby S. Shackouls Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Burlington Resources Inc. and in the capacities and on the dates indicated. By BOBBY S. SHACKOULS Chairman of the Board, January 14, 1998 ----------------------------------------------------- President and Chief Bobby S. Shackouls Executive Officer JOHN E. HAGALE Executive Vice President and January 14, 1998 - -------------------------------------------------------- Chief Financial Officer John E. Hagale PHILIP W. COOK Vice President, January 14, 1998 - -------------------------------------------------------- Controller and Chief Philip W. Cook Accounting Officer H. LEIGHTON STEWARD Vice Chairman of the Board January 14, 1998 - -------------------------------------------------------- H. Leighton Steward JOHN V. BYRNE Director January 14, 1998 - -------------------------------------------------------- John V. Byrne S. PARKER GILBERT Director January 14, 1998 - -------------------------------------------------------- S. Parker Gilbert LAIRD I. GRANT Director January 14, 1998 - -------------------------------------------------------- Laird I. Grant JOHN T. LAMACCHIA Director January 14, 1998 - -------------------------------------------------------- John T. LaMacchia JAMES F. MCDONALD Director January 14, 1998 - -------------------------------------------------------- James F. McDonald KENNETH W. ORCE Director January 14, 1998 - -------------------------------------------------------- Kenneth W. Orce DONALD M. ROBERTS Director January 14, 1998 - -------------------------------------------------------- Donald M. Roberts JOHN F. SCHWARZ Director January 14, 1998 - -------------------------------------------------------- John F. Schwarz WALTER SCOTT, JR. Director January 14, 1998 - -------------------------------------------------------- Walter Scott, Jr. WILLIAM E. WALL Director January 14, 1998 - -------------------------------------------------------- William E. Wall
45 48 REPORT OF MANAGEMENT The management of Burlington Resources is responsible for the preparation and integrity of all information contained in this Annual Report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles. The financial statements include amounts that are management's best estimates and judgments. BR maintains a system of internal control and a program of internal auditing that provides management with reasonable assurance that BR's assets are protected and that published financial statements are reliable and free of material misstatement. Management is responsible for the effectiveness of internal controls. This is accomplished through established codes of conduct, accounting and other control systems, policies and procedures, employee selection and training, appropriate delegation of authority and segregation of responsibilities. The Audit Committee of the Board of Directors, composed solely of directors who are not officers or employees, meets regularly with the independent certified public accountants, financial management, counsel and corporate audit. To ensure complete independence, the certified public accountants and corporate audit have full and free access to the Audit Committee to discuss the results of their audits, the adequacy of internal controls and the quality of financial reporting. Our independent certified public accountants provide an objective independent review by their audit of the Company's financial statements. Their audit is conducted in accordance with generally accepted auditing standards and includes a review of internal accounting controls to the extent deemed necessary for the purposes of their audit. John E. Hagale Philip W. Cook Executive Vice President and Vice President, Controller and Chief Financial Officer Chief Accounting Officer CORPORATE INFORMATION PRINCIPAL CORPORATE OFFICE STOCK EXCHANGE LISTING Additional copies of this Annual Burlington Resources Inc. New York Stock Exchange Report are available, without charge, 5051 Westheimer, Suite 1400 Symbol: BR by writing or calling: Houston, Texas 77056 (713) 624-9500 ANNUAL MEETING STOCK TRANSFER AGENT AND Corporate Secretary The Annual Meeting of Stockholders REGISTRAR Burlington Resources Inc. will be in Houston, Texas, on March Bank Boston, N.A. P.O. Box 4239 26, 1998. Formal notice of the c/o Boston EquiServe, L.P. Houston, Texas 77210 meeting will be mailed in advance. Investor Relations Department (713) 624-9500 P.O. Box 8040/MS 45-02-64 Boston, Massachusetts 02266 1 (800) 736-3001 http: //www.equiserve.com
46 49 BURLINGTON RESOURCES INC. AMENDED EXHIBIT INDEX The following exhibits are filed as part of this report.
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ 3.1 Certificate of Incorporation of Burlington Resources Inc. as amended (Exhibit 3.1 to Form 8, filed March 1990)........... * 3.2 By-Laws of Burlington Resources Inc. amended and restated as of October 22, 1997......................................... 4.1 Form of Rights Agreement dated as of December 16, 1988, between Burlington Resources Inc. and The First National Bank of Boston which includes, as Exhibit A thereto, the form of Certificate of Designation specifying terms of the Series A Preferred Stock and, as Exhibit B thereto, the form of Rights Certificate (Exhibit 1 to Form 8-A, filed December 1988)....................................................... * Amendment No. 1 to Form of Rights Agreement (Exhibit 2 to Form 8-K, filed March 1989)................................. * Amendment No. 2 to Form of Rights Agreement (Exhibit 5 to Form 8-A/A, filed October 1996)............................. * 4.2 Indenture, dated as of June 15, 1990, between the registrant and Citibank, N.A., including Form of Debt Securities (Exhibit 4.2 to Form 8, filed February 1992)................ * 4.3 Indenture, dated as of October 1, 1991, between the registrant and Citibank, N.A., including Form of Debt Securities (Exhibit 4.3 to Form 8, filed February 1992)..... * 4.4 Indenture, dated as of April 1, 1992, between the registrant and Citibank, N.A., including Form of Debt Securities (Exhibit 4.4 to Form 8, filed March 1993)................... * 4.5 Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) (Exhibit 4.1 LL&E's Form S-3, as amended, filed November 1993)....................................................... * 10.1 The 1988 Burlington Resources Inc. Stock Option Incentive Plan as amended (Exhibit 10.4 to Form 8, filed March 1993)....................................................... * +10.2 Burlington Resources Inc. Incentive Compensation Plan as amended and restated (Exhibit 10.2 to Form 10-K, filed February 1997).............................................. * +10.3 Burlington Resources Inc. Senior Executive Survivor Benefit Plan dated as of January 1, 1989 (Exhibit 10.11 to Form 8, filed February 1989)........................................ * +10.4 Burlington Resources Inc. Deferred Compensation Plan as amended and restated (Exhibit 10.4 to Form 10-K, filed February 1997).............................................. * +10.5 Burlington Resources Inc. Supplemental Benefits Plan as amended and restated (Exhibit 10.5 to Form 10-K, filed February 1997).............................................. * +10.6 Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls (Exhibit 10.7 to Form 10-K, filed February 1996).............................................. * Amendment to Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls, dated July 9, 1997... +10.7 Employment Contract between Burlington Resources Inc. and H. Leighton Steward, dated October 22, 1997.................... +10.8 Burlington Resources Inc. Compensation Plan for Non-Employee Directors as amended and restated (Exhibit 10.8 to Form 10-K, filed February 1997).................................. *
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EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ +10.9 Burlington Resources Inc. Key Executive Severance Protection Plan as amended June 8, 1989 (Exhibit 10.20 to Form 8, filed February 1992).............................................. * +10.10 Burlington Resources Inc. Retirement Savings Plan as amended (Exhibits to Form S-8, No. 2-97533, filed December 1989).... * Amendment No. 1 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.15 to Form 8, filed March 1993)................. * Amendment No. 2 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.21 to Form 8, filed February 1992).............. * Amendment No. 3 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.15 to Form 8, filed March 1993)................. * Amendment No. 4 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.10 to Form 10-K, filed February 1996)........... * Amendment No. 5 to Burlington Resources Inc. Retirement Savings Plan................................................ +10.11 Burlington Resources Inc. Retirement Income Plan for Directors (Exhibit 10.21 to Form 8, filed February 1991).... * +10.12 Burlington Resources Inc. Phantom Stock Plan for Non-Employee Directors, effective March 21, 1996 (Exhibit 10.12 to Form 10-K, filed February 1996).................... * +10.13 Burlington Resources Inc. 1991 Director Charitable Award Plan, dated as of January 16, 1991 (Exhibit 10.22 to Form 8, filed February 1991)........................................ * 10.14 Master Separation Agreement and documents related thereto dated January 15, 1992 by and among Burlington Resources Inc., El Paso Natural Gas Company and Meridian Oil Holding Inc., including exhibits (Exhibit 10.24 to Form 8, filed February 1992).............................................. * +10.15 Burlington Resources Inc. 1992 Stock Option Plan for Non-employee Directors (Exhibit 28.1 of Form S-8, No. 33-46518, filed March 1992)................................. * +10.16 Burlington Resources Inc. Key Executive Retention Plan and Amendments No. 1 and 2 (Exhibit 10.20 to Form 8, filed March 1993)....................................................... * Amendments No. 3 and 4 to the Burlington Resources Inc. Key Executive Retention Plan (Exhibit 10.17 to Form 10-K, filed February 1994).............................................. * +10.17 Burlington Resources Inc. 1992 Performance Share Unit Plan as amended and restated (Exhibit 10.17 to Form 10-K, filed February 1997).............................................. * +10.18 Burlington Resources Inc. 1993 Stock Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1994).................... * +10.19 Petrotech Long Term Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1995).................................. * +10.20 Burlington Resources Inc. 1994 Restricted Stock Exchange Plan (Exhibit 10.23 to Form 10-K, filed February 1995)...... * +10.21 Burlington Resources Inc. 1997 Performance Share Unit Plan, (Exhibit 10.21 to Form 10-K, filed February 1997)........... * 10.22 $300 million Short-term Revolving Credit Agreement, dated as of July 20, 1994, between Burlington Resources Inc. and Citibank, N.A., as agent (Exhibit 10.22 to Form 10-K, filed February 1996).............................................. * First Amendment to Short-term Revolving Credit Agreement, dated as of July 14, 1995 (Exhibit 10.22 to Form 10-K, filed February 1997).............................................. *
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EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ Second Amendment to Short-term Revolving Credit Agreement, dated as of July 12, 1996 (Exhibit 10.22 to Form 10-K, filed February 1997).............................................. * 10.23 Second Amended and Restated $600 million Long-term Revolving Credit Agreement, dated as of July 12, 1996, between Burlington Resources Inc. and Citibank, N.A. as agent (Exhibit 10.23 to Form 10-K, filed February 1997)........... * +10.24 Form of Termination Agreement with Certain Senior Management Personnel as amended (Exhibit 10(a)(i) to LL&E's Form 10-K, filed March 1996)........................................... * +10.25 Pension Agreement, dated as of December 27, 1994 (Exhibit 10(e) to LL&E's Form 10-K filed March 1995)................. * +10.26 Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Exhibit 10(g) to LL&E's Form 10-K filed March 1991)................. * +10.27 The LL&E Supplemental Excess Plan (Exhibit 10(j) to LL&E's Form 10-K filed March 1993)................................. * 21.1 Subsidiaries of the Registrant.............................. 23.1 Consent of Independent Accountants.......................... 27.1 Financial Data Schedule..................................... **
- --------------- *Exhibit incorporated by reference as indicated. **Exhibit required only for filings made electronically using the Securities and Exchange Commission's EDGAR System. +Exhibit constitutes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K. A-3 EX-3.2 2 BY-LAWS OF BURLINGTON RESOURCES, INC. 1 EXHIBIT 3.2 BY-LAWS OF BURLINGTON RESOURCES INC. AS AMENDED THROUGH OCTOBER 22, 1997 2 BY-LAWS OF BURLINGTON RESOURCES INC TABLE OF CONTENTS
PAGE ---- ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1 Registered Office and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 4 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 5 Fixing of Record Date for Determining Stockholders . . . . . . . . . . . . . . . . 2 Section 6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 7 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 8 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 9 Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 10 List of Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1 Number, Qualification and Term of Office . . . . . . . . . . . . . . . . . . . . . 5 Section 2 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4 Removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 5 Place of Meetings; Books and Records . . . . . . . . . . . . . . . . . . . . . . . 6 Section 6 Annual Meeting of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 7 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 8 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 9 Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 10 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 11 Consent of Directors in Lieu of Meeting . . . . . . . . . . . . . . . . . . . . . . 7 Section 12 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 13 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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PAGE ---- ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 1 Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2 Finance Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3 Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 4 Compensation and Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5 Committee Chairman, Books and Records . . . . . . . . . . . . . . . . . . . . . . . 10 Section 6 Alternates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 7 Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 8 Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 1 Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2 Election, Term of Office and Qualifications . . . . . . . . . . . . . . . . . . . . 11 Section 3 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 4 Removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 6 Compensation of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 8 Vice Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 9 President and Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . 12 Section 10 Executive Vice President and Chief Financial Officer . . . . . . . . . . . . . . . 14 Section 11 Executive Vice President, Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 12 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 13 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 14 Absence or Disability of Officers . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VI STOCK CERTIFICATES AND TRANSFER THEREOF . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1 Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 2 Transfer of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3 Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 4 Additional Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 5 Lost, Destroyed or Mutilated Certificates . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VII DIVIDENDS, SURPLUS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VIII SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE IX FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-ii- 4 ARTICLE X IDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 1 Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 2 Right of Indemnitee to Bring Suit . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3 Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 4 Insurance, Contracts and Funding . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5 Definition of Director and Officer . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6 Indemnification of Employees and Agents of the Corporation . . . . . . . . . . . . 19 ARTICLE XI CHECKS, DRAFTS, BANK ACCOUNTS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 1 Checks, Drafts, Etc.; Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE XII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-iii- 5 BY-LAWS OF BURLINGTON RESOURCES INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE AND AGENT. The registered office of the corporation is located at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware, and the name of its registered agent at such address is The Corporation Trust Company. SECTION 2. OTHER OFFICES. The corporation may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. A meeting of the stockholders for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting shall be held annually at ten (10) o'clock A.M. on the third Thursday of April, or at such other time on such other day as shall be fixed by resolution of the Board of Directors. If the day fixed for the annual meeting shall be a legal holiday such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes may be called only by a majority of the Board of Directors, the Chairman of the Board, or the President. (Amended February 22, 1989) 1 6 SECTION 3. PLACE OF MEETINGS. The annual meeting of the stockholders of the corporation shall be held at the general offices of the corporation in the City of Houston, State of Texas, or at such other place in the United States as may be stated in the notice of the meeting. All other meetings of the stockholders shall be held at such places within or without the State of Delaware as shall be stated in the notice of the meeting. (Amended December 6, 1995) SECTION 4. NOTICE OF MEETINGS. 4.1 Giving of Notice. Except as otherwise provided by statute, written notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be given when deposited in the United States mails, postage prepaid, directed to such stockholder at his address as it appears in the stock ledger of the corporation. Each such notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 4.2 Notice of Adjourned Meetings. When a meeting is adjourned to another time and place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is given. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4.3 Waiver of Notice. 4.3.1 Whenever any notice is required to be given to any stockholder under the provisions of these By-Laws, the Certificate of Incorporation or the General Corporation Law of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 4.3.2 The attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 5. FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS. 5.1 Meetings. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board, the record date for 2 7 determining stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at the meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. 5.2 Dividends, Distributions and Other Rights. For the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. SECTION 6. QUORUM. A majority of the outstanding shares of stock of the corporation entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of the stockholders; provided that where a separate vote by a class or classes or by a series of a class is required, a majority of the outstanding shares of such class or classes or of such series of a class, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on that matter. If less than a majority of the outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present or represented at a reconvened meeting following such an adjournment, any business may be transacted that might have been transacted at the meeting as originally called. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION 7. ORGANIZATION. At each meeting of the stockholders, the Chairman of the Board, or in his absence such person as shall have been designated by the Board of Directors, or in the absence of such designation a person elected by the holders of a majority in number of shares of stock present in person or represented by proxy and entitled to vote, shall act as Chairman of the meeting. The Secretary, or in his absence or in the event he shall be presiding over the meeting in accordance with the provisions of this Section, an Assistant Secretary or, in the absence of the Secretary and all of the Assistant Secretaries, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. 3 8 SECTION 8. VOTING. 8.1 Generally. Unless otherwise provided in the Certificate of Incorporation or a resolution of the Board of Directors creating a series of stock, at each meeting of the stockholders, each holder of shares of any series or class of stock entitled to vote at such meeting shall be entitled to one vote for each share of stock having voting power in respect of each matter upon which a vote is to be taken, standing in his name on the stock ledger of the corporation on the record date fixed as provided in these By-Laws for determining the stockholders entitled to vote at such meeting. In all matters other than the election of Directors, if a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number is required by these By-Laws, the Certificate of Incorporation or the General Corporation Law of Delaware. Where a separate vote by a class or classes or by a series of a class is required, if a quorum is present, the affirmative vote of the majority of shares of such class or classes or series of a class present in person or represented by proxy at the meeting shall be the act of such class or classes or series of a class. 8.2 Voting for Directors. At each election of Directors the voting shall be by ballot. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors. 8.3 Shares Held or Controlled by the Corporation. Shares of its own capital stock belonging to the corporation, or to another corporation if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the corporation, shall neither be entitled to vote nor counted for quorum purposes. 8.4 Proxies. A stockholder may vote by proxy executed in writing by the stockholder or by his attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. A proxy shall become invalid three years after the date of its execution, unless otherwise provided in the proxy. A proxy with respect to a specified meeting shall entitle the holder thereof to vote at any reconvened meeting following adjournment of such meeting but shall not be valid after the final adjournment thereof. SECTION 9. INSPECTORS. Prior to each meeting of stockholders, the Board of Directors shall appoint two Inspectors who are not directors, candidates for directors or officers of the corporation, who shall receive and determine the validity of proxies and the qualifications of voters, and receive, inspect, count and report to the meeting in writing the votes cast on all matters submitted to a vote at such meeting. In case of failure of the Board of Directors to make such appointments or in case of failure of any Inspector so appointed to act, the Chairman of the Board shall make such appointment or fill such vacancies. Each Inspector, immediately before entering upon his duties, shall subscribe to an oath or affirmation faithfully to execute the duties of Inspector at such meeting with strict impartiality and according to the best of his ability. 4 9 SECTION 10. LIST OF STOCKHOLDERS. The Secretary or other officer or agent having charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares of each class and series registered in the name of each such stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section, or the books of the corporation, or to vote in person or by proxy at any such meeting. ARTICLE III BOARD OF DIRECTORS SECTION 1. NUMBER, QUALIFICATION AND TERM OF OFFICE. The business, property and affairs of the corporation shall be managed by a Board consisting of not less than one Director. The Board of Directors shall from time to time by a vote of a majority of the Directors then in office fix the specific number of Directors to constitute the Board. At each annual meeting of stockholders a Board of Directors shall be elected by the stockholders for a term of one year. Each Director shall serve until his successor is elected and shall qualify. SECTION 2. VACANCIES. Vacancies in the Board of Directors and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors. SECTION 3. RESIGNATIONS. Any Director may resign at any time upon written notice to the Secretary of the corporation. Such resignation shall take effect on the date of receipt of such notice or at any later date specified therein; and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make it effective. When one or more Directors shall resign effective at a future date, a majority of the Directors then in office, including those who have 5 10 resigned, shall have power to fill such vacancy or vacancies to take effect when such resignation or resignations shall become effective. SECTION 4. REMOVALS. Any Director may be removed, with cause, at any special meeting of the stockholders called for that purpose, by the affirmative vote of the holders of a majority in number of shares of the corporation entitled to vote for the election of such Director, and the vacancy in the Board caused by any such removal may be filled by the stockholders at such a meeting. SECTION 5. PLACE OF MEETINGS; BOOKS AND RECORDS. The Board of Directors may hold its meetings, and have an office or offices, at such place or places within or without the State of Delaware as the Board from time to time may determine. The Board of Directors, subject to the provisions of applicable statutes, may authorize the books and records of the corporation, and offices or agencies for the issue, transfer and registration of the capital stock of the corporation, to be kept at such place or places outside of the State of Delaware as, from time to time, may be designated by the Board of Directors. SECTION 6. ANNUAL MEETING OF THE BOARD. The first meeting of each newly elected Board of Directors, to be known as the Annual Meeting of the Board, for the purpose of electing officers, designating committees and the transaction of such other business as may come before the Board, shall be held as soon as practicable after the adjournment of the annual meeting of stockholders, and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held due to the absence of a quorum, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the newly elected Directors. SECTION 7. REGULAR MEETINGS. The Board of Directors shall, by resolution, provide for regular meetings of the Board at such times and at such places as it deems desirable. Notice of regular meetings need not be given. SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the Secretary on the written request of three Directors on such notice as the person or persons calling the meeting shall deem appropriate in the circumstances. Notice of each such special meeting shall be mailed to each Director or delivered to him by telephone, telegraph or any other means of electronic communication, in each case 6 11 addressed to his residence or usual place of business, or delivered to him in person or given to him orally. The notice of meeting shall state the time and place of the meeting but need not state the purpose thereof. Whenever any notice is required to be given to any Director under the provisions of these By-Laws, the Certificate of Incorporation or the General Corporation Law of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or any committee appointed by the Board need be specified in the waiver of notice of such meeting. Attendance of a Director at any meeting shall constitute a waiver of notice of such meeting except when a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. (Amended July 7, 1992) SECTION 9. QUORUM AND MANNER OF ACTING. Except as otherwise provided by statute, the Certificate of Incorporation, or these By-Laws, the presence of a majority of the total number of Directors shall constitute a quorum for the transaction of business at any regular or special meeting of the Board of Directors, and the act of a majority of the Directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the Directors present may adjourn the meeting, from time to time, until a quorum is present. Notice of any such adjourned meeting need not be given. SECTION 10. ORGANIZATION. At every meeting of the Board of Directors, the Chairman of the Board or in his absence the President or, if both of the said officers are absent, a Chairman chosen by a majority of the Directors present shall act as Chairman of the meeting. The Secretary, or in his absence, an Assistant Secretary, or in the absence of the Secretary and all the Assistant Secretaries, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. (Amended July 7, 1992) SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board, may be taken without a meeting if all members of the Board or committee consent thereto in writing, and such written consent is filed with the minutes of the proceedings of the Board or committee. SECTION 12. TELEPHONIC MEETINGS. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in 7 12 the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting. SECTION 13. COMPENSATION. Each Director, who is not a full-time salaried officer of the corporation or any of its wholly owned subsidiaries, when authorized by resolution of the Board of Directors, may receive as a Director a stated salary or an annual retainer and in addition may be allowed a fixed fee and his reasonable expenses for attendance at each regular or special meeting of the Board of any Committee thereof. ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may, in its discretion, designate annually an Executive Committee consisting of not less than five Directors as it may from time to time determine. The Committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it, but the Committee shall have no power or authority to amend the Certificate of Incorporation (except that the Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, amend the By-Laws of the corporation, elect officers or fill vacancies on the Board of Directors or any Committee of the Board, declare a dividend, authorize the issuance of stock, or such other powers as the Board may from time to time eliminate. SECTION 2. FINANCE COMMITTEE. The Board of Directors may, in its discretion, designate annually a Finance Committee, consisting of such number of Directors as the Board of Directors may from time to time determine. The Committee shall monitor, review, appraise and recommend to the Board of Directors appropriate action with respect to the corporation's capital structure, its source of funds and its financial position; review and recommend appropriate delegations of authority to management on expenditures and other financial commitments; review terms and conditions of 8 13 financing plans; develop and recommend dividend policies and recommend to the Board specific dividend payments; review the performance of the trustee of the corporation's pension trust fund, and any proposed change in the investment policy of the trustee with respect to such fund; and such other duties, functions and powers as the Board may from time to time prescribe. SECTION 3. AUDIT COMMITTEE. The Board of Directors shall designate annually an Audit Committee consisting of not less than three Directors as it may from time to time determine, none of whom shall be officers of the corporation. The Committee shall review with the independent accountants the corporation's financial statements, basic accounting and financial policies and practices, competency of control personnel, standard and special tests used in verifying the corporation's statements of account and in determining the soundness of the corporation's financial condition and report to the Board the results of such reviews; review the policies and practices pertaining to publication of quarterly and annual statements to assure consistency with audited results and the implementing of policies and practices recommended by the independent accountants; ensure that suitable independent audits are made of the operations and results of subsidiary corporations and affiliates; monitor compliance with the corporation's code of business conduct, and such other duties, functions and powers as the Board may from time to time prescribe. SECTION 4. COMPENSATION AND NOMINATING COMMITTEE. The Board of Directors shall designate annually a Compensation and Nominating Committee consisting of such number of Directors as the Board of Directors may from time to time determine. The Committee shall review, report and make recommendations to the Board of Directors on the following matters: (a) The compensation of the Chief Executive Officer and all senior officers of the corporation and its principal operating subsidiaries reporting directly to the Chief Executive Officer following an annual review of management's recommendations for the individuals involved. If circumstances involving individuals require a salary adjustment between such reviews, a recommendation may be made directly to the Board of Directors by the Chief Executive Officer without the necessity of a meeting of the Compensation and Nominating Committee. (b) The size and composition of the Board and nominees for Directors; evaluate the performance of the officers of the corporation and together with management, select and recommend to the Board appropriate individuals for election, appointment and promotion as officers of the corporation and ensure the continuity of able capable management. (c) Any proposed stock option plans, stock purchase plans, retirement plans, and any other plans, systems and practices of the corporation relating to the compensation of any employees of the corporation and any proposed plans 9 14 of any subsidiary company involving the issuance or purchase of capital stock of the corporation. (d) Such other matters as the Board may from time to time prescribe. The Committee shall carry out the duties assigned to the Committee under any existing stock option plans or other existing compensation or benefit plans; and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. (Amended July 7, 1992 and December 6, 1995) SECTION 5. COMMITTEE CHAIRMAN, BOOKS AND RECORDS. Each Committee shall elect a Chairman to serve for such term as it may determine, shall fix its own rules of procedure and shall meet at such times and places and upon such call or notice as shall be provided by such rules. It shall keep a record of its acts and proceedings, and all action of the Committee shall be reported to the Board of Directors at the next meeting of the Board. SECTION 6. ALTERNATES. Alternate members of the Committees prescribed by this Article IV may be designated by the Board of Directors from among the Directors to serve as occasion may require. Whenever a quorum cannot be secured for any meeting of any such Committee from among the regular members thereof and designated alternates, the member or members of such Committee present at such meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of such absent or disqualified member. Alternative members of such Committees shall receive a reimbursement for expenses and compensation at the same rate as regular members of such Committees. SECTION 7. OTHER COMMITTEES. The Board of Directors may designate such other Committees, each to consist of two or more Directors, as it may from time to time determine, and each such Committee shall serve for such term and shall have and may exercise, during intervals between meetings of the Board of Directors, such duties, functions and powers as the Board of Directors may from time to time prescribe. SECTION 8. QUORUM AND MANNER OF ACTING. At each meeting of any Committee the presence of a majority of the members of such Committee, whether regular or alternate, shall be necessary to constitute a quorum for the transaction of business, and if a quorum is present the concurrence of a majority of those present shall be necessary for the taking of any action; provided, however, that no action may be taken 10 15 by the Executive Committee or the Finance Committee when two or more officers of the corporation are present as members at a meeting of either such Committee unless such action shall be concurred in by the vote of two or more members of such Committee who are not officers of the corporation. ARTICLE V OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a Chairman of the Board, a President and Chief Executive Officer, a Vice Chairman, an Executive Vice President and Chief Financial Officer, an Executive Vice President, Law, a Secretary, a Treasurer, and such other officers as may be elected or appointed by the Board of Directors. Any number of offices may be held by the same person. (Amended July 7, 1992, December 6, 1995 and October 22, 1997) SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of the corporation shall be elected annually by the Board of Directors. Each officer elected by the Board of Directors shall hold office until his successor shall have been duly elected and qualified, or until he shall have died, resigned or been removed in the manner hereinafter provided. SECTION 3. RESIGNATIONS. Any officer may resign at any time upon written notice to the Secretary of the corporation. Such resignation shall take effect at the date of its receipt, or at any later date specified therein; and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make it effective. SECTION 4. REMOVALS. Any officer elected or appointed by the Board of Directors may be removed, with or without cause, by the Board of Directors at a regular meeting or special meeting of the Board. Any officer or agent appointed by any officer or committee may be removed, either with or without cause, by such appointing officer or committee. SECTION 5. VACANCIES. Any vacancy occurring in any office of the corporation shall be filled for the unexpired portion of the term in the same manner as prescribed in these By-Laws for regular election or appointment to such office. 11 16 SECTION 6. COMPENSATION OF OFFICERS. The compensation of all officers elected by the Board of Directors shall be approved or authorized by the Board of Directors or by the President and Chief Executive Officer when so authorized by the Board of Directors or these By- Laws. (Amended July 7, 1992 and December 6, 1995) SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, when present, preside at all meetings of the stockholders and of the Board of Directors; have authority to call special meetings of the stockholders and of the Board of Directors; have authority to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments except when the signing thereof shall be expressly delegated to some other officer or agent by the Board of Directors or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board of Directors, may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his place and stead all such documents and instruments. He shall consult with the President and Chief Executive Officer regarding the strategic direction and business and affairs of the corporation and shall have such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors or the Executive Committee. (Amended July 7, 1992 and December 6, 1995) SECTION 8. VICE CHAIRMAN. The Vice Chairman of the Board who was designated by the Board as the successor to the Chairman, or if no Vice Chairman is so designated, the Vice Chairman first elected to such office, shall in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board; have authority to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments, except when the signing thereof shall be expressly delegated to some other officer or agent by the Board, the Chairman of the Board, the President and Chief Executive Officer, or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board, may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his place and stead, all such documents and instruments. He shall have such other powers and perform such other duties as from time to time any be assigned to him by the Board of Directors, the Executive Committee, the Chairman of the Board, or the President and Chief Executive Officer. A Vice Chairman of the Board shall have such power and authority as is usual, customary and desirable to perform the duties of the office. (Amended October 22, 1997) SECTION 9. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President and Chief Executive Officer shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors and have authority to call special meetings of the stockholders and of the Board of Directors. The President and Chief Executive Officer shall have general authority over the property, business and affairs of the 12 17 corporation, and over all other officers, agents and employees of the corporation, subject to the control and direction of the Board of Directors and the Executive Committee, including the power to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments except when the signing thereof shall be expressly delegated to some other officer or agent by the Board of Directors or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board of Directors, may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his place and stead all such documents and instruments; he shall fix the compensation of officers of the corporation other than his own compensation and that of the senior officers of the corporation and its principal operating subsidiaries reporting directly to him; and he shall approve proposed employee compensation and benefit plans of subsidiary companies not involving the issuance or purchase of capital stock of the corporation. The President and Chief Executive Officer is hereby authorized, without further approval of the Finance Committee or the Board of Directors: (a) To approve any expenditure by the corporation of up to $20 million for those expenditure categories presented to the Board of Directors in the annual budget and up to $10 million for any expenditure categories not presented, including investments, leases, options to purchase or lease assets, business acquisitions and land purchases (b) To approve individual cost overruns of up to 10% of any amounts approved by or presented to the Board of Directors. (c) To approve disposition of assets and interests in securities of subsidiaries or related commitments, provided that the aggregate market value of the assets being disposed of in any one such transaction does not exceed $10 million. (d) To enter into leases or extensions thereof and other agreements with respect to the assets of the corporation, including interests in minerals and real estate, for a term of not more than 10 years or for an unlimited term if the aggregate initial rentals, over the term of the lease, including renewal options, do not exceed $3 million. (e) To approve increases in the capital budgets of the corporation's operating subsidiaries provided such increases in the aggregate do not exceed 10% of the corporation's capital budget for the fiscal year. (f) To approve in emergency situations commitments in excess of the above-described limits provided they are in the interests of the corporation. 13 18 The above delegation of authority does not authorize the corporation or its subsidiaries to make a significant change in its business or to issue the corporation's capital stock without the specific approval of the Board of Directors. Notwithstanding these limitations, the President and Chief Executive Officer shall have such power and authority as is usual, customary and desirable to perform all the duties of the office. (Amended July 7, 1992 and December 6, 1995) SECTION 10. EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. The Executive Vice President and Chief Financial Officer shall have responsibility for development and administration of the corporation's financial plans and all financial arrangements, its insurance programs, its cash deposits and short term investments, its accounting policies, and its federal and state tax returns. Such officer shall also be responsible for the corporation's internal control procedures and for its relationship with the financial community. (Amended July 7, 1992 and December 6, 1995) 14 19 SECTION 11. EXECUTIVE VICE PRESIDENT, LAW. The Executive Vice President, Law shall be the chief legal advisor of the corporation and shall have charge of the management of the legal affairs and litigation of the corporation. (Amended July 7, 1992 and December 6, 1995) SECTION 12. SECRETARY. The Secretary shall record the proceedings of the meetings of the stockholders and directors, in one or more books kept for that purpose; see that all notices are duly given in accordance with the provisions of the By-Laws or as required by law; have charge of the corporate records and of the seal of the corporation; affix the seal of the corporation or a facsimile thereof, or cause it to be affixed, to all certificates for shares prior to the issue thereof and to all documents the execution of which on behalf of the corporation under its seal is duly authorized by the Board of Directors or otherwise in accordance with the provisions of the By-Laws; keep a register of the post office address of each stockholder, director or member, sign with the Chairman of the Board or the President, certificates for shares of stock of the corporation, the issuance of which shall have been duly authorized by resolution of the Board of Directors; have general charge of the stock transfer books of the corporation; and in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors, the Executive Committee, the Chairman of the Board, the President, or the Executive Vice President, Law. (Amended July 7, 1992 and December 6, 1995) SECTION 13. TREASURER. The Treasurer shall have the responsibility for the custody and safekeeping of all funds of the corporation and shall have charge of their collection, receipt and disbursement; shall receive and have authority to sign receipts for all monies paid to the corporation and shall deposit the same in the name and to the credit of the corporation in such banks or depositories as the Board of Directors shall approve; shall endorse for collection on behalf of the corporation all checks, drafts, notes and other obligations payable to the corporation; shall sign or countersign all notes, endorsements, guaranties and acceptances made on behalf of the corporation when and as directed by the Board of Directors; shall give bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors may require; shall have the responsibility for the custody and safekeeping of all securities of the corporation; and in general shall have such other powers and perform such other duties as are incident to the office of Treasurer and as from time to time may be prescribed by the Board of Directors or be delegated to him by the Chairman of the Board, the President or the Executive Vice President and Chief Financial Officer. (Amended July 7, 1992 and December 6, 1995) SECTION 14. ABSENCE OR DISABILITY OF OFFICERS. In the absence or disability of the Chairman of the Board, Vice Chairmanor the President, the Board of Directors may designate, by resolution, individuals to perform the duties 15 20 of those absent or disabled. The Board of Directors may also delegate this power to a committee or to a senior corporate officer. (Amended July 7, 1992) ARTICLE VI STOCK CERTIFICATES AND TRANSFER THEREOF SECTION 1. STOCK CERTIFICATES. Except as otherwise permitted by statute, the Certificate of Incorporation or resolution or resolutions of the Board of Directors, every holder of stock in the corporation shall be entitled to have a certificate, signed by or in the name of, the corporation by the Chairman of the Board, the President, or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares, and the class and series thereof, owned by him in the corporation. Any and all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. (Amended July 7, 1992) SECTION 2. TRANSFER OF STOCK. Transfer of shares of the capital stock of the corporation shall be made only on the books of the corporation by the holder thereof, or by his attorney duly authorized, and on surrender of the certificate or certificates for such shares. A person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof as regards the corporation, and the corporation shall not, except as expressly required by statute, be bound to recognize any equitable or other claim to, or interest in, such shares on the part of any other person whether or not it shall have express or other notice thereof. SECTION 3. TRANSFER AGENT AND REGISTRAR. The corporation shall at all times maintain a transfer office or agency in the Borough of Manhattan, The City of New York, in charge of a transfer agent designated by the Board of Directors (who shall have custody, subject to the direction of the Secretary, of the original stock ledger and stock records of the corporation), where the shares of the capital stock of the corporation of each class shall be transferable, and also a registry office in the Borough of Manhattan, The City of New York, other than its transfer office or agency in said city, in charge of a registrar designated by the Board of Directors, where its stock of each class shall be registered. The corporation may, in addition to the said offices, if and whenever the Board of Directors shall so determine, maintain in such place or places as the Board shall determine, one or more additional transfer offices or agencies, each in charge of a transfer agent designated by the Board, where the shares of capital stock of the corporation of any class or classes shall be 16 21 transferable, and also one or more additional registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock of any class or classes shall be registered. Except as otherwise provided by resolution of the Board of Directors in respect of temporary certificates, no certificates for shares of capital stock of the corporation shall be valid unless countersigned by a transfer agent and registered by a registrant authorized as aforesaid. SECTION 4. ADDITIONAL REGULATIONS. The Board of Directors may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. SECTION 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The Board of Directors may provide for the issuance of new certificates of stock to replace certificates of stock lost, stolen, mutilated or destroyed, or alleged to be lost, stolen, mutilated or destroyed, upon such terms and in accordance with such procedures as the Board of Directors shall deem proper and prescribe. ARTICLE VII DIVIDENDS, SURPLUS, ETC. Except as otherwise provided by statute or the Certificate of Incorporation, the Board of Directors may declare dividends upon the shares of its capital stock either (1) out of its surplus, or (2) in case there shall be no surplus, out of its net profits for the fiscal year, whenever, and in such amounts as, in its opinion, the condition of the affairs of the corporation shall render it advisable. Dividends may be paid in cash, in property, or in shares of the capital stock of the corporation. ARTICLE VIII SEAL The Board of Directors shall adopt a suitable corporate seal which shall be in the form imprinted hereon. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 17 22 ARTICLE IX FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January of each year. ARTICLE X INDEMNIFICATION SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a Director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Director, officer, employee or agent or in any other capacity while serving as such a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the full extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators, provided, however, that except as provided in Section 2 of this Article with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such indemnitee while a Director or officer, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be 18 23 determined that such indemnitee is not entitled to be indemnified under this Section 1, or otherwise. SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1 of this Article is not paid in full by the corporation within sixty days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the indemnitee shall be entitled to be paid also the expense of prosecuting such suit. The indemnitee shall be presumed to be entitled to indemnification under this Article upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking, if any is required, has been tendered to the corporation), and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is not so entitled. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled. SECTION 3. NONEXCLUSIVITY OF RIGHTS. The rights to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested Directors or otherwise. SECTION 4. INSURANCE, CONTRACTS AND FUNDING. The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. The corporation may enter into contracts with any indemnitee in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article. 19 24 SECTION 5. DEFINITION OF DIRECTOR AND OFFICER. Any person who is or was serving as a Director or officer of a wholly owned subsidiary of the corporation shall be deemed, for purposes of this Article only, to be a Director or officer of the corporation entitled to indemnification under this Article. SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The corporation may, by action of the Board of Directors from time to time, grant rights to indemnification and advancement of expenses to employees and agents of the corporation with the same scope and effect as the provisions of this Article with respect to the indemnification and advancement of expenses of Directors and officers of the corporation. ARTICLE XI CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. CHECKS, DRAFTS, ETC.; LOANS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall, from time to time, be determined by resolution of the Board of Directors. No loans shall be contracted on behalf of the corporation unless authorized by the Board of Directors. Such authority may be general or confined to specific circumstances. (Amended July 7, 1992) SECTION 2. DEPOSITS. All funds of the corporation shall be deposited, from time to time, to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select, or as may be selected by any officer or officers, agent or agents of the corporation to whom such power may, from time to time, be delegated by the Board of Directors; and for the purpose of such deposit, the Chairman of the Board, the President, any Vice President, the Treasurer or any Assistant Treasurer, the Secretary or any Assistant Secretary, or any other officer or agent to whom such power may be delegated by the Board of Directors, may endorse, assign and deliver checks, drafts and other order for the payment of money which are payable to the order of the corporation. 20 25 ARTICLE XII AMENDMENTS These By-Laws may be altered or repealed and new By-Laws may be made by the affirmative vote, at any meeting of the Board, of a majority of the whole Board of Directors, subject to the rights of the stockholders of the corporation to amend or repeal By-Laws made or amended by the Board of Directors by the affirmative vote of the holders of record of a majority in number of shares of the outstanding stock of the corporation present or represented at any meeting of the stockholders and entitled to vote thereon, provided that notice of the proposed action be included in the notice of such meeting. 21 26 (Amended February 22, 1989) (Amended July 7, 1992) (Amended December 6, 1995) (Amended October [22], 1997) 22 EX-10.6 3 AMENDMENT TO EMPLOYMENT CONTRACT - MR. SHACKOULS 1 EXHIBIT 10.6 July 9, 1997 Mr. Bobby S. Shackouls 5051 Westheimer Houston, Texas 77056-2124 Dear Bobby: Your Employment Agreement with Burlington Resources Inc. (the "Company") is dated December 6, 1995 (the "Agreement"). The Board of Directors (the "Board") of the Company has deemed it advisable and in the best interests of the Company and its stockholders to amend the Agreement with respect to the matters addressed herein. Accordingly, this letter, when accepted by you in the space provided below, will amend the Agreement, effective immediately, in the following particulars: 1. Position. Your position will be that of Chairman of the Board, President and Chief Executive Officer of the Company. 2. Base Salary. Your minimum salary will be $750,000 per annum or such higher rate as may be fixed from time to time by the Board. 3. Term of Obligations. Each reference in the Agreement to December 15, 2000 shall be replaced with July 9, 2002. The Agreement, as amended hereby, shall remain in full force and effect in accordance with its terms. If this letter correctly sets forth our agreement, please sign the original and return it to me. Please retain a copy for your records. Very truly yours, BURLINGTON RESOURCES INC. /s/ GERALD J. SCHISSLER - -------------------------------- BY Gerald J. Schissler Its Executive Vice President, Law and Administration ACCEPTED AND AGREED TO this 9th day of July, 1997. /s/ BOBBY S. SHACKOULS ------------------------------------ Bobby S. Shackouls EX-10.7 4 EMPLOYMENT CONTRACT - MR. STEWARD 1 EXHIBIT 10.7 October 22, 1997 Mr. H. Leighton Steward 909 Poydras Street New Orleans, Louisiana 70112 Dear Leighton, This letter constitutes your Employment Agreement with Burlington Resources Inc. (the "Company") when accepted by you in the space provided below. Reference is hereby made to the Agreement and Plan of Merger dated as of July 16, 1997 among the Company, The Louisiana Land and Exploration Company ("LL&E") and BR Acquisition Corporation (the "Merger Agreement"). 1. POSITION AND TERM. The Company agrees to employ you and you agree to act as its Vice Chairman of the Board of Directors of the Company (the "Board") during the period commencing at the Effective Time of the Merger, as those terms are defined in the Merger Agreement, and continuing through December 1, 1999. The Company will amend its By-Laws to provide that the position of Vice Chairman of the Board will constitute an officer position within the Company. For at least so long as you serve as Vice Chairman, you will also serve as Chairman of the Executive Committee of the Board. 2. BASE SALARY. Your minimum salary will be $450,000 per annum or such higher rate as may be fixed from time to time by the Board. 3. STOCK OPTIONS. You shall participate in the Company's 1993 Stock Incentive Plan in accordance with the Company's normal option grant process as to amounts and timing and options granted thereunder shall be at an option price per share equal to 100% of the fair market value of such stock on such date of grant and become exercisable on the first anniversary of such date of grant; provided, however, that the second grant to you of stock options shall in no event become exercisable later than November 30, 1999. 4. INCENTIVE COMPENSATION, LONG-TERM INCENTIVES AND OTHER BENEFITS. You will participate with other senior executives of the Company in compensation and benefit plans in effect from time to time including the Incentive Compensation Plan, the Stock Incentive Plan, the Performance Share Unit Plan, the Deferred Compensation Plan, the Supplemental Benefits Plan, the Key Executive Severance Protection Plan and any other plan or perquisites available to other executives at your level of responsibility in the Company, including a company 2 Mr. H. Leighton Steward October 22, 1997 Page 2 automobile and company-provided country and luncheon club memberships but not including the Senior Executive Survivor Plan. You will also participate in health, retirement, survivor and disability plans available to all employees of the Company. You understand that the Company may amend, modify or terminate these plans at any time. You shall also be entitled to receive $50,000 per year, payable in monthly installments, as a housing allowance and such amount shall be paid to you whether or not you incur any housing expenses. For purposes of computing all benefits (other than Incentive Compensation) that are tied to the level of your compensation, your salary shall be treated as the greater of your actual salary hereunder or your actual annual salary rate from LL&E immediately before the effective date of this agreement. Your maximum bonus opportunity under the Incentive Compensation Plan will be 100% of base salary. Annual bonuses are determined by the Compensation and Nominating Committee of the Board (the "Compensation Committee") based on Company and individual performance. All plans referenced in this section are plans of the Company. You and the Company agree that, for purposes of the letter agreement dated December 27, 1994 between you and LL&E, you will not be treated as having terminated employment for purposes of paragraph 2 and Appendix A of said letter agreement until your employment with the Company terminates. 5. SEVERANCE BENEFIT. If your employment is terminated by the Company for any reason before December 1, 1999 other than as a result of your death, permanent disability or for Cause, or is initiated by you for Good Reason, the Company will pay you within 10 days after the date of termination an amount equal to the product of the number of whole and partial months remaining from the date of your termination until December 1, 1999, times your then current monthly base salary. The terms Cause and Good Reason are defined in the Key Executive Severance Protection Plan. 6. COORDINATION WITH OTHER PLANS. If your termination entitles you to benefits under the Key Executive Severance Protection Plan, you may elect to receive the benefits payable under Section 5 of this agreement in lieu of those benefits. If you elect to receive the benefits under this agreement, you will nevertheless be eligible to receive the additional benefits related to the gross-up payment for excise taxes under Article 6 of that plan. 7. TERMINATION AGREEMENT. The Company agrees that it shall pay or cause to be paid to you the benefits described in the Termination Agreement dated March 13, 1996 between you and LL&E (the "Termination Agreement") if (i) you are terminated by the Company on any grounds whatsoever except for "cause" during the "Protection Period" or if you terminate your 3 Mr. H. Leighton Steward October 22, 1997 Page 3 employment with the Company voluntarily within the "Protection Period" (it being acknowledged that there has been a significant change in the nature or scope of your duties and/or responsibilities for the purposes of the Termination Agreement) or (ii) your employment with the Company terminates by reason of your death during the "Protection Period", or (iii) you become disabled during the "Protection Period" under circumstances entitling you to disability benefits under the Company's long-term disability plan or under Social Security. Terms in quotation marks in this Section 7 shall have the meaning set forth in the Termination Agreement. The benefits provided under this Section 7 shall be in addition to any other benefits to which you may be entitled under the plans of the Company. You acknowledge and agree that you shall not become a participant in the Company's Executive Survivor Benefit Plan and hereby waive any benefits to which you would otherwise become entitled under such plan. 8. NON-DISCLOSURE. As an officer of the Company, you will have access to and continue to receive and develop confidential and proprietary information and trade secrets pertaining to the business of the Company and its affiliates, including, without limitation, reports, maps, data (including geologic and seismic data and interpretations thereof), plans, and contracts. As part of the consideration for this agreement and in return for receiving access to such confidential information, you agree to keep all such confidential and proprietary information confidential. In particular, you agree that you will not divulge, communicate or otherwise disclose any confidential information furnished to you or obtained or developed by you while employed by the Company to any person, firm, corporation or entity other than to an authorized representative of the Company. You agree that if your employment with the Company is terminated, you will not discuss the Company's business, operations, plans, strategies, personnel or business relationships or agreements with the press or with any of the Company's current or prospective customers or suppliers or with any other person with which the Company has business relationships. 9. NON-COMPETITION. In order to enforce your obligations under Section 8 and in consideration for the benefits of employment described in this agreement, you agree to the covenant not to compete in this Section 9. You agree and acknowledge that this covenant not to compete is ancillary to your commitment as set forth in Section 8 to refrain from disclosing such confidential information. If you initiate the termination of your employment with the Company other than for Good Reason during the term of this agreement, you agree that you will not for a period of two years after your termination be employed by, consult with, provide advice or information to, otherwise perform services for, own, manage, operate, join, control or participate in the ownership of more than 5% of the voting power of equity securities of, management, operation or control of any Competitor (as defined in this agreement) unless released by the Company from such obligation in writing with respect to a specific situation, it being understood 4 Mr. H. Leighton Steward October 22, 1997 Page 4 that your serving as a director of a public entity will not be in violation of the foregoing provision, provided that you are not at such time serving as a director of the Company, and, provided further, that your obligations under Section 8 will continue to be in effect during any such service. A Competitor is defined as any entity (i) that is engaged in exploring for and producing oil and natural gas in Louisiana, Montana, New Mexico, North Dakota, Oklahoma, Texas or federal or state waters in the Gulf of Mexico or in the oil and gas marketing business in the mainland United States and (ii) whose assets associated with such oil and gas business exceed $50 million. 10. NON-INTERFERENCE. For a period ending two years after you terminate employment with the Company, you agree not to solicit, directly or indirectly, any officer or employee of the Company to leave and work for any other employer. During this same period, you agree not to suggest to others that they approach or solicit any officers or employees of the Company with respect to potential employment elsewhere. 11. SEVERABILITY AND ENFORCEMENT. It is the desire of the parties hereto that this agreement be enforced to the maximum extent permitted by law, and should any provision contained herein be held unenforceable, the parties hereby agree and consent that such provision will be reformed to make it a valid and enforceable provision to the maximum extent permitted by law. Any provision hereof not capable of such reformation and determined to be prohibited by or unenforceable under applicable law of any jurisdiction will as to such jurisdiction be deemed ineffective and deleted from this agreement without affecting any other provision of this agreement. In the event of a breach by you of any of the provisions of Sections 8, 9 or 10, you understand and agree that the Company may, in addition to any other rights or remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and injunctive or other relief in order to enforce or prevent any violations of such provisions. You understand and agree that this agreement is being executed by the Company on behalf of itself and each of its affiliates, and that all rights of the Company under this agreement and all of your obligations and duties under this agreement will inure to the benefit of and may be enforced by the Company or any of its affiliates. 5 \Mr. H. Leighton Steward October 22, 1997 Page 5 If the above correctly sets forth our agreement, please sign the original and return it to me. Please retain a copy for your records. Very truly yours, BURLINGTON RESOURCES INC. /s/ BOBBY S. SHACKOULS ----------------------------------------- By Bobby S. Shackouls Its Chairman of the Board, President and Chief Executive Officer ACCEPTED and AGREED TO this 22 day of October, 1997 /s/ H. LEIGHTON STEWARD - --------------------------------- H. Leighton Steward EX-10.10 5 AMENDMENT NO. 5 TO RETIREMENT SAVINGS PLAN 1 Exhibit 10.10 Amendment Five to the Burlington Resources Inc. Retirement Savings Plan Whereas, Burlington Resources Inc. (the "Company") maintains the Burlington Resources Inc. Retirement Savings Plan (the "Plan"), as adopted effective as of January 1, 1990, which has been previously amended on four occasions; Whereas, the Company desires to amend the Plan's hardship withdrawal provisions to adopt the "safe harbor" provisions for "distributions deemed to be on account of an immediate and heavy financial need" and "distributions deemed necessary to satisfy financial need," as set forth in Treas. Reg. section 1.401(k)-1(d)(2)(iv)(A) and (B); and Whereas, section 12.1 of the Plan provides that the Company may amend the Plan from time to time. Now, therefore, in accordance with the provisions of such section 12.1, the Plan is hereby amended as follows: 1. Subsections (a), (d), (e), (f) and (g) of section 7.7 of the Plan are hereby deleted and replaced with the following subsections: (a) Any Participant or inactive Participant shall be permitted to make a cash withdrawal, in any whole percentage increment or dollar amount, of up to one hundred percent (100%) of the unwithdrawn amount in his or her Basic Account (excluding any earnings arising after 1988 on before-tax Basic Contributions, Flex Contributions, and other similar Code section 401(k) deferrals that may have been transferred directly to this Plan from an Other Plan), his Supplemental Account, his Company Match Account, his Rollover Account, and his ESOP Rollover Account if such withdrawal is made on account of the Participant's hardship. A distribution is made on account of hardship only if the distribution both is made on account of an immediate and heavy financial need of a Participant and is necessary to satisfy the financial need. The determination of the existence of an immediate and heavy financial need and the amount necessary to meet the need shall be made in accordance with the standards set forth in this section 7.7. 1 2 (d) A hardship withdrawal shall be deemed to be made on account of an immediate and heavy financial need of a Participant only if the Participant represents in writing, in any manner prescribed by the Committee, that he requires the distribution to meet an immediate and heavy financial need which falls under one of the following categories: (1) Expenses for medical care (described in Code section 213(d) previously incurred by the Participant, the Participant's spouse, or any of the Participant's dependents (as defined in Code section 152) or necessary for these persons to obtain such medical care; (2) Costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); (3) Payment of tuition, related educational fees, and room and board expenses (which shall not include, among other things, books and wearing apparel), for the next twelve (12) months of post-secondary education for the Participant, or the Participant's spouse, children, or dependents (as defined in Code section 152); (4) Payments necessary to prevent the eviction of the Participant from the Participant's principal residence or foreclosure on the mortgage on that residence; (5) Payment of funeral expenses for the Participant's spouse, child or dependent (as defined in Code section 152); or (6) Any other financial need specifically listed by the U.S. Secretary of the Treasury or the Commissioner of Internal Revenue in Income Tax Regulations or revenue rulings, notices or other documents of general applicability of the U.S. Department of the Treasury or the Internal Revenue Service that would allow the Plan to make hardship distributions. (e) A hardship withdrawal shall be deemed necessary to satisfy an immediate and heavy financial need of a Participant only if all of the following requirements are satisfied: (1) The hardship distribution is not in excess of the amount of the immediate and heavy financial need of the Participant. The amount of the immediate and heavy financial need may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution. 2 3 (2) The Participant has obtained all distributions, other than hardship distributions, and all non-taxable (at the time of the loan) loans currently available under the Plan and under all other plans maintained by the Company or an Affiliate. (3) The Participant's Basic Contributions under the Plan and similar elective contributions and employee contributions under all other qualified and nonqualified plans of deferred compensation (including stock option, stock purchase and similar plans) maintained by the Company or an Affiliate shall be suspended for at least twelve months after receipt of the hardship distribution. To the extent that any other such plan or plans maintained by the Company or an Affiliate, in which the Participant participates during such twelve-month period, do not provide for such a twelve-month suspension of contributions, the Participant shall be required to agree, in writing, in any manner specified by the Committee, not to make any elective contributions or employee contributions under any such plans for at least the duration of such twelve-month period. (4) The Participant's Basic Contributions, together with any other elective contributions of the Participant under the Plan and all other plans maintained by the Company and/or an Affiliate, for the Participant's taxable year immediately following the year of the Participant's hardship withdrawal shall not exceed the applicable limit under Code section 402(g) for that year, less the amount of the Participant's elective contributions for the year of the hardship withdrawal. (f) The Committee shall not approve a hardship withdrawal for any reason unless such withdrawal complies with any applicable Treasury regulations. In addition, hardship withdrawals shall be limited to prevent the distribution of earnings arising after 1988 on before-tax Basic Contributions and Flex Contributions, and also to prevent the distribution of Company Matching Contributions and the earnings thereon to the extent necessary to satisfy the withdrawal restrictions of Code section 401(k)(2)(B) in the event that such Company Matching Contributions are used to satisfy the average deferral percentage test of section 4.11. 3 4 (g) Amounts that are withdrawn pursuant to this section 7.7 may not be subsequently repaid to the Plan. 2. Except as amended herein, the terms of the Plan as in effect prior to this amendment shall continue unchanged. 3. This Amendment Five shall be effective as of February 1, 1997. In Witness Whereof, the authorized officers of the Company have signed this document and have affixed the corporate seal on February 3, 1997, but effective as of February 1, 1997. BURLINGTON RESOURCES INC. ATTEST: By /s/ Bobby S. Shackouls _____________________________________ Its President and CEO _________________________________ By /s/ William B. Usher _____________________________________ Its Vice President HR & (Corporate Seal) __________________________________ Administration 4 EX-21.1 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 BURLINGTON RESOURCES INC. SUBSIDIARIES OF THE REGISTRANT The following is a list of the significant subsidiaries of Burlington Resources Inc. showing the place of incorporation and the percentage of voting securities owned.
PERCENTAGE OF VOTING SECURITIES OWNED DIRECTLY OR JURISDICTION OF INDIRECTLY BY NAME OF COMPANY INCORPORATION IMMEDIATE PARENT --------------- --------------- ---------------- Burlington Resources Hydrocarbons Inc. ..................... Delaware 100% Burlington Resources Oil & Gas Company...................... Delaware 100% Burlington Resources Trading Inc. .......................... Delaware 100% Glacier Park Company........................................ Delaware 100% The Louisiana Land and Exploration Company.................. Maryland 100%
The names of certain subsidiaries are omitted as such subsidiaries, considered as a single subsidiary, would not constitute a significant subsidiary. EX-23.1 7 CONSENT OF INDEPENDENT ACCOUNTANTS. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Burlington Resources Inc. on Form S-8 (Registration Nos. 33-22493, 33-25807, 33-26024 (as amended in Registration No. 2-97533), 33-33626, 33-46518, 33-53973, 333-02029, 333-32603 and 333-40565) and on Form S-3 (Registration Nos. 33-54477 and 333-24999) of our report dated January 14, 1998, on our audits of the consolidated financial statements of Burlington Resources Inc. as of December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, which report is included in this 1997 Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. February 12, 1998 Houston, Texas EX-27.1 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1997 DEC-31-1997 152 83 376 0 39 678 9,355 4,315 5,821 538 0 0 0 2 3,014 5,821 2,000 2,000 1,497 1,497 (50) 0 142 411 92 319 0 0 0 319 1.80 1.79
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