Burlington Resources to Spend 88% of '05 Capital Budget in North America
Houston-based independent Burlington Resources Inc. on Wednesday announced it will spend $2 billion next year on capital investments, with 88% of the total set aside for U.S. and Canadian operations.
Burlington, which spent $1.8 billion this year, including $85 million for acquisitions, said it expects "higher activity in all major operating areas," but will continue its "strategic focus" on North America.
The North American portion of the budget includes $170 million for discretionary land acquisitions and drilling associated with potential unconventional resource exploration success, most notably in the Bossier trend in East Texas and the Bakken Shale trend in the Williston Basin. The other 12% will be allocated for international properties. On a functional basis, Burlington said 85% of the budget is allocated to development and extension projects, with the other 15% directed toward exploration.
"Our base capital program, adjusted for the service cost and currency exchange impacts, is up only modestly," said CEO Bobby Shackouls. "This reflects Burlington's larger scale, while honoring our commitment to invest consistently throughout price cycles, which we believe is essential for maintaining our efficiency."
Burlington's board of directors also restored a $1 billion share repurchase authorization, the third time since late 2000 that the program has been authorized. Since it was authorized in 2000, the company has repurchased 60.6 million shares, nearly 15% of its total shares outstanding, at an average cost of $25.20 share, all on a post-stock-split basis. As of Dec. 7 (Tuesday), Burlington this year has repurchased 13.3 million shares, representing more than 3% of shares outstanding, at an average cost of $35.80/share, on a post-stock-split basis.
"The share repurchase program is an integral part of our continuing effort to add value for shareholders," said CFO Steve Shapiro. "It supplements our dividend while serving as a value play for the company, since we are in effect repurchasing reserves in the ground at prices lower than the industry's average replacement costs, and lower than the equivalent cost of acquisitions we've seen in the marketplace this year."
The company expects to fund both the capital investment and share repurchase programs from internally generated cash flow.
Burlington also estimates that during 2004 it will replace more than 115% of its production with new reserves at an average cost of $1.35-1.45/Mcfe. If adjusted for the service cost and currency exchange impacts, the performance would be comparable to the company's previous three-year average replacement cost of $1.22/Mcfe, the company said.
"This favorable reserve replacement record and cost performance further confirms the quality of our opportunity portfolio," said COO Randy Limbacher. "We've achieved basin excellence in a number of areas that offer long-term, repeatable development programs, and we look forward to future operational success."