Marking a significant increase from 1998, Burlington Resourcesestimated its replacement of reserves at 140% of total productionat a cost of 72 cents/Mcfe, the company said yesterday. Theseresults compare to 123% of replaced production at $1.10/Mcfe in1998. The bullish production news was dampened somewhat by theannouncement of a $225 million fourth quarter charge because ofperformance-related downward adjustments to some Gulf of MexicoShelf and Permian Basin assets.

Bobby Shackouls, CEO of BR, said, “We are very pleased with ouroverall operating results in 1999. With our high-graded investmentprogram, we were able to reduce our internal oil and gas capitalspending by 40% in comparison to 1998 while improving our reservereplacement performance substantially. Our finding and developmentcosts are significantly below our average for the last severalyears. This is clear evidence that our fiscal discipline aimed atimproving financial returns on the capital we invest is working.”

Burlington’s proved oil and gas reserves as of year-end 1999 areexpected to exceed 10.2 Tcfe, approximately 4% above year-end 1998totals. BR indicated that the estimated year-end reserve balancesfor both 1999 and 1998 include the reserves of Poco PetroleumsLtd., which was acquired by BR in a pooling of intereststransaction last November. Production for the combined company isexpected to total approximately 925 Bcfe for 1999.

Most of the replacement success has come through the drill bit.Reserves added through extensions and discoveries, or “drill bit”additions, are expected to total over 1,250 Bcfe. Reserves addedthrough acquisitions are estimated at 200 Bcfe; and net negativereserve revisions are expected to total 140 Bcfe.

BR said the adjustments were necessitated by acceleratingdecline on the Gulf of Mexico Shelf properties and poorer thanexpected waterflood response on a secondary recovery project inWest Texas. This charge will be taken along with a one-time $40million charge for cost related to the Poco purchase. In aconference call after the announcement, BR’s upper management saidit plans to sell $200 to $300 million in Gulf Coast properties nextyear, including Shelf assets.

“Undoubtedly, the downward reserve revisions associated with ourGulf of Mexico Shelf operations were, in part, related to ourdecision to scale back investments there,” Shackouls said.”However, the steeper than anticipated declines that we havecontinued to experience on the Shelf have reinforced our view thatwe made the right decision in redirecting that capital to higherreturn projects with lasting value creation prospects. We believethat the impact of future natural production declines in this areawill be less than we have experienced this year, and will be morethan offset by production growth elsewhere in our operations.”

BR’s total oil and gas capital expenditures for 1999 areestimated at $940 million. Exclusive of acquisitions, the 1999internal oil and gas capital expenditures are estimated to beapproximately $800 million, down 40% from 1998.

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