UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9971
BURLINGTON RESOURCES INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1413284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5051 Westheimer, Suite 1400, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 624-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding
----- -----------
Common Stock, par value $.01 per share,
as of March 31, 1999 177,345,960
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
FIRST QUARTER
--------------------
1999 1998
------ ------
(In Millions, Except per Share Amounts)
Revenues............................................ $ 349 $ 432
------ ------
Costs and Expenses
Production Taxes ................................. 17 24
Production and Processing ........................ 94 93
Depreciation, Depletion and Amortization ......... 129 128
Exploration Costs ................................ 48 54
Administrative ................................... 35 34
------ ------
Total Costs and Expenses ........................... 323 333
------ ------
Operating Income ................................... 26 99
Interest Expense ................................... 41 36
Other Income - Net ................................. 1 3
------ ------
Income (Loss) Before Income Taxes .................. (14) 66
Income Tax Expense (Benefit) ....................... (4) 18
------ ------
Net Income (Loss)................................... $ (10) $ 48
====== ======
Basic Earnings (Loss) per Common Share ............. $(.05) $ .27
====== ======
Diluted Earnings (Loss) per Common Share ........... $(.05) $ .27
====== ======
See accompanying Notes to Consolidated Financial Statements.
2
BURLINGTON RESOURCES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, December 31,
1999 1998
------- -------
(In Millions, Except Share Data)
ASSETS
Current Assets
Cash and Cash Equivalents.........................................$ 248 $ -
Accounts Receivable............................................... 346 402
Inventories....................................................... 34 33
Other Current Assets.............................................. 26 21
------- -------
654 456
------- -------
Oil & Gas Properties (Successful Efforts Method).................... 9,456 9,348
Other Properties.................................................... 841 828
------- -------
10,297 10,176
Accumulated Depreciation, Depletion and Amortization.............. 4,947 4,818
------- -------
Properties - Net................................................ 5,350 5,358
------- -------
Other Assets........................................................ 117 103
------- -------
Total Assets.................................................. $ 6,121 $ 5,917
======= =======
LIABILITIES
Current Liabilities
Accounts Payable.................................................. $ 355 $ 374
Taxes Payable..................................................... 49 53
Accrued Interest.................................................. 48 26
Dividends Payable................................................. 24 24
Deferred Revenue.................................................. 16 17
Other Current Liabilities......................................... 2 -
------- -------
494 494
------- -------
Long-term Debt...................................................... 2,197 1,938
------- -------
Deferred Income Taxes............................................... 187 199
------- -------
Deferred Revenue.................................................... 36 40
------- -------
Other Liabilities and Deferred Credits.............................. 215 217
------- -------
Put Options on Common Stock......................................... - 11
------- -------
Commitments and Contingent Liabilities
STOCKHOLDERS' EQUITY
Preferred Stock, Par Value $.01 Per Share
(Authorized 75,000,000 Shares; No Shares Issued)................. - -
Common Stock, Par Value $.01 Per Share
(Authorized 325,000,000 Shares; Issued 202,795,635 Shares)....... 2 2
Paid-in Capital..................................................... 2,993 2,984
Retained Earnings................................................... 1,005 1,039
------- -------
4,000 4,025
Cost of Treasury Stock
(25,449,675 and 25,420,562 Shares for 1999 and 1998, respectively) 1,008 1,007
------- -------
Stockholders' Equity................................................ 2,992 3,018
------- -------
Total Liabilities and Stockholders' Equity....................$ 6,121 $ 5,917
======= =======
See accompanying Notes to Consolidated Financial Statements.
3
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FIRST QUARTER
---------------
1999 1998
------ ------
(In Millions)
Cash Flows From Operating Activities
Net Income (Loss) ......................................... $ (10) $ 48
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By Operating Activities
Depreciation, Depletion and Amortization ................ 133 131
Deferred Income Taxes ................................... (12) 8
Exploration Costs ....................................... 48 54
Working Capital Changes
Accounts Receivable ..................................... 56 41
Inventories ............................................. (1) (2)
Other Current Assets .................................... (5) (3)
Accounts Payable ........................................ (19) (129)
Taxes Payable ........................................... (4) 11
Accrued Interest ........................................ 22 19
Other Current Liabilities ............................... 1 (1)
Other ..................................................... (11) 59
------ ------
Net Cash Provided By Operating Activities ............. 198 236
------ ------
Cash Flows From Investing Activities
Additions to Properties ................................... (142) (245)
Short-term Investments .................................... -- 5
Other ..................................................... (23) (45)
------ ------
Net Cash Used In Investing Activities ................. (165) (285)
------ ------
Cash Flows From Financing Activities
Proceeds from Long-term Debt .............................. 450 --
Reduction in Long-term Debt ............................... (190) --
Dividends Paid ............................................ (24) (24)
Common Stock Purchases .................................... (9) --
Other ..................................................... (12) (5)
------ ------
Net Cash Provided By (Used In) Financing Activities ... 215 (29)
------ ------
Increase (Decrease) in Cash and Cash Equivalents ........... 248 (78)
Cash and Cash Equivalents
Beginning of Year ......................................... -- 152
------ ------
End of Period ............................................. $ 248 $ 74
====== ======
See accompanying Notes to Consolidated Financial Statements.
4
BURLINGTON RESOURCES INC.
Notes TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1998 Annual Report of Burlington Resources Inc. (the "Company")
includes certain definitions and a summary of significant accounting policies
and should be read in conjunction with this Quarterly Report on Form 10-Q
("Quarterly Report"). The financial statements for the periods presented herein
are unaudited, condensed and do not contain all information required by
generally accepted accounting principles to be included in a full set of
financial statements. In the opinion of management, all material adjustments
necessary to present fairly the results of operations have been included. All
such adjustments are of a normal, recurring nature. The results of operations
for any interim period are not necessarily indicative of the results of
operations for the entire year. The consolidated financial statements include
certain reclassifications that were made to conform to current presentation.
Basic earnings per common share ("EPS") is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. The weighted average number of common shares
outstanding for computing basic EPS was 177 million for the first quarter of
1999 and 1998, respectively. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The weighted average number of common
shares outstanding for computing diluted EPS, including dilutive stock options,
was 178 million for the first quarter of 1999 and 1998, respectively. No
adjustments were made to reported net income in the computation of EPS. EPS
discussions within this document are in reference to basic EPS.
2. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in several proceedings challenging the payment
of royalties for its crude oil and natural gas production.
On November 20, 1997, the Company and numerous other defendants entered
into a settlement agreement in a lawsuit styled as The McMahon Foundation, et
al. v. Amerada Hess Corporation, et al. This lawsuit is a proposed class action
consisting of both working interest owners and royalty owners against numerous
defendants, all of which are oil companies and/or purchasers of oil from oil
companies, including Burlington Resources Oil & Gas Company, formerly known as
Meridian Oil Inc. ("BROG") and The Louisiana Land and Exploration Company
("LL&E"). The plaintiffs allege that the defendants conspired to fix, depress,
stabilize and maintain at artificially low levels the prices paid for oil by,
among other things, setting their posted prices at arbitrary levels below
competitive market prices. Cases involving similar allegations have been filed
in federal courts in other states. On January 14, 1998, the United States
Judicial Panel on Multidistrict Litigation issued an order consolidating these
cases and transferring the McMahon case to the United States District Court for
the Southern District of Texas in Corpus Christi (In Re Lease Oil Antitrust
Litigation, MDL No. 1206). The Company and other defendants have entered into a
Settlement Agreement which received preliminary approval by the Court on October
28, 1998. A hearing was held by the Court in April 1999 to receive evidence
relating to the fairness and reasonableness of the settlement and a decision by
the Court is pending.
5
The Company is also involved in several governmental proceedings
relating to the payment of royalties. Various administrative proceedings are
pending before the Minerals Management Service ("MMS") of the United States
Department of the Interior with respect to the proper valuation of oil and gas
produced on federal and Indian lands for purposes of paying royalties on
production sold by BROG to its affiliate, Burlington Resources Trading Inc.
("BRTI"), or gathered by its affiliate, Burlington Resources Gathering Inc. In
general, these proceedings stem from regular MMS audits of the Company's royalty
payments over various periods of time and involve the interpretation of the
relevant federal regulations.
In late February 1998, the Company and numerous other oil and gas
companies received a complaint filed in the United States District Court for the
Eastern District of Texas in Lufkin in a lawsuit styled as United States of
America ex rel J. Benjamin Johnson, Jr., et al v. Shell Oil Company, et al.
alleging violations of the civil False Claims Act. The United States has
intervened in this lawsuit as to some of the defendants, including the Company,
and has filed a separate complaint. This suit alleges that the Company underpaid
royalties for crude oil produced on federal and Indian lands through the use of
below-market posted prices in the sale of oil from BROG to BRTI. The suit
alleges that royalties paid by BROG based on these posted prices were lower than
the royalties allegedly required to be paid under federal regulations, and that
the forms filed by BROG with the MMS reporting the royalties paid were false,
thereby violating the civil False Claims Act. The Company and others have also
received document subpoenas and other inquiries from the Department of Justice
relating to the payment of royalties to the federal government for natural gas
production. These requests and inquiries have been made in the context of one or
more other False Claims Act cases brought by individuals which remain under seal
and are now being investigated by the Civil Division of the Department of
Justice. The Company has responded and continues to respond to these requests
and inquiries, but the Company does not know what action, if any, the Department
of Justice will take with regard to these other cases. If the government chooses
not to intervene and pursue these cases, the individuals who initially brought
these cases are free to pursue them in return for a share, if any, of any final
settlement or judgment. In addition, the Company has been advised that it is a
target of a criminal investigation by the United States Attorney for the
District of Wyoming into the alleged underpayment of oil and gas royalties. The
Company has responded to numerous grand jury document subpoenas in connection
with an investigation and is otherwise cooperating with the investigation.
Management cannot predict when the investigation will be completed or its
ultimate outcome.
Based on the Company's present understanding of the various
governmental proceedings relating to royalty payments, described in the
preceding two paragraphs, the Company believes that it has substantial defenses
to these claims and intends to vigorously assert such defenses. However, in the
event that the Company is found to have violated the civil False Claims Act or
is indicted or convicted on criminal charges, the Company could be subjected to
a variety of sanctions, including trebble damages, substantial monetary fines,
civil and/or criminal penalties and a temporary suspension from entering into
future federal mineral leases and other federal contracts for a defined period
of time. While the ultimate outcome and impact on the Company cannot be
predicted with certainty, management believes that the resolution of these
proceedings will not have a material adverse effect on the consolidated
financial position of the Company, although results of operations and cash flow
could be significantly impacted in the reporting periods in which such matters
are resolved.
6
In addition to the foregoing, the Company and its subsidiaries are
named defendants in numerous other lawsuits and named parties in numerous
governmental and other proceedings arising in the ordinary course of business.
While the outcome of these other lawsuits and proceedings cannot be predicted
with certainty, management believes these matters, other than the
above-described proceedings, will not have a material adverse effect on the
consolidated financial position, results of operations or cash flows of the
Company.
3. COMMODITY HEDGING ACTIVITIES
The Company enters into gas swap agreements to fix the price of
anticipated future natural gas production. As of March 31, 1999, the Company has
the following volumes hedged.
Total Hedged Average
Production Volume Hedge/Strike Deferred Gain
Period (MMBTU) Price (In Millions)
----------- ------------ -------------- ---------------
1999 119,150,000 $ 2.33 $ 23
2000 201,300,000 2.33 10
2001 91,345,000 2.35 -
2002 2,530,000 $ 2.57 $ -
Due to the change in gas prices, the deferred loss on gas swaps as of Apirl
30, 1999 is $18 million.
4. SEGMENT AND GEOGRAPHIC INFORMATION
The Company's reportable segments are North America and International.
Both segments are engaged principally in the exploration, development,
production and marketing of oil and gas. The North America segment is
responsible for the Company's operations in the U.S. and Canada and the
International segment is responsible for all operations outside that
geographical region. There are no significant intersegment sales or transfers.
The following tables present information about reported segment
operations.
First Quarter 1999
-----------------------------------------
North America International Total
------------- -------------- -------
(In Millions)
Revenues............................. $ 320 $ 29 $ 349
Operating income (loss).............. 87 (22) 65
Additions to oil and gas properties.. $ 63 $ 68 $ 131
First Quarter 1998
-----------------------------------------
North America International Total
------------- -------------- -------
(In Millions)
Revenues............................. $ 385 $ 47 $ 432
Operating income..................... 136 1 137
Additions to oil and gas properties.. $ 200 $ 42 $ 242
7
The following is a reconciliation of segment operating income to
consolidated income (loss) before income taxes.
First Quarter
-------------------------
1999 1998
---------- ----------
(In Millions)
Total operating income for reportable segments.... $ 65 $ 137
Corporate expenses................................ 39 38
Interest expense.................................. 41 36
Other income - net................................ 1 3
---------- ----------
Consolidated income (loss) before income taxes.... $ (14) $ 66
========== ==========
The following is a reconciliation of segment additions to oil and gas
properties to consolidated amounts.
First Quarter
---------------
1999 1998
------ ------
(In Millions)
Total additions to oil and gas properties for reportable segments. $ 131 $ 242
Administrative expenditures....................................... 11 3
------ ------
Consolidated additions to properties.............................. $ 142 $ 245
====== ======
8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity
The total long-term debt to capital ratio at March 31, 1999 and
December 31, 1998 was 42 percent and 39 percent, respectively. In March 1999,
the Company issued $450 million of 7 3/8% Debentures due March 1, 2029. The net
proceeds will be used for general corporate purposes, including working capital,
capital expenditures, acquisitions and reducing indebtedness. Indebtedness
includes $300 million notes maturing in May 1999 and $150 million notes maturing
in August 1999. During the first quarter, commercial paper of $190 million was
repaid.
The Company's credit facilities are comprised of a $600 million
revolving credit agreement that expires in February 2003 and a $400 million
revolving credit agreement that expires in February 2000. The $400 million
revolving credit agreement is renewable annually by mutual consent. As of March
31, 1999, there were no borrowings outstanding under the credit facilities. The
Company also has the capacity to issue $550 million of securities under a shelf
registration statement filed with the Securities and Exchange Commission. The
Company plans to restore that capacity to $1 billion during the second quarter
of 1999.
In July 1998, the Company's Board of Directors approved the repurchase
of up to two million shares of its Common Stock. During the first quarter of
1999, the Company repurchased 250,000 shares of its Common Stock for $9 million.
Since December 1988, the Company has repurchased approximately 32 million
shares. In conjunction with the Company's stock repurchase program, the Company
sold put options ("options") during 1998. The options entitled the holders, upon
exercise on the expiration dates, to sell shares of BR Common Stock to the
Company at specified prices. Alternatively, the Company retained the ability to
settle the options in cash. During the first quarter of 1999, 150,000 options
were exercised, 115,000 expired and none remained outstanding at March 31, 1999.
Net cash provided by operating activities for the first three months of
1999 was $198 million compared to $236 million in 1998. The decrease was
primarily due to lower operating income, principally as a result of lower
commodity prices.
The Company and its subsidiaries are named defendants in numerous
lawsuits and named parties in numerous governmental and other proceedings
arising in the ordinary course of business. While the outcome of lawsuits and
other proceedings cannot be predicted with certainty, management believes these
matters will not have a material adverse effect on the consolidated financial
position of the Company, although results of operations and cash flows could be
significantly impacted in the reporting periods in which such matters are
resolved.
The Company has certain other commitments and uncertainties related to
its normal operations. Management believes that there are no other commitments,
uncertainties or contingent liabilities that will have a material adverse effect
on the consolidated financial position, results of operations or cash flows of
the Company.
9
Capital Expenditures
Capital expenditures for the first three months of 1999 totaled $142
million compared to $245 million in 1998. Capital expenditures, excluding proved
property acquisitions, are currently projected to be approximately $750 million
for all of 1999 and are expected to be primarily for the development and
exploration of oil and gas properties and plant and pipeline expenditures.
Capital expenditures will be funded from internal cash flows, supplemented, if
needed, by external financing.
Dividends
On April 7, 1999, the Board of Directors declared a quarterly common stock
dividend of $.1375 per share, payable July 1, 1999.
Results of Operations - First Quarter 1999 Compared to First Quarter 1998
The Company reported a net loss of $10 million or $.05 per share for
the first quarter of 1999 compared to net income of $48 million or $.27 per
share in 1998. Operating income for the first quarter of 1999 was $26 million
compared to $99 million in 1998.
Revenues were $349 million for the first quarter of 1999 compared to
$432 million for the first quarter of 1998. Natural gas sales prices decreased 7
percent to $1.88 per MCF which decreased revenues $21 million. Natural gas sales
volumes decreased 5 percent to 1,565 MMCF per day which decreased revenues $15
million. Average oil sales prices decreased 31 percent to $10.55 per barrel
which decreased revenues $32 million. Oil sales volumes decreased 13 percent to
74.5 MBbls per day which decreased revenues $16 million. Gas and oil sales
volumes decreased primarily due to decreased activity on the Gulf of Mexico
shelf as a result of lower capital spending in the area.
Costs and expenses were $323 million for the first quarter of 1999
compared to $333 million in 1998. The decrease was primarily due to a $6 million
decrease in exploration costs and a $7 million decrease in production taxes
partially offset by a $3 million increase in other expenses.
Interest expense was $41 million for the first quarter of 1999 compared
to $36 million in 1998. The increase was due to the $450 million of fixed-rate
debt issued in March 1999 and also higher outstanding commercial paper
borrowings in 1999.
The effective income tax rate was a benefit of approximately 32 percent
for the first quarter of 1999 compared to a 28 percent expense in 1998. The
decrease in income tax expense was primarily due to lower pretax income
partially offset by lower benefits from nonconventional fuel tax credits.
Other Matters
The year 2000 issue is the result of computer systems and other
equipment with embedded chips or processors using two digits instead of four to
define a specific year and potentially being unable to process accurately
certain data before, during or after the year 2000. This could result in system
failures or miscalculations, causing disruptions to various activities and
operations.
The Company began a program during 1996 to assess computer software and
hardware (hereafter referred to as information technology), which included an
assessment of any year 2000 issues. Since 1996, significant portions of the
Company's information technology has been replaced with information
10
technology that is year 2000 compliant, and the Company has further developed
a year 2000 readiness plan.
The Company's year 2000 readiness plan involves four phases:
assessment, remediation, testing and implementation. The Company has completed
its assessment of all material systems that could be affected by the year 2000
issue. The assessment confirmed that information technology exposures were not
material; however, assets used in producing, gathering and transporting
hydrocarbons (hereafter referred to as operating equipment) were determined to
be at risk of encountering year 2000 problems.
The Company has completed 90 percent of the remediation phase for all
significant operating equipment. It has completed 80 percent of the testing and
implementation phases for operating equipment and expects to have those phases
completed in the second quarter of 1999. The Company's goal under its year 2000
readiness plan is to ensure that all critical operating equipment, systems and
processes under its direct control remain operational. However, because certain
operating equipment, systems and processes may be linked with systems outside of
the Company's control, there can be no assurance that all implementations will
be successful.
The Company has no means of ensuring that its third-party vendors and
suppliers will be year 2000 compliant. The Company has contacted all third-party
vendors and suppliers of products and services that it considers material to its
operations in order to ascertain their level of year 2000 readiness. All of the
significant vendors and suppliers of the Company have responded that they
believe the year 2000 issue will not have a material adverse impact on their
ability to perform. However, if the Company's third party vendors and suppliers
are unable to perform because of year 2000 problems, such failures could result
in the inability to transport, deliver or market crude oil, natural gas or
natural gas liquids.
Crude oil gathering, transportation and marketing by the Company are
widely dispersed across the United States, and it is unlikely that a year 2000
failure by any single gatherer, transporter, or purchaser of crude oil would
significantly impact the Company. A significant portion of natural gas sales
originate in the San Juan Basin. Natural gas is gathered in the San Juan Basin
through three primary gathering systems operated by an affiliate and two other
companies. The gas is then sold through two primary pipelines. Approximately 70%
of natural gas sales by all producers in the San Juan Basin and 35% of the
Company's natural gas sales are transported to markets by a single pipeline
system. The Company, in conjunction with other major producers in the San Juan
Basin, has evaluated these entities' assessment, remediation, testing and
implementation on their systems for year 2000 readiness. The Company and other
major producers have had discussions with certain suppliers and vendors upon
which these gathering and transportation systems rely to perform their services
for the Company. The Company has also participated in the development of
contingency plans to deal with unforeseeable year 2000 failures. If a failure
does occur with respect to the gathering and transportation of natural gas in
the San Juan Basin, the Company is developing contingency plans to address the
reasonably foreseeable issues. These plans include manual back-up of computer
controlled and embedded technology systems and identification of alternative
vendors and suppliers.
Although management believes it is unlikely, the most reasonable worst
case scenario for the Company would be a complete or partial failure of one or
more of the three gathering systems or the complete or partial failure of one of
the transportation lines in the San Juan Basin. Such a failure could disrupt or
delay a significant portion of the gas sales out of the San Juan Basin during
the time of the failure and could be material to the Company.
11
The Company has enhanced existing crisis management plans and year 2000
contingency plans to address potential operational disruptions throughout its
production areas. The year 2000 readiness project is estimated to cost $3
million, of which $2.5 million has been incurred. The costs of the contingency
plans are estimated to be $500,000. Management does not expect the costs of the
Company's year 2000 project to have material adverse effect on the Company's
financial position, results of operations or cash flows.
The Company's plan to complete the year 2000 modifications and its
estimate of the worst case scenarios and contingency plans are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, the failure of embedded chip
technology, the inability to control third parties and their year 2000 readiness
programs, the failure of electric, communication or transportation
infrastructure in the areas where the Company operates and other uncertainties.
Presently, based on information available, the Company cannot conclude
that any failure of the Company or third parties to achieve year 2000 compliance
will not adversely affect the Company.
Forward-looking Statements
This Quarterly Report contains projections and other forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. These projections and statements reflect the Company's current views with
respect to future events and financial performance. No assurances can be given,
however, that these events will occur or that these projections will be achieved
and actual results could differ materially from those projected as a result of
certain factors. A discussion of these factors is included in the Company's 1998
Form 10-K.
12
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 2 of Notes to Consolidated Financial Statements.
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibits are filed as part of this report.
Exhibit Nature of Exhibit Page
4.1 The Company and its subsidiaries either *
have filed with the Securities and Exchange
Commission or upon request will furnish
a copy of any instrument with respect to
long-term debt of the Company.
10.28 Severance Benefit Agreement between 15
John A. Williams and the Company
27.1 Financial Data Schedule **
* Exhibit incorporated by reference.
** Exhibit required only for filings made electronically using the Securities
and Exchange Commission's EDGAR System.
B. Reports on Form 8-K
On March 2, 1999, the Company filed Form 8-K in connection with
the issuance of $450 million of 7 3/8% Debentures.
Items 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
13
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
BURLINGTON RESOURCES INC.
(Registrant)
By /s/ John E. Hagale
John E. Hagale
Executive Vice President and
Chief Financial Officer
By /s/ Philip W. Cook
Philip W. Cook
Vice President, Controller and
Chief Accounting Officer
Date: May 4, 1999
14
EXHIBIT 10.28
SEVERANCE BENEFIT AGREEMENT
This Severance Benefit Agreement (the "Agreement") is entered into by and
between John A. Williams (the "Employee") and Burlington Resources Inc. ("BR").
RECITALS
A. The Employee is employed in Houston, Texas as President and Chief
Executive Officer of Burlington Resources International Inc. ("International")
and Senior Vice President of The Louisiana Land and Exploration Company
("LL&E").
B. LL&E and International are all wholly owned subsidiaries of BR. BR,
LL&E, Burlington Resources Oil & Gas Company ("Burlington"), International and
other subsidiaries of BR are hereinafter collectively referred to as the "BR
Companies."
C. The Employee would be entitled to certain benefits under that certain
Termination Agreement (the "Termination Agreement") entered into as of March 13,
1996 between the Employee and LL&E in the event of the "Involuntary Termination"
(as such phrase is defined in the Termination Agreement) of employment of the
Employee with LL&E on or before October 21, 1999.
D. BR wishes to induce the Employee to continue in the employment of the BR
Companies beyond October 21, 1999.
E. In exchange for BR's agreement to provide severance benefits as provided
for herein, the Employee is willing to waive his rights under the Termination
Agreement.
In order to set forth the understanding of the parties with respect to
severance benefits in the event of the termination of the Employee's employment
with the BR Companies, the Employee and BR have agreed to enter into this
Agreement.
AGREEMENTS
In consideration of the foregoing recitals, the mutual agreements and
undertakings of the parties set forth below, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
expressly confessed and acknowledged, BR and the Employee agree as follows:
1. Waiver of Rights under Termination Agreement
The Employee hereby waives any and all rights that the Employee may
have under the Termination Agreement, including without limitation any
entitlement to severance benefits and any other payments or benefits thereunder
or otherwise.
15
2. Severance Benefits
BR agrees that, in the event either (i) the employment of the Employee
with the BR Companies is terminated by the BR Companies other than for "Cause"
(as hereinafter defined) prior to September 30, 2002 or (ii) the Employee
terminates employment with the BR Companies for "Good Reason" (as hereinafter
defined) prior to September 30, 2002, the total value of severance payments and
benefits paid to the Employee by the BR Companies shall in no event be less than
the following:
(i) If such termination occurs during the period commencing on the
date of this Agreement through and including September 30,
1999, the sum of $3,000,000;
(ii) If such termination occurs during the period commencing on
October 1, 1999 through and including September 30, 2002, the
sum of $3,000,000 reduced by the amount of $83,333.333 at the
beginning of each month after September 1999 during which
Employee remains employed by one or more of the BR Companies.
The severance payment described above is not intended to be payable in
addition to any other severance, change in control or termination payments or
benefits which any of the BR Companies may, in their sole and absolute
discretion, decide to pay the Employee or to which the Employee may be entitled
under any plan, program, arrangement or other agreement of any of the BR
Companies, but instead constitutes a minimum severance payment payable hereunder
only to the extent not satisfied by the value of payments and benefits
(including, without limitation, the accelerated vesting of any long term
incentive benefits), if any, payable as severance, change in control or other
termination payments or benefits under all such plans, programs, agreements and
arrangements or otherwise paid as severance, change in control or other
termination payments or benefits by any of the BR Companies. For purposes of
this Section 2, the following definitions shall apply:
(a) "Cause" shall mean (i) an act or acts of dishonesty on the part of
the Employee resulting or intended to result directly or indirectly in
substantial gain or personal enrichment to which the Employee was not legally
entitled at the expense of any of the BR Companies, or (ii) a material breach of
the Employee's duties or responsibilities resulting in demonstrably material
injury to any of the BR Companies.
(b) "Good Reason" shall mean a material reduction in the Employee's
base salary or bonus opportunity other than in connection with a reduction that
also applies to all or substantially all other officers of Burlington.
3. LL&E Service
Although the BR Companies are not obligated to do so (and would not
otherwise as a matter of practice do so), BR expects that, if any of the BR
Companies choose to provide a severance benefit to the Employee using service as
a factor in determining the amount of the benefit, the BR Companies will take
into account the Employee's service with LL&E prior to LL&E's becoming a
subsidiary of BR as if such service were service with Burlington. The preceding
sentence reflects only the current expectation of BR, and the parties hereby
expressly acknowledge that this Agreement, including this Section 3, does not
create any obligation on the part of any of the BR Companies to pay any
severance benefit to the Employee (based on years of service or otherwise) apart
from the benefit described in Section 2 hereof and does not restrict in any way
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the discretion of the BR Companies in determining the amount of any severance
benefit except as provided in Section 2 hereof.
4. Miscellaneous
The Employee understands and agrees that this Agreement is being
executed by BR on behalf of each of the BR Companies, and that all of the rights
of BR under this Agreement and all of the Employee's obligations under this
Agreement will inure to the benefit of the BR Companies and may be enforced by
any of the BR Companies.
The Employee represents, warrants and agrees that he does not rely and
has not relied on any representation or statement made by any officer, director,
agent or representative of any of the BR Companies with regard to the subject
matter, background or effect of this Agreement, except as expressly set forth in
this Agreement.
This Agreement sets forth the entire agreement between the parties and
supersedes any and all prior agreements or understandings (whether or not in
writing) pertaining to the subject matter of this Agreement.
This Agreement shall be governed by and construed under the laws of the
State of Texas.
This Agreement is executed in duplicate originals and is effective if
signed by both parties and an executed copy is returned to BR.
EMPLOYEE BURLINGTON RESOURCES INC.
/s/ John A. Williams /s/ L. David Hanower
John A. Williams By: L. David Hanower
Its Senior Vice President
Date: March 25, 1999 Date: March 25, 1999
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