EX-99.5 15 h92808ex99-5.txt BURLINGTON RESOURCES INC. PRO FORMA INCOME STMTS. EXHIBIT 99.5 UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME On December 5, 2001, Burlington Resources Inc. ("BR") acquired all of the outstanding common stock of Canadian Hunter Exploration Ltd. ("Hunter") for cash consideration of C$53 per share representing an aggregate value of approximately U.S. $2.1 billion. The acquisition was funded primarily with the proceeds from the issuance of $1.5 billion of fixed-rate notes and $400 million of commercial paper. The acquisition was accounted for under the purchase method in accordance with SFAS No. 141, Business Combinations. The following unaudited pro forma combined statements of income are presented to give effect to the acquisition of Hunter by BR under the purchase method of accounting. The unaudited pro forma combined statements of income for the year ended December 31, 2000 and the nine months ended September 30, 2001 assume that the transaction had been consummated on January 1, 2000. The unaudited pro forma combined statements of income do not reflect any cost savings or other synergies which may result from the transaction and are not necessarily indicative of future results of operations. These unaudited pro forma combined statements of income are presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") under the successful efforts method of accounting for oil and gas properties. The unaudited pro forma combined statements of income should be read in conjunction with the historical consolidated financial statements of BR and Hunter, including the notes thereto, included in this Form 10-K and Exhibits 99.3 and 99.4 to this Form 10-K, respectively. 1 EXHIBIT 99.5 UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2001 -------------------------------------------------- HUNTER HISTORICAL PRO FORMA BR U.S. GAAP ADJUSTMENTS PRO FORMA HISTORICAL (NOTE 1) (NOTE 2) COMBINED ---------- ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) REVENUES............................................ $2,715 $525 $ -- $3,240 ------ ---- ----- ------ COSTS AND EXPENSES Taxes Other Than Income Taxes..................... 130 2 -- 132 Transportation Expense............................ 191 31 -- 222 Production and Processing......................... 368 36 -- 404 Depreciation, Depletion and Amortization.......... 527 127 (5)(2a) 649 Exploration Costs................................. 201 1 23(2b) 245 20(2e) Administrative.................................... 119 12 4(2c) 135 ------ ---- ----- ------ Total Costs and Expenses............................ 1,536 209 42 1,787 ------ ---- ----- ------ Operating Income.................................... 1,179 316 (42) 1,453 Interest Expense.................................... 132 2 82(2d) 216 Other Expense (Income) - Net........................ 4 (3) -- 1 ------ ---- ----- ------ Income from Continuing Operations Before Income Taxes............................................. 1,043 317 (124) 1,236 Income Tax Expense (Benefit)........................ 406 124 (82)(2f) 448 ------ ---- ----- ------ Income from Continuing Operations................... $ 637 $193 $ (42) $ 788 ====== ==== ===== ====== BASIC EARNINGS PER COMMON SHARE..................... $ 3.05 $ 3.77 ====== DILUTED EARNINGS PER COMMON SHARE................... $ 3.04 $ 3.75 ====== ====== Weighted Average Number of Common Shares Outstanding....................................... 209 209 ====== ====== Weighted Average Number of Common Shares Outstanding, Including Dilution................... 210 210 ====== ======
See accompanying Notes to Unaudited Pro Forma Combined Statements of Income. 2 EXHIBIT 99.5 UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000 -------------------------------------------------- HUNTER HISTORICAL PRO FORMA BR U.S. GAAP ADJUSTMENTS PRO FORMA HISTORICAL (NOTE 1) (NOTE 2) COMBINED ---------- ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) REVENUES............................................ $3,147 $501 $ -- $3,648 ------ ---- ------ ------ COST AND EXPENSES................................... Taxes Other than Income Taxes....................... 147 2 149 Transportation Expense.............................. 240 23 263 Production and Processing........................... 463 36 499 Depreciation, Depletion and Amortization............ 704 130 8(2a) 842 Exploration Costs................................... 237 1 19(2b) 283 26(2e) Administrative...................................... 165 15 8(2c) 188 ------ ---- ------ ------ Total Costs and Expenses............................ 1,956 207 61 2,224 ------ ---- ------ ------ Operating Income.................................... 1,191 294 (61) 1,424 Interest Expense.................................... 197 44 109(2d) 350 Other Expense (Income) - Net........................ 27 1 -- 28 ------ ---- ------ ------ Income Before Income Taxes.......................... 967 249 (170) 1,046 Income Tax Expense (Benefit)........................ 292 108 (111)(2f) 289 ------ ---- ------ ------ Income from Continuing Operations................... $ 675 $141 $ (59) $ 757 ====== ==== ====== ====== BASIC EARNINGS PER COMMON SHARE..................... $ 3.13 $ 3.51 ====== ====== DILUTED EARNINGS PER COMMON SHARE................... $ 3.12 $ 3.50 ====== ====== Weighted Average Number of Common Shares Outstanding....................................... 216 216 ====== ====== Weighted Average Number of Common Shares Outstanding, Including Dilution................... 216 216 ====== ======
See accompanying Notes to Unaudited Pro Forma Combined Statements of Income. 3 EXHIBIT 99.5 PRO FORMA STATEMENTS OF INCOME NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME 1. CONVERSION OF HUNTER TO U.S. GAAP AND U.S. DOLLARS The historical consolidated financial statements of Hunter were prepared under Canadian GAAP and in Canadian dollars. For these unaudited pro forma combined financial statements, the historical financial information of Hunter has been converted to U.S. GAAP using the full cost method of accounting for oil and gas properties and converted to U.S. dollars using the average exchange rates for the nine months ended September 30, 2001 (.6506) and the year ended December 31, 2000 (.6737). U.S. GAAP STATEMENTS OF INCOME -- HUNTER
PERIOD ENDED SEPTEMBER 30, 2001 -------------------------------------------------------------------- HUNTER HUNTER HUNTER HISTORICAL U.S. HISTORICAL HISTORICAL CANADIAN GAAP CONFORMING U.S. U.S. GAAP GAAP ADJUSTMENTS ADJUSTMENTS GAAP U.S. $ ---------- ----------- ----------- ---------- ---------- (IN MILLIONS) REVENUES............................. C$759 C$48(a) C$-- C$810 $527 ----- ---- ---- ----- ---- 3(g) COSTS AND EXPENSES Production and Processing.......... 57 (2)(c) 55 36 Taxes Other than Income Taxes...... 2(c) 2 2 Transportation Expense............. 48(a) 48 31 General and Administrative......... 20 (1)(d) 19 12 Interest and Other Financing Charges......................... 3 (3)(e) -- -- Exploration Costs.................. 1(d) 1 1 Depreciation, Depletion and Amortization.................... 196 196 127 Other.............................. (1) 1(b) -- -- Minority Interest.................. -- -- -- ----- ---- ---- ----- ---- Total Costs and Expenses............. 275 48 (2) 321 209 ----- ---- ---- ----- ---- Operating Income (Loss).............. 484 3 2 489 318 Interest Expense..................... -- -- 3(e) 3 2 Other Expense (Income) - Net......... -- (1)(b) (1) (1) ----- ---- ---- ----- ---- Income Before Income Taxes........... 484 3 -- 487 317 Income Tax Expense................... 190 2(f) -- 192 124 ----- ---- ---- ----- ---- NET INCOME........................... C$294 C $1 C$-- C$295 $193 ===== ==== ==== ===== ====
4 EXHIBIT 99.5 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------- HUNTER HUNTER HUNTER HISTORICAL U.S. HISTORICAL HISTORICAL CANADIAN GAAP CONFORMING U.S. U.S. GAAP GAAP ADJUSTMENTS ADJUSTMENTS GAAP U.S. $ ---------- ----------- ----------- ---------- ---------- (IN MILLIONS) REVENUES........................ C$709 C$34(a) C$-- C$743 $501 ----- ---- ---- ----- ---- COSTS AND EXPENSES Production and Processing..... 56 (3)(c) 53 36 Taxes Other than Income Taxes...................... -- 3(c) 3 2 Transportation Expense........ -- 34(a) 34 23 Administrative................ 24 (2)(d) 22 15 Interest and Other Financing Charges.................... 65 (65)(e) -- Exploration Costs............. -- 2(d) 2 1 Depreciation, Depletion and Amortization............... 193 193 130 Other......................... 2 (2)(b) -- -- Minority Interest............. -- -- -- -- ----- ---- ---- ----- ---- Total Costs and Expenses........ 340 34 (67) 307 207 ----- ---- ---- ----- ---- Operating Income................ 369 -- 67 436 294 Interest Expense................ -- -- 65(e) 65 44 Other Expense (Income) - Net.... -- -- 2(b) 2 1 ----- ---- ---- ----- ---- Income Before Income Taxes...... 369 -- -- 369 249 Income Tax Expense.............. 161 -- -- 161 108 ----- ---- ---- ----- ---- NET INCOME...................... C$208 C$-- C$-- C$208 $141 ===== ==== ==== ===== ====
(a) Reflects reclassification of transportation expenses from revenues to production and processing in accordance with U.S. GAAP. (b) Reclassify other expenses from operating expense to non-operating expense to conform to BR's presentation. (c) Reclassify production taxes included in production and processing costs to conform to BR's presentation. (d) Reclassify certain costs included in general and administrative expense to exploration expense to conform to BR's presentation. (e) Reclassify interest expense from operating expense to non-operating expense to conform to BR's presentation. (f) To adjust income taxes related to U.S. GAAP adjustment using a blended statutory tax rate of 43%. (g) Reflects recognition of unrealized gains on derivative financial instruments in accordance with U.S. GAAP. 2. PRO FORMA ADJUSTMENTS (a) To adjust depreciation, depletion and amortization ("DD&A") expense for Hunter based on the step-up to estimated fair value of the assets assuming the acquisition occurred on January 1, 2000 and to record DD&A at a field level under successful efforts method of accounting. The Company's pro forma depreciation, depletion and amortization per mcfe equivalent is $.818 for the year ended December 31, 2000 and for the nine months ended September 30, 2001. (b) Reflects the increase in exploration expense for the recognition of geological and geophysical expenses, lease rentals and exploratory dry hole costs previously capitalized under the full cost method of accounting for oil and gas properties used by Hunter prior to the acquisition. 5 EXHIBIT 99.5 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED) (c) Reflects increase due to recognition of general and administrative costs under the successful efforts method of accounting for oil and gas properties to conform to BR's accounting policies. These costs were capitalized under the full cost method of accounting for oil and gas properties used by Hunter prior to the acquisition. (d) Reflects additional pro forma interest expense related to $1.5 billion of fixed rate debt and $400 million of commercial paper issued to fund the Hunter acquisition. It is assumed that the borrowings occurred on January 1, 2000. Interest expense was computed using weighted average interest rates of 6.5% and 2.5% on the fixed rate debt and commercial paper, respectively. A .125 percent change in interest rates would impact pro forma interest expense by approximately $500 thousand and $375 thousand for the year ended December 31, 2000, and the nine months ended September 30, 2001, respectively. (e) Reflects impairment of unproved leasehold costs acquired under the successful efforts method of accounting. (f) To reflect the tax effect of the pro forma adjustments. The tax effect was calculated using a blended statutory tax rate of 43% for cost and expense items except for interest expense, which was calculated using a blended statutory tax rate of 79% reflecting the deductibility of interest expense in both Canada and the U.S. 6