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Reinstated Credit to Boost Burlington's Earnings

Reinstated Credit to Boost Burlington's Earnings

Houston's Burlington Resources said last week that a tax benefit reinstated by the Federal Energy Regulatory Commission in September will raise the independent's earnings in the third quarter by 14 cents, beating analysts' expectations.

First Call analysts' forecasts have predicted the company's third quarter profit at 70 cents, without the tax benefit, but Burlington is confident the per-share earnings will be between 87 cents and 92 cents. The benefit, said Burlington, would raise quarterly earnings by 14 cents a share, which would put third quarter profit between 73 cents and 78 cents per share.

The tax relief came from FERC's decision Sept. 25 to reinstate the certification process for qualifying wells under Section 29 of the Internal Revenue Code. Because of the tax change, Burlington said it would realize about $30 million in cumulative tax benefits related to 1999 production.

Even before the tax benefit was reinstated by FERC, Burlington had said its third quarter profits would beat analysts' expectations because of the run-up in oil and gas prices. In mid-September, Burlington predicted 3Q profit between 70 and 75 cents a share. The company posted earnings of 23 cents a diluted share for the same period a year ago.

Burlington also expects to produce between 1,830 and 1,850 MMcf/d of natural gas and 72,000 and 74,000 b/d of oil during the third quarter. Those volumes would actually be down from what they were in the second quarter.

In mid-September, Credit Suisse First Boston cut its investment rating on Burlington to "buy" from "strong buy" because it said the company had set a 12-month target of $45, and had lowered its earnings per share expectations from $2.76 from $1.60. "Continued share repurchases and debt reduction improve returns, but not as meaningfully as a strong reinvestment program," said CSFB.

Carolyn Davis, Houston

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