EXHIBIT 99.3
Consolidated Financial Statements
CANADIAN HUNTER EXPLORATION LTD.
December 31, 2000
CANADIAN HUNTER EXPLORATION LTD.
Consolidated Balance Sheet
(THOUSANDS OF CANADIAN DOLLARS)
As at December 31, 2000
<Table>
ASSETS
CURRENT
Accounts receivable 212,777
Inventories 18,948
Other current assets [Note 3] 3,351
----------
235,076
Other assets [Note 3] 33,064
Property, plant and equipment [Note 4] 1,252,484
----------
1,520,624
==========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 180,164
Income taxes payable 19,909
Current portion of deferred revenue and other liabilities [Note 5] 4,256
----------
204,329
Deferred revenue and other liabilities [Note 5] 52,266
Long-term debt [Note 6] 234,883
Future income tax liability 397,060
Minority interest 13,998
----------
902,536
----------
SHAREHOLDERS' EQUITY
Share capital [Note 8] 347,638
Retained earnings 270,445
Cumulative translation adjustment 5
----------
618,088
----------
1,520,624
==========
</Table>
See accompanying notes
On behalf of the Board:
Clifford A. Rae Stephen J. Savidant
DIRECTOR DIRECTOR
2
CANADIAN HUNTER EXPLORATION LTD.
Consolidated Statement of Net Income and Retained Earnings
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31, 2000
<Table>
REVENUE
Petroleum and natural gas sales 909,315
Royalties (200,488)
----------
708,827
----------
EXPENSES
Production 56,198
General and administrative 24,266
Interest and other financing charges [Note 6] 65,012
Depletion, depreciation and amortization 192,839
Other 1,732
Minority interest 426
----------
340,473
----------
INCOME BEFORE INCOME TAXES 368,354
Income taxes [Note 7]
Current 17,195
Future 143,430
----------
Net income 207,729
----------
RETAINED EARNINGS, BEGINNING OF YEAR 68,488
Cash issued under incentive share option plan [Note 8] (5,772)
----------
RETAINED EARNINGS, END OF YEAR 270,445
==========
NET INCOME PER SHARE [NOTE 8]
Basic $ 3.49
Fully diluted $ 3.37
</Table>
See accompanying notes
3
CANADIAN HUNTER EXPLORATION LTD.
Consolidated Statement of Cash Flow
(THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
Year Ended December 31, 2000
<Table>
OPERATING ACTIVITIES
NET INCOME 207,729
Add items not involving cash
Depletion, depreciation and amortization 192,195
Deferred revenue recognized in the year [Note 5] 49,334
Future income taxes 143,430
Minority interest 426
----------
Funds from operations 593,114
Net change in non-cash working capital [Note 12] (78,246)
----------
Cash provided by operating activities 514,868
----------
INVESTING ACTIVITIES
Exploration and development of oil and natural gas properties (356,971)
Acquisition of equipment and other assets (4,684)
Acquisition of oil and natural gas properties (93,097)
Acquisition of Atalaya Energy S. A. [Note 2] (54,530)
Disposition of oil and natural gas properties 30,533
Increase in other assets (14,956)
Net change in non-cash working capital [Note 12] 14,997
----------
Cash used in investing activities (478,708)
----------
FINANCING ACTIVITIES
Cash issued under incentive share option plan (5,772)
Share capital issued [Note 8] 118
Drawings on long-term debt [Note 6] 74,504
Foreign exchange (21)
Decrease in deferred revenue and other liabilities (104,989)
----------
Cash used in financing activities (36,160)
----------
NET CHANGE IN CASH --
Cash, beginning of year --
----------
CASH, END OF YEAR --
----------
FUNDS FROM OPERATIONS PER SHARE [NOTE 8]
Basic $ 9.96
Fully diluted $ 9.56
</Table>
See accompanying notes
4
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared by management in accordance with
accounting principles generally accepted in Canada. A summary of the differences
between accounting principles generally accepted in Canada and those generally
accepted in the United States is contained in Note 15 to these statements.
As these financial statements have been prepared for a special purpose, to meet
the United States filing requirements for financial statement disclosure for a
significant acquisition by Burlington Resources Inc., comparative financial
statements have not been presented.
CONSOLIDATION
The consolidated financial statements of Canadian Hunter Exploration Ltd. (the
"Corporation") include the financial position and the results of operations for
all of its subsidiaries. A substantial portion of the Corporation's activities
are conducted jointly with others and the consolidated financial statements
reflect only the Corporation's proportionate interest in such activities.
PROPERTY, PLANT AND EQUIPMENT
The Corporation follows the full cost method of accounting for oil and natural
gas operations, as prescribed by The Canadian Institute of Chartered
Accountants, whereby all costs relating to the exploration for and the
development of oil and natural gas reserves are capitalized and accumulated in
country-by-country cost centres. Capitalized costs include lease and reserve
acquisition costs, geological and geophysical costs, carrying charges of
non-producing properties, costs of drilling both productive and non-productive
wells and direct overhead expenditures related to exploration and development
activities. Costs capitalized are depleted and depreciated using the
unit-of-production method based on gross proven oil and natural gas reserves
converted to a common unit of measure utilizing relative heating value. In
determining its depletion base the Corporation includes the cost of unproven
land and an estimate of future costs to be incurred in developing proven
reserves. The entire proceeds from the disposal of oil and natural gas
properties are applied as a reduction of capitalized costs, except when such
disposition would result in a greater than 20 percent change in the rate of
depletion, in which case a gain or loss on disposal would be recorded.
In applying the full cost method of accounting, the Corporation performs a
ceiling test which restricts capitalized costs less accumulated depletion and
depreciation, future income tax liabilities and site restoration from exceeding
the estimated undiscounted value of future net revenue derived from gross proven
oil and natural gas reserves, less the aggregate of estimated future general and
administrative, financing, site restoration and abandonment costs, net of
salvage values, and income tax costs, plus the lower of cost and estimated net
realizable value of unproved properties. In calculating the ceiling test,
year-end prices of oil and natural gas are used and all costs are assumed to be
held constant.
Estimated future site restoration and abandonment costs are calculated using the
unit-of-production method. Costs are based on engineering estimates using
current costs and technology and in accordance with current legislation and
industry practices. The annual charge is recorded as additional depletion and
depreciation.
Depreciation of equipment and other assets is provided using the declining
balance method at rates ranging from 10 percent to 33 percent per annum.
5
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
INVENTORIES
Inventories of materials and supplies are carried at the lower of average cost
and net realizable value.
DEFERRED REVENUE AND OTHER LIABILITIES
Payments received for products not delivered until required in the future are
deferred and recorded as revenue when the products are delivered or the right to
take delivery expires. Payments received in respect of the natural gas
transportation agreement are recorded as revenue over the term of the contract.
FOREIGN CURRENCY TRANSLATION
All of the Corporation's foreign operations are self-sustaining. The accounts
are translated using the current rate method in which assets and liabilities are
converted to Canadian dollars at the exchange rate in effect at the balance
sheet date and revenues and expenses are translated at the monthly average
exchange rate during the month in which the transaction occurred. Translation
gains or losses are included in a separate component of shareholders' equity.
FINANCIAL INSTRUMENTS
The Corporation periodically enters into financial instrument and commodity
contracts to reduce its exposure to adverse changes in commodity prices,
interest rates and foreign exchange rates. Costs and gains on hedge contracts
are recognized in income in the same period as the hedged transactions are
settled. Costs and gains associated with unwinding a hedged position, if
material, would be recognized in the same period that the hedged item was
recognized in income.
The fair value of accounts receivable, accounts payable and accrued liabilities,
income taxes payable, and long-term debt approximates their carrying amounts.
INCOME TAXES
The Corporation follows the liability method in accounting for income taxes.
Under this method future tax assets and liabilities are determined based on
differences between financial reporting and income tax bases of assets and
liabilities, and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The effect on future tax
assets and liabilities of a change in tax rates is recognized in net income in
the period in which the change occurs.
6
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
PENSION COSTS
The Corporation has both a defined benefit and a defined contribution pension
plan.
(a) Defined benefit plan
For the defined benefit pension plan, the Corporation uses the projected benefit
actuarial method prorated on length of service and best estimate assumptions to
value benefit obligations. The obligation for the defined benefit pension plan
is determined through periodic actuarial reports that are based on projections
of interest, employees' compensation levels, and length of service to the time
of retirement. Adjustments arising from plan amendments, experience gains and
losses, and changes in assumptions are amortized over various periods depending
on the nature of the adjustment, ranging from the term of the employment
contract to which the adjustment relates, to the estimated average remaining
service lives of the related employee group. For the purpose of calculating the
expected return on plan assets, those assets are valued at fair value. Current
service costs are expensed in the year.
Commencing January 1, 2000, the Corporation prospectively applied the new
accounting recommendations for employee future benefits. In applying the new
recommendation, the pension liability is calculated using a discount rate based
on the current market interest rate of high quality debt instruments rather than
an estimated rate. This resulted in a transitional asset of $5,754 which is
being amortized over the estimated average remaining service life of 15 years.
(b) Defined contribution plan
Costs associated with the defined contribution pension plan are based upon
specific amounts contributed on behalf of participating employees during the
year and are expensed as incurred.
SHARE-BASED COMPENSATION PLANS
The Corporation has both an incentive share option plan and an employee share
savings plan.
For the incentive share option plan no compensation expense is recognized when
options are issued. If the options are repurchased from employees, the excess
consideration paid over the exercise price of the option purchased is charged to
retained earnings. If the option holder purchases the shares at the option
price, the consideration received from the option holder is credited to share
capital.
For the employee share savings plan, any contributions made by the Corporation
are charged to compensation expense in the current year.
USE OF ESTIMATES
Management is required to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the period.
7
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
2. ACQUISITIONS
Effective March 1, 2000, the Corporation purchased 78 percent of the outstanding
shares of Atalaya Energy S.A. ("Atalaya") for cash consideration of US$37,516
(CDN$54,530). Atalaya is engaged in the exploration for and production of
natural gas and liquids in Argentina. The Corporation has made an offer to
acquire the remaining 22 percent of the outstanding shares of Atalaya. This
offer expires September 2001.
This transaction was accounted for using the purchase method with the results of
operations included in the consolidated statement of net income from the date of
acquisition.
The Corporation allocated the purchase price to the assets and liabilities of
the acquired company as follows:
NET ASSETS ACQUIRED
<Table>
Property, plant and equipment 78,367
Net non-cash working capital 3,548
Future income tax liability (14,242)
Minority interest (13,143)
------------
54,530
============
</Table>
3. OTHER ASSETS
<Table>
Prepaid natural gas contract 21,459
Long-term sales tax receivable 14,956
------------
36,415
Less current portion 3,351
------------
33,064
============
</Table>
PREPAID NATURAL GAS CONTRACT
The Corporation has a prepaid natural gas contract which represents a continuing
obligation of a major independent producer to deliver to the Corporation
approximately 10,865 mmbtu per day of natural gas. As at December 31, 2000 the
remaining obligation totaled 25 bcf of natural gas.
LONG-TERM SALES TAX RECEIVABLE
Long-term sales tax receivable consists of sales tax paid on the purchase of
foreign properties. This tax is recoverable as revenue is earned from the
properties purchased.
8
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
4. PROPERTY, PLANT AND EQUIPMENT
<Table>
<Caption>
ACCUMULATED
DEPLETION AND
COST DEPRECIATION NET BOOK VALUE
------------ ------------ --------------
Oil and natural gas properties 2,830,269 (1,591,124) 1,239,145
Equipment and other assets 48,703 (35,364) 13,339
------------ ------------ ------------
2,878,972 (1,626,488) 1,252,484
============ ============ ============
</Table>
General and administrative expenses of $11,297 were capitalized in 2000.
5. DEFERRED REVENUE AND OTHER LIABILITIES
<Table>
Prepaid natural gas contracts 2,115
Future site restoration 37,107
Natural gas transportation agreement 13,022
Provision for future lease costs 3,613
Pension liability [Note 9] 665
------------
56,522
Less current portion 4,256
------------
52,266
============
</Table>
PREPAID NATURAL GAS CONTRACTS
In 1991 the Corporation entered into a natural gas pre-sale agreement with a
co-generation facility in Syracuse, New York to supply 120 bcf of natural gas
over a 16 year period, and in connection therewith a pre-payment equal to
$101,328 was received. As at December 31, 1999, the Corporation's remaining
supply commitment totaled 69 bcf of natural gas. On August 2, 2000 the remaining
obligation was terminated for a payment of $103,082.
During the year the Corporation entered into an AECO/Nymex differential contract
with a third party. As part of the contract, the Corporation received a payment
for a call premium on 20,000 mmbtu per day to October 2001.
FUTURE SITE RESTORATION
The Corporation estimates total future site restoration and abandonment costs to
be $78,792 at December 31, 2000 of which $37,107 has been accrued as a liability
and $5,851 has been charged to income during the year.
9
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
NATURAL GAS TRANSPORTATION AGREEMENT
The Corporation is a party to a natural gas transportation agreement for the
utilization of pipeline capacity of 19,438 mmbtu per day to October 31, 2023. In
return, a payment of US$10,500 was received which is being amortized into income
over the term of the contract.
PROVISION FOR FUTURE LEASE COSTS
The provision for future lease costs relates to the subleasing of seven floors
of space within the Calgary head office. This provision represents the
difference between the original lease rate and the estimated amounts recoverable
under subleases during the remaining term of the lease which expires in 2003.
The provision is being amortized over the term of the lease.
6. LONG-TERM DEBT
<Table>
Canadian dollar debt 144,271
US dollar debt 90,612
------------
234,883
============
</Table>
BANK CREDIT FACILITIES
The Corporation has arranged $500,000 of unsecured lines of credit with four
major Canadian banks. Drawings on these lines have a revolving term which may,
at the Corporation's discretion, be converted into an amortizing term. If the
term date is not extended, the facilities will become repayable in equal
quarterly payments over 4 years. No amount is required to be paid on these
facilities within the next year and accordingly no current portion of long-term
debt was recognized. The remaining available line of credit at December 31, 2000
is $198,808. The average rate of interest paid by the Corporation during the
year on these facilities was 6.21 percent.
INTEREST AND OTHER FINANCING CHARGES
<Table>
Interest on long-term debt 16,208
Loss on termination of a prepaid natural gas contract 48,634
Other 170
------------
65,012
============
</Table>
10
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
7. INCOME TAXES
The future income tax provision results primarily from the deduction, as
permitted by tax legislation, of exploration and development expenditures in
advance of the related deductions in the financial statements.
The effective tax rate used in the financial statements differs from the
statutory income tax rate due to the following:
<Table>
INCOME BEFORE TAXES 368,354
Statutory rate 44.87%
------------
Expected income taxes 165,280
Add/(deduct):
Non-deductible crown charges, net of Alberta Royalty Tax Credit 79,313
Resource allowance (78,716)
Tax benefit not previously recognized (529)
Provincial royalty tax deduction (1,842)
Large corporations tax 2,194
Other (5,075)
------------
Provision for income tax expense 160,625
------------
Effective tax rate 43.61%
============
</Table>
11
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
8. SHARE CAPITAL
Authorized
Unlimited number of common shares
Unlimited number of preferred shares - issuable in series
Issued
Common shares
<Table>
<Caption>
SHARES AMOUNT
(000's) ($000's)
------------ ------------
BALANCE, BEGINNING OF YEAR 59,657 347,520
Issued during year 12 118
------------ ------------
BALANCE, END OF YEAR 59,669 347,638
============ ============
</Table>
Certain members of management have the right to receive 92,540 common shares
which were issued at a price of $8.63 per share. These common shares were issued
under the Corporation's share purchase plan and are held as security for loans
receivable from management of $799. For financial statement reporting purposes,
these loans have been deducted from shareholders' equity.
COMMON SHARE OPTIONS
The Corporation has an incentive share option plan under which options granted
to acquire common shares vest proportionately over five years and expire ten
years after the grant date. The exercise price is equal to the market price of
the Corporation's common shares on the last trading day preceding the date of
grant.
<Table>
<Caption>
NUMBER OF
OPTIONS WEIGHTED AVERAGE
(000'S) PRICE/SHARE
------------ ----------------
OUTSTANDING AT BEGINNING OF YEAR 2,224 9.84
Granted 803 23.92
Exercised (292) 9.67
Forfeited (40) 14.46
------------ ------------
OUTSTANDING AT END OF YEAR 2,695 13.99
------------ ------------
EXERCISABLE AT END OF YEAR 153 10.14
------------ ------------
</Table>
12
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
At December 31, 2000 the following options to purchase common shares were
outstanding:
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- --------------------------------
NUMBER NUMBER
RANGE OF EXERCISE OF OPTIONS WEIGHTED AVERAGE WEIGHTED AVERAGE OF OPTIONS WEIGHTED AVERAGE
PRICE (000'S) EXERCISE PRICE YEARS TO EXPIRY (000'S) EXERCISE PRICE
- ----------------- ------------ ---------------- ---------------- ------------ ----------------
Under $15.00 1,855 $ 9.60 8.0 145 $ 9.59
$15.00 to $25.00 39 $ 18.35 8.4 6 $ 18.94
Over $25.00 801 $ 23.94 9.2 2 $ 25.10
------------ ------------ ------------ ------------ ------------
Total 2,695 $ 13.99 8.4 153 $ 10.14
============ ============ ============ ============ ============
</Table>
At December 31, 2000, there were 2,863,286 common shares reserved for the
granting of additional options.
EARNINGS PER SHARE AND FUNDS FROM OPERATIONS PER SHARE
Earnings per common share and funds from operations per common share have been
calculated using the weighted average number of common shares of 59,574,775.
Fully diluted earnings per common share have been calculated based on the
assumption that all options issued, to the extent they are not antidilutive,
have been exercised. The fully diluted earnings per share amount assumes
62,244,550 fully diluted shares outstanding, and includes imputed interest of
$1,725 at a rate of 5 percent on the proceeds from the exercise of options.
13
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
9. PENSION PLAN
For the current year, the Corporation used an independent actuary for
determining the defined benefit pension plan funding and accounting reporting
requirements.
Summary information relating to the defined benefit plan at December 31, 2000 is
as follows:
<Table>
Significant actuarial assumptions:
Expected long-term rate of return on plan assets (%) 7.0
Discount rate (%) 7.0
Rate of compensation increase (%) 4.5
------------
Accrued benefit obligation:
Accrued benefit obligation, beginning of year 16,450
Current service cost 222
Interest cost 1,184
Actuarial losses 757
Benefits paid (904)
------------
Accrued benefit obligation, end of year 17,709
------------
Plan assets*:
Fair value of plan assets, beginning of year 21,783
Actual return on plan assets 1,918
Employer contributions 151
Benefits paid (904)
------------
Fair value of plan assets, end of year 22,948
------------
Funded status - plan surplus: 5,239
Unamortized net actuarial gains 552
Unamortized net transitional asset (5,370)
------------
Net accrued benefit asset 421
Net balance sheet liability 665
------------
Excess of fund assets over net balance sheet liability 1,086
------------
Pension expense:
Defined benefit 344
Defined contribution 1,017
------------
1,361
============
</Table>
*Pension fund assets consist of short-term and money market investments.
14
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
10. FINANCIAL INSTRUMENTS
FINANCIAL CONTRACTS
To reduce its exposure to adverse changes in commodity prices, interest rates
and foreign exchange rates, from time-to-time the Corporation utilizes financial
instruments such as swaps and fixed commodity contracts to hedge against market
fluctuations.
COMMODITY CONTRACTS
At December 31, 2000, the Corporation had the following natural gas hedging
positions in place:
<Table>
<Caption>
NOTIONAL UNRECOGNIZED
CONTRACT AVERAGE LOSS AT
AMOUNT FIXED PRICE DECEMBER 31,
CONTACT TYPE CONTRACT PERIOD (UNITS) ($/UNIT) 2000
------------ --------------- -------- ----------- ------------
AECO fixed price January 2001 to 20,000 GJ/day $4.15 61,727
October 2005
AECO/NYMEX January 2001 to 20,000 mmbtu/day US$0.045 11,878
differential October 2001
</Table>
The AECO/NYMEX differential has a US$5.00/mmbtu Nymex ceiling. The AECO fixed
price contract was entered into simultaneously with the termination of the
prepaid natural gas contract.
The above estimated unrecognized amounts are based on the market value of these
financial instruments as at year end, and represent the amounts the Corporation
would receive or pay to terminate the contracts at year end. No amount for these
instruments is recorded in the financial statements.
CREDIT RISK
A significant portion of the Corporation's accounts receivable are due from
entities in the oil and gas industry. Concentration of credit risk is mitigated
by having a broad customer base, which includes a significant number of
companies engaged in joint operations with the Corporation. The Corporation
routinely assesses the financial strength of its partners and customers,
including parties involved in marketing or other commodity arrangements.
The Corporation is exposed to credit risk associated with possible
non-performance by financial instrument counter parties. The Corporation
believes the risks of non-performance are minimal as the counter parties are
major financial institutions that have an investment-grade credit rating as
determined by recognized credit rating agencies. The Corporation also limits its
total exposure to individual counter parties.
15
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
OFF-BALANCE-SHEET RISK
The Corporation entered into a foreign exchange forward contract to hedge its
net investment in a self-sustaining foreign subsidiary. This forward contract to
exchange US$38,983 for Canadian dollars at an exchange rate of 1.4529 matures on
September 2005. As a result of the forward contract, the exchange gains and
losses recorded on translation of the subsidiaries' financial statements will be
offset by the gains and losses attributable to the foreign exchange forward
contract.
11. COMMITMENTS
Operating leases under existing lease commitments are as follows:
<Table>
2001 4,869
2002 4,443
2003 1,076
------------
10,388
============
</Table>
12. STATEMENT OF CASH FLOW
The net changes in non-cash working capital consist of the following:
<Table>
CASH (USED IN) PROVIDED BY
Accounts receivable (148,444)
Inventories (14,327)
Accounts payable and accrued liabilities 81,774
Income taxes payable 14,200
------------
(66,797)
Atalaya Energy S.A. net working capital [Note 2] 3,548
------------
(63,249)
============
</Table>
The change in non-cash working capital relates to the following activities:
<Table>
Operating (78,246)
Investing 14,997
------------
(63,249)
============
</Table>
Cash taxes paid in 2000 were $3,009 and cash interest paid in 2000 was $15,419.
16
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
13. SEGMENTED INFORMATION
The Corporation has operations in Canada and Argentina. All activities relate to
the exploration, development and production of oil, liquids and natural gas.
<Table>
<Caption>
CANADA ARGENTINA TOTAL CORPORATE
------------ ------------ ---------------
Petroleum and natural gas sales 895,592 13,723 909,315
Property, plant and equipment 1,096,577 155,907 1,252,484
</Table>
14. SUBSEQUENT EVENT
Effective December 5, 2001, Burlington Acquisition Corporation, an indirect
wholly-owned subsidiary of Burlington Resources Inc., acquired all of the issued
and outstanding common shares of the Corporation.
15. UNITED STATES ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP"). These
principles, as they pertain to the Corporation's consolidated financial
statements, conform in all material respects with accounting principles
generally accepted in the United States ("U.S. GAAP") except that:
(a) Unrealized gains and losses relating to the translation of long-term
monetary liabilities repayable in foreign funds are deferred and amortized
over the remaining term of the liability. In accordance with U.S. GAAP,
these gains and losses would be recognized in earnings in the period in
which they occur.
(b) U.S. GAAP requires recognition of an additional minimum pension liability
equal to the excess of the unfunded accumulated benefit obligation over the
accrued pension cost. The additional minimum pension liability is
recognized in other comprehensive income, a component of shareholders'
equity, to the extent it exceeds the sum of the unrecognized prior service
cost.
(c) The Canadian GAAP ceiling test is comparable to the method promulgated by
the Securities and Exchange Commission ("SEC") except that the SEC method
requires the projected future net cash from proved reserves be discounted
at 10 percent and does not require a deduction for general and
administrative and financing cost from those net cash flows.
(d) Prior to January 1, 2001, fully diluted per share amounts under Canadian
GAAP are calculated utilizing the imputed earnings method which
incorporates the dilutive effect of the stock options outstanding under the
stock option plan and the imputed interest earned on the cash received upon
conversion of these options. In accordance with U.S. GAAP, the treasury
stock method calculates the diluted per share amounts assuming the proceeds
that arise from the exercise of outstanding, in the money options are used
to purchase common shares of the Corporation at their average market price
for the period. Effective January 1, 2001, Canadian GAAP requires the use
of the treasury stock method.
(e) In accordance with Canadian GAAP, the payment associated with the cash
settlement of stock options is included as a reduction of shareholders'
equity when the stock options are cash settled as long as the cash
settlement was at the holder's option. Under U.S. GAAP, when options
include a cash settlement feature, compensation expense is recognized in
the Consolidated Statement of Net Income and Retained Earnings over the
vesting period and is adjusted for changes in the quoted market price of
the common stock between the grant date and the measurement date.
17
CANADIAN HUNTER EXPLORATION LTD.
Notes to Consolidated Financial Statements
(THOUSANDS OF CANADIAN DOLLARS)
Year Ended December 31, 2000
(f) In accordance with Canadian GAAP, the implementation of a new tax rate is
applied to the computation of income taxes in the period in which it has
been substantially enacted. A tax rate is substantially enacted when the
proposed change is specified in sufficient detail to be understood and
applied in practice, has been drafted in legislative or regulatory form and
has been tabled in Parliament or presented in Council. Under U.S. GAAP, a
new tax rate cannot be applied until the period it has been enacted into
law.
(g) In accordance with Canadian GAAP, foreign currency translation adjustments
arising upon consolidation of self-sustaining foreign subsidiaries are
recorded directly to the cumulative translation adjustment, a separate
component of shareholders' equity. Under U.S. GAAP, these foreign currency
translation adjustments are included in other comprehensive income which is
a component of shareholder's equity.
(h) Under U.S. GAAP, funds from operations per share cannot be reported in the
financial statements.
(i) In accordance with Canadian GAAP, the fair value and unrealized gains and
losses of financial instruments qualifying as cash flow hedges are not
recorded on the balance sheet. The costs and gains on hedge contracts are
recognized in income in the same period as the hedged transactions are
settled. Effective January 1, 2001, under U.S. GAAP, the fair value of
those instruments are reflected as an asset or liability on the balance
sheet with the effective portion of the unrealized gains or losses included
in other comprehensive income. The ineffective portion of unrealized gains
and losses as well as the fair market value of any derivatives not
designated or qualifying as hedges are reflected in earnings.
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