Burlington Resources Inc. reported an 8.2% increase in third quarter earnings to $79 million, or $0.39 per diluted share, including a net after-tax gain of $0.12 per diluted share from asset sales and accompanying tax benefits. Higher production, including a 10% increase in gas production to 1.8 Bcf/d, and lower cash operating costs, along with higher oil prices and the asset sale and tax benefits, more than offset lower prices for natural gas and higher interest expenses and production taxes. Realized natural gas prices fell to $2.65/Mcf (Henry Hub) from $2.89 in 3Q2001.

“We upgraded our opportunity portfolio through a combination of high-quality acquisitions and our ongoing non-core property divestiture program,” said CEO Bobby S. Shackouls. Burlington expects to reach $1.3 billion in property sales by the end of the year. “During the quarter, we improved our balance sheet flexibility and reduced our embedded cost structure, with both measures evident in the results. Finally, our core drilling programs and large-scale development projects are on track, allowing us to deliver on our promise of profitable growth.”

The most significant achievements during the quarter included the addition of a third processing train to the Lost Cabin Gas Plant in the Madden Field, the purchase of producing properties and exploratory acreage in the Barnett Shale natural gas drilling trend in North Texas, the doubling of production to 75 MMcf/d from the Viking-Kinsella properties in Canada and continued progress toward the planned start-ups of oil production in Algeria and China in 2003 and new natural gas fields in the East Irish Sea in 2004.

Total production increased 6% to 2,465 MMcfe/d. Natural gas production rose 10% to 1,839 MMcf/d after the addition of producing properties in Canada. Additions in Canada also enabled an increase in gas liquids production to 59,600 b/d from 46,800 b/d in 3Q2001. Oil production averaged 44,700 b/d, compared to 61,200 b/d, with the decline attributable primarily to the property sales. Discretionary cash flow fell to $291 million from $396 million during the same quarter last year. Burlington said all of its operating statistics were on target with, or better than, previous guidance.

Lower natural gas price realizations reflected weak basis differentials in the western U.S. and Canada, which were partly offset by hedging gains of $0.11 per Mcf, Burlington said. NGL price realizations of $15.22 per barrel were down from $15.46 per barrel realized during the prior year’s quarter. Oil price realizations of $25.90 per barrel were up from $23.81 per barrel realized during the prior year’s quarter.

For the remainder of 2002, Burlington expects production to decline from the third-quarter totals as a result of property divestitures. Declines will be partially offset by higher production in the Madden Field and the initiation of winter drilling in Canada. Fourth-quarter total production is expected to be 2,260-2,490 MMcfe/d. Gas production is expected to be 1,750-1,900 MMcf/d, NGL production is expected to be 52,000-60,000 b/d and crude oil production is expect to be 33-38 b/d.

The company has hedged 25% of its fourth-quarter North American natural gas production (primarily during the month of October) with collars of roughly $2.90 to $4.15/Mcf (Henry Hub) and 25% of 2003 production with collars of roughly $3.25 to $5.10 per Mcf.

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