A strong North American natural gas position appears to be regaining its value for the majors. As domestic natural gas futures prices continue to trade in the uncharted territory of $14-15, rumors were circulating Monday about Houston-based ConocoPhillips taking an interest in buying Burlington Resources, also Houston-based. The Wall Street Journal reported that the two companies are in “advanced talks” on a deal valued in excess of $30 billion.

Citing “people familiar with the matter,” the Journal said talks are fluid and could still fall apart. However, those same sources said that if the discussions stay on track, a deal could be announced later this week.

“As a matter of policy, we do not comment on market rumors,” a ConocoPhillips spokesman said. Likewise, a Burlington spokesman said the company “doesn’t comment on takeover speculation.”

If agreed upon, the deal would be among the largest energy transactions in the past several years. On April 5, Chevron agreed to buy Unocal Corp. for about $16.8 billion of cash and stock, with the assumption of $1.6 billion in debt. The most recent prior transactions of similar magnitude were the merger of Phillips and Conoco in 2002 and the formation of ChevronTexaco when Chevron and Texaco merged in 2001 (Chevron later removed Texaco from its name).

ConocoPhillips and Burlington are among the largest natural gas, gas liquids and crude oil producers in the world with a combined third quarter total of about 4,997 MMcf/d of gas production (Burlington, 1,888 MMcf/d, most of it in the United States; and ConocoPhillips, 3,109 MMcf/d), about 158.1 Mbbl/d of gas liquids production (66.1 Mbbl/d from Burlington and 92 Mbbl/d from ConocoPhillips) and 983 Mbbl/d of crude oil production (93 Mbbl/d from Burlington and 890 Mbbl/d from ConocoPhillips).

The two companies also are among the top 20 largest natural gas marketers in North America. According to NGI’s Top North American Gas Marketers survey for 3Q2005, ConocoPhillips was the second largest gas marketer, moving 12.2 Bcf/d during the quarter, while Burlington was eighteenth in the survey with 1.75 Bcf/d (see Daily GPI, Dec. 5).

With U.S. gas demand growing while domestic supply is flat or in decline, natural gas spot futures are currently trading at a $7.50 premium to the same time last year. Burlington’s assets are approximately 80% North American natural gas, representing an attractive buy for any of the majors, which in recent years have turn more toward building overseas operations.

Burlington is also coveted for its large portfolio of unconventional natural gas plays, where the gas is trapped in difficult to tap underground formations. As conventional basins in North America continue to dry up, advanced technology is allowing more producers to go after these unconventional plays.

Burlington Resources nearly doubled its 3Q2005 income from a year ago, earning $748 million, compared with $394 million in 3Q2004 (see Daily GPI, Oct. 28). Earnings per diluted share were $1.96, up 96% from $1/share a year ago, attributed to higher commodity prices, increased equivalent production, share repurchases and an after-tax gain on the sale of Permian Basin Royalty Trust units for 19 cents/share.

Burlington’s North American operations are focused on the San Juan Basin in northwestern New Mexico and southwestern Colorado; the Madden Field located in the Wind River Basin, covering approximately 70,000 acres in Wyoming’s Fremont and Natrona counties; the Williston Basin in Montana and the Dakotas; the Anadarko Basin in western Oklahoma; the Permian Basin in West Texas; the Fort Worth Basin in North Texas; and the Onshore Gulf Coast region, including various drilling trends in southern Louisiana.

In Canada, Burlington engages in exploration and development activities in Alberta, British Columbia, and Saskatchewan. Burlington’s international activities include exploration projects, field development projects, and production operations. Its focus areas are northwest Europe, North Africa, China, and South America.

ConocoPhillips is an international, integrated energy company with operations in more than 40 countries and assets totaling $104 billion. The company’s four core activities are:

For 3Q2005, ConocoPhillips’ earnings soared 89%, with net income reaching $3.8 billion ($2.68/share), from $2.01 billion ($1.43) in 3Q2004. Revenue increased 43% to $49.7 billion from $34.7 billion. In its E&P unit, income from continuing operations jumped 61% to $2.29 billion from $1.42 billion.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.