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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