Burlington Resources Inc. said Tuesday it would lower its capital investments in 2002 to $1.3 billion, compared with combined full-year expenditures by the company and merger partner Canadian Hunter Exploration Ltd. of $1.6 billion this year. Totals for both years exclude capital for acquisitions. Next year, about 40% of Burlington’s exploration and production budget will be spent in Canada, with another 30% allocated to develop the San Juan Basin and Midcontinent areas of the United States. Another 30% will be spent on major development programs around the world.

Burlington also announced that its $2.1 billion (C$3.3 billion) acquisition of Canadian Hunter was completed on December 6, and that key Canadian regulatory approvals have been received to acquire some producing properties from ATCO Gas for $352 million (C$550 million).

Burlington announced the Canadian Hunter acquisition in October (see Daily GPI, Oct. 10). It announced the ATCO acquisition in January 2001 (see Daily GPI, Jan. 22). “Burlington has undergone a significant transformation during recent years, culminating with the acquisition of Canadian Hunter,” said CEO Bobby S. Shackouls. “We’ve emerged from this process more focused than ever on applying our core competencies to our unique franchise in the Rocky Mountain natural gas fairway.” He said the Canadian Hunter and ATCO “transactions will provide an infusion of new opportunities, while our strong cash flow gives us the financial capability to fund aggressive exploitation programs. As a result, we believe we are well positioned for a profitable future that includes visible per-share growth.”

Burlington agreed to buy some of ATCO Gas assets in the Viking-Kinsella area, and that agreement has now been approved by the Alberta Energy and Utilities Board, as well as Investment Canada Act approval. The transaction is expected to close January 3, 2002. The properties hold proved reserves of 251 Bcf. In addition, Burlington estimates that approximately 200 Bcf of probable reserves exist on the properties, which are located 70 miles southeast of Edmonton. Current production from the properties is approximately 35 MMcf/d net (in U.S. standards), and Burlington expects to double that rate within one year.

The company also confirmed plans to sell approximately $500 million worth of properties in various areas, including all its Gulf of Mexico shelf properties and certain onshore properties in South Texas, in the Permian Basin of West Texas and in the Williston Basin of North Dakota. Burlington disclosed that in anticipation of these divestitures, it would record a pre-tax, non-cash impairment to earnings of $175-to-$225 million during the current year’s fourth quarter. In addition, the company will record a one-time charge of up to $15 million for restructuring costs associated with the sale of these properties. The company does not anticipate any additional non-cash charges or write-downs for the current year.

“We’ve wanted to fine-tune our portfolio for some time,” said Shackouls. “The new property acquisitions now pose an ideal opportunity to upgrade our asset base. The properties we are offering will be attractive to a number of potential buyers, and their sale will enable us to focus in areas where we have a major presence and more compelling competitive advantages.”

The Houston-based company also announced revised guidance for the fourth quarter of 2001, based on actual production for October and November, and the inclusion of one month of expected production from Canadian Hunter. Burlington raised guidance on fourth quarter 2001 natural gas production to between 2,025-2,100 MMcf/d. Fourth quarter 2001 oil production is now estimated to range from 62-to-66 million bbl/d.

On a gas equivalent per unit basis, fourth quarter depreciation, depletion and amortization expense is now expected to average in the range of $0.85-$0.90/Mcfe. All other guidance provided in October 2001 for the current quarter remains unchanged. Burlington expects to announce fourth-quarter results on January 23.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.