e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B9x4J0Uautjwn7XhlSTOEMudSFFXd6YF3zV4bSNzAZxns6BjwFaGCX/Vhjlld4nc wvbw/opTIrGLqBOnmKODeA== 0000950129-04-002984.txt : 20040507 0000950129-04-002984.hdr.sgml : 20040507 20040507170535 ACCESSION NUMBER: 0000950129-04-002984 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURLINGTON RESOURCES INC CENTRAL INDEX KEY: 0000833320 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 911413284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09971 FILM NUMBER: 04789985 BUSINESS ADDRESS: STREET 1: 717 TEXAS AVENUE STREET 2: SUITE 2100 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136249500 MAIL ADDRESS: STREET 1: 717 TEXAS AVENUE STREET 2: STE 2100 CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 h15157e10vq.htm BURLINGTON RESOURCES INC.- MARCH 31, 2004 e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004


o		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)


717 Texas Ave., Suite 2100, Houston, Texas		77002
(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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ No o

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, 2004		198,365,132

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		CONSOLIDATED STATEMENT OF INCOME
		CONSOLIDATED BALANCE SHEET
		CONSOLIDATED STATEMENT OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosures about Commodity Risk
	ITEM 4. Controls and Procedures
PART II — OTHER INFORMATION
	ITEM 1. Legal Proceedings
	ITEM 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
INDEX TO EXHIBITS
Certificate of Incorporation, as amended
Certification of Bobby S. Shackouls - Section 302
Certification of Steven J. Shapiro - Section 302
Certification Pursuant to Section 906
Certification Pursuant to Section 906

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)


	FIRST QUARTER
	2004			2003
	(In Millions, Except per Share Amounts)
Revenues	$	1,308		$	1,128

Costs and Other Income — Net
Taxes Other than Income Taxes		59			48
Transportation Expense		110			99
Operating Costs		131			102
Depreciation, Depletion and Amortization		277			203
Exploration Costs		60			68
Administrative		48			42
Interest Expense		71			64
(Gain)/Loss on Disposal of Assets		8			(1	)
Other Expense (Income) — Net		(3	)		4

Total Costs and Other Income — Net		761			629

Income Before Income Taxes and Cumulative Effect of Change in Accounting Principle		547			499
Income Tax Expense		193			171

Income Before Cumulative Effect of Change in Accounting Principle		354			328
Cumulative Effect of Change in Accounting Principle — Net		—			(59	)

Net Income	$	354		$	269

Earnings per Common Share
Basic
Before Cumulative Effect of Change in Accounting Principle	$	1.79		$	1.63
Cumulative Effect of Change in Accounting Principle — Net		—			(0.29	)

Net Income	$	1.79		$	1.34

Diluted
Before Cumulative Effect of Change in Accounting Principle	$	1.78		$	1.62
Cumulative Effect of Change in Accounting Principle — Net		—			(0.29	)

Net Income	$	1.78		$	1.33

See accompanying Notes to Consolidated Financial Statements.

BURLINGTON RESOURCES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)


	March 31,			December 31,
	2004			2003
	(In Millions, Except Share Data)
ASSETS
Current Assets
Cash and Cash Equivalents	$	1,027		$	757
Accounts Receivable		716			605
Inventories		97			81
Other Current Assets		84			74

		1,924			1,517

Oil & Gas Properties (Successful Efforts Method)		16,370			15,962
Other Properties		1,395			1,381

		17,765			17,343
Accumulated Depreciation, Depletion and Amortization		7,279			7,032

Properties — Net		10,486			10,311

Goodwill		968			982

Other Assets		188			185

Total Assets	$	13,566		$	12,995

LIABILITIES
Current Liabilities
Accounts Payable	$	832		$	714
Taxes Payable		81			43
Accrued Interest		63			61
Dividends Payable		30			30
Commodity Hedging Contracts and Other Derivatives		56			33
Other Current Liabilities		5			10

		1,067			891

Long-term Debt		3,914			3,873

Deferred Income Taxes		2,045			1,948

Other Liabilities and Deferred Credits		755			762

Commitments and Contingencies (Note 5)
STOCKHOLDERS’ EQUITY
Preferred Stock, Par Value $.01 Per Share (Authorized 75,000,000 Shares)		—			—
Common Stock, Par Value $.01 Per Share (Authorized 325,000,000 Shares; Issued 241,188,688 Shares)		2			2
Paid-in Capital		3,965			3,946
Retained Earnings		3,086			2,761
Deferred Compensation — Restricted Stock		(23	)		(10	)
Accumulated Other Comprehensive Income		578			655
Cost of Treasury Stock (42,823,556 and 43,539,885 Shares for 2004 and 2003, respectively)		(1,823	)		(1,833	)

Stockholders’ Equity		5,785			5,521

Total Liabilities and Stockholders’ Equity	$	13,566		$	12,995

See accompanying Notes to Consolidated Financial Statements.

BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)


	FIRST QUARTER
	2004			2003
	(In Millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	354		$	269
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities
Depreciation, Depletion and Amortization		277			203
Deferred Income Taxes		125			136
Exploration Costs		60			68
Cumulative Effect of Change in Accounting Principle — Net		—			59
Changes in Derivative Fair Values		—			(5	)
Working Capital Changes
Accounts Receivable		(118	)		(207	)
Inventories		(17	)		(12	)
Other Current Assets		(11	)		13
Accounts Payable		37			62
Taxes Payable		47			26
Accrued Interest		2			3
Other Current Liabilities		(3	)		(7	)
Changes in Other Assets and Liabilities		(11	)		(19	)

Net Cash Provided By Operating Activities		742			589

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Properties		(472	)		(537	)
Other		(10	)		(8	)

Net Cash Used In Investing Activities		(482	)		(545	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Borrowings		41			—
Dividends Paid		(29	)		(28	)
Common Stock Purchases		(90	)		(72	)
Common Stock Issuances		94			23
Other		—			1

Net Cash Provided by (Used In) Financing Activities		16			(76	)

Effect of Exchange Rate Changes on Cash and Cash Equivalents		(6	)		17

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		270			(15	)
CASH AND CASH EQUIVALENTS
Beginning of Year		757			443

End of Period	$	1,027		$	428

See accompanying Notes to Consolidated Financial Statements.

BURLINGTON RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The 2003 Annual Report on Form 10-K (“Form 10-K”) 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 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 period 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 197 million and 201 million for the first quarter of 2004 and 2003, 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 198 million and 202 million for the first quarter of 2004 and 2003, respectively. For the periods ended March 31, 2004 and 2003, approximately 1 million and 3 million shares, respectively, attributable to the potential exercise of outstanding options were excluded from the calculation of diluted EPS because the effect was antidilutive. The Company has no convertible securities affecting EPS, therefore, no adjustments related to convertible securities were made to reported net income in the computation of EPS.

Other

Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets, were issued in June 2001 and became effective for the Company July 1, 2001 and January 1, 2002, respectively. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Additionally, SFAS No. 141 requires companies to disaggregate and report certain intangible assets separately from goodwill. SFAS No. 142 established new guidelines for accounting for goodwill and other intangible assets. Under SFAS No. 142, goodwill and certain other intangible assets are not amortized, but rather are reviewed annually for impairment. One interpretation being considered relative to these standards is that oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves for both undeveloped and developed leaseholds should be classified separately from oil and gas properties, and included as intangible assets on the Company’s consolidated balance sheets. Historically, the Company, like many other oil and gas companies, has included oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves as part of the oil and gas properties, even after SFAS No. 141 and No. 142

became effective. This matter was referred to the Emerging Issues Task Force (“EITF”) in late 2003. At the March 2004 meeting, the EITF reached a consensus that mineral rights for mining companies should be accounted for as tangible assets. However, this issue as it pertains to oil and gas companies is still under consideration by the EITF. The Company will continue to monitor this issue and classify its oil and gas mineral rights held under lease and other contractual rights representing the right to extract such reserves as oil and gas properties until further guidance is provided.

This interpretation of SFAS No. 141 and No. 142 would only affect the Company’s consolidated balance sheet classification of oil and gas leaseholds. The Company’s results of operations and cash flows would not be affected, since these oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves would continue to be amortized in accordance with accounting rules for oil and gas companies provided in SFAS No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies.

At March 31, 2004, the Company had undeveloped and developed leaseholds of approximately $1.2 billion and $2.3 billion that would have been classified on the consolidated balance sheet as intangible undeveloped leaseholds and intangible developed leaseholds, respectively, if it had applied the interpretation currently being discussed.

2. STOCK-BASED COMPENSATION

The Company uses the intrinsic value based method of accounting for stock-based compensation, as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Under this method, the Company records no compensation expense for stock options granted when the exercise price for options granted is equal to the fair market value of the Company’s Common Stock on the date of the grant.

The following table illustrates the effect on net income and EPS if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, to stock-based employee compensation. The fair value of stock options included in the pro forma amounts is not necessarily indicative of future effects on net income and EPS.


	First Quarter
	2004		2003
	(In Millions,
	Except per Share Amounts)
Net income — as reported	$	354	$	269
Pro forma stock based employee compensation cost, after tax		3		3

Net income — pro forma	$	351	$	266

Basic EPS — as reported	$	1.79	$	1.34
Basic EPS — pro forma		1.78		1.32
Diluted EPS — as reported		1.78		1.33
Diluted EPS — pro forma	$	1.77	$	1.32

3. COMPREHENSIVE INCOME (LOSS)


	First Quarter
	2004						2003
	(In Millions)
Accumulated other comprehensive income (loss) — beginning of period				$	655					$	(164	)
Net income	$	354					$	269

Other comprehensive income (loss) — net of tax
Hedging activities
Current period changes in fair value of settled contracts		2						(19	)
Reclassification adjustments for settled contracts		1						25
Changes in fair value of outstanding hedging positions		(17	)					(19	)

Hedging activities		(14	)					(13	)
Foreign currency translation
Foreign currency translation adjustments		(63	)					262

Total other comprehensive income (loss)		(77	)		(77	)		249			249

Comprehensive income	$	277					$	518

Accumulated other comprehensive income — end of period				$	578					$	85

4. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company uses derivative instruments to manage risks associated with natural gas and crude oil price volatility as well as interest rate and foreign currency exchange rate fluctuations. Derivative instruments that meet the hedge criteria in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, are designated as cash-flow hedges, fair-value hedges, or foreign-currency hedges. Derivative instruments designated as cash-flow hedges are used by the Company to mitigate the risk of variability in cash flows from natural gas and crude oil sales due to changes in market prices. Fair-value hedges are used by the Company to hedge or offset the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. In addition to hedges of commodity prices, the Company also uses foreign-currency swaps to hedge its exposure to exchange rate fluctuations related to its Canadian subsidiaries. Derivative instruments that do not meet the hedge criteria in SFAS No. 133 are not designated as hedges.

As of March 31, 2004, the Company had the following derivative instruments outstanding with average underlying prices that represent hedged prices of commodities at various market locations.


			Notional Amount
							Average		Fair Value Asset
Settlement	Derivative	Hedge			Oil		Underlying		(Liability)
Period	Instrument	Strategy	Gas (MMBTU)		(Barrels)		Prices		(In Millions)
2004	Swap	Cash flow		11,729,119			$	3.22	$	(24	)
	Swap	Not designated		1,060,000				5.93		—
	Purchased put	Cash flow		85,801,921				4.46		6
	Written call	Cash flow		85,801,921				6.30		(19	)
	Purchased put	Cash flow				3,665,000		28.76		2
	Written call	Cash flow				3,665,000		35.65		(6	)
	Swap	Fair value		1,790,000				3.04		4
	N/A	Fair value (obligation)		1,790,000				3.06		(4	)
2005	Swap	Cash flow		10,511,522				3.16		(19	)
	Purchased put	Cash flow		8,694,729				4.73		3
	Written call	Cash flow		8,694,729				7.13		(3	)
	Swap	Fair value		1,579,200				2.82		3
	N/A	Fair value (obligation)		1,579,200				2.83		(3	)
2006	Swap	Cash flow		912,500				3.06		(1	)
2007	Swap	Cash flow		760,000			$	3.06		(1	)

									$	(62	)

As of March 31, 2004, the Company had the following derivative instruments outstanding related to interest rate and foreign currency swaps.


			Notional Amount						Fair Value
					Average			Average	Asset
Settlement	Derivative	Hedge	U.S. $		Underlying			Floating	(Liability)
Period	Instrument	Strategy	(In Millions)		Rate			Rate	(In Millions)
2004	Interest rate swap	Fair value	$	50		5.6	%	LIBOR+3.36%	$	—
	Swap	Foreign currency		6		1.43				—
2005	Interest rate swap	Fair value		50		5.6	%	LIBOR+3.36%		—
2006	Interest rate swap	Fair value	$	50		5.6	%	LIBOR+3.36%		—

									$	—

Based on commodity prices and foreign exchange rates as of March 31, 2004, the Company expects to reclassify losses of $49 million ($30 million after tax) to earnings from the balance in accumulated other comprehensive loss during the next twelve months. At March 31, 2004, the Company had derivative assets of $8 million and derivative liabilities of $70 million. Of the derivative assets of $8 million, $6 million and $2 million are included in Other Current Assets and Other Assets, respectively, on the Consolidated Balance Sheet. Of the derivative liabilities of $70 million, $14 million are included in Other Liabilities and Deferred Credits on the Consolidated Balance Sheet.

The derivative assets and liabilities related to commodities represent the difference between hedged prices and market prices on hedged volumes of the commodities as of March 31, 2004. Hedging activities related to cash settlements on commodities decreased revenues $1 million and $41 million in the first quarter of 2004 and 2003, respectively. In addition, non-cash gains of $438 thousand and non-cash losses of $1 million were recorded in revenues associated with ineffectiveness of cash-flow and fair-value hedges during the first quarter of 2004 and 2003, respectively. Also, non-cash losses of $39 thousand and non-cash gains of $6 million were recorded in revenues associated with changes in the fair value of derivative instruments that do not qualify for hedge accounting during the first quarter of 2004 and 2003, respectively.

5. COMMITMENTS AND CONTINGENCIES

The Company and numerous other oil and gas companies have been named as defendants in various lawsuits alleging violations of the civil False Claims Act. These lawsuits were consolidated during 1999 and 2000 for pre-trial proceedings by the United States Judicial Panel on Multidistrict Litigation in the matter of In re Natural Gas Royalties Qui Tam Litigation, MDL-1293, United States District Court for the District of Wyoming (“MDL-1293”). The plaintiffs contend that defendants underpaid royalties on natural gas and NGLs produced on federal and Indian lands through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies during the period of 1985 to the present. Plaintiffs allege that the royalties paid by defendants were lower than the royalties required to be paid under federal regulations and that the forms filed by defendants with the Minerals Management Service (“MMS”) reporting these royalty payments were false, thereby violating the civil False Claims Act. The United States has intervened in certain of the MDL-1293 cases as to some of the defendants, including the Company. The plaintiffs and the intervenor have not specified in their pleadings the amount of damages they seek from the Company. On December 5, 2003, the United States Judicial Panel on Multidistrict Litigation entered an order transferring the cases alleging claims of below-market prices, improper deductions, and transactions with affiliated companies for further pre-trial proceedings and trial in Wright v. AGIP, 5:03CV264, United States District Court for the Eastern District of Texas, Texarkana Division. The cases alleging improper measurement techniques remain pending in MDL-1293.

Various administrative proceedings are also pending before the MMS of the United States Department of the Interior with respect to the valuation of natural gas produced by the Company on federal and Indian lands. 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. Most of these proceedings involve production volumes and royalties that are the subject of Natural Gas Royalties Qui Tam Litigation.

Based on the Company’s present understanding of the various governmental and civil False Claims Act proceedings described above, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. The Company is also exploring the possibility of a settlement of these claims. Although there has been no formal demand for damages, the Company currently estimates, based on its communications with the intervenor, that the amount of underpaid royalties on onshore production claimed by the intervenor in these proceedings is approximately $68 million. In the event that the Company is found to have violated the civil False Claims Act, the Company could also be subject to double damages, civil monetary penalties and other sanctions, including a temporary suspension from bidding on and entering into future federal mineral leases and other federal contracts for a defined period of time.

The Company has established a reserve that management believes to be adequate to provide for this potential liability based upon its evaluation of this matter.

The Company has also been named as a defendant in the lawsuit styled UNOCAL Netherlands B.V., et al v. Continental Netherlands Oil Company B.V., et al, No. 98-854, filed in 1995 in the District Court in The Hague and currently pending in the Court of Appeal in The Hague, the Netherlands. Plaintiffs, who are working interest owners in the Q-1 Block in the North Sea, have alleged that the Company and other former working interest owners in the adjacent Logger Field in the L16a Block unlawfully trespassed or were otherwise unjustly enriched by producing part of the oil from the adjoining Q-1 Block. The plaintiffs claim that the defendants infringed upon plaintiffs’ right to produce the minerals present in its license area and acted in violation of generally accepted standards by failing to inform plaintiffs of the overlap of the Logger Field into the Q-1 Block. Plaintiffs seek damages of $97.5 million as of January 1, 1997, plus interest. For all relevant periods, the Company owned a 37.5 percent working interest in the Logger Field. Following a trial, the District Court in The Hague rendered a Judgment in favor of the defendants, including the Company, dismissing all claims. Plaintiffs thereafter appealed. On October 19, 2000, the Court of Appeal in The Hague issued an interim Judgment in favor of the plaintiffs and ordered that additional evidence be presented to the court relating to issues of both liability and damages. After receiving additional evidence from the parties, the Court of Appeals subsequently issued a ruling in favor of defendants. In an interim judgment issued on December 18, 2003, the Court of Appeals found that defendants should not have assumed that they were extracting oil from the Q-1 Block, that Unocal was not entitled to compensation for any production occurring prior to 1992 and that damages, if any, would be limited to the proceeds Unocal would have received for oil extracted from the Q-1 Block, less the costs Unocal would have incurred to produce the oil from an existing well in the L16a Block. The Court of Appeals ordered that further evidence be presented to a court appointed expert to determine whether any damages had been suffered by Unocal. The Company and the other defendants are continuing to present evidence to the Court and vigorously assert defenses against these claims. The Company has also asserted claims of indemnity against two of the defendants from whom it had acquired a portion of its working interest share. If the Company is successful in enforcing the indemnities, its working interest share of any adverse judgment could be reduced to 15 percent for some of the periods covered by plaintiffs’ lawsuit. The Company currently does not believe that an unfavorable outcome is probable nor, in the event of an unfavorable outcome, is the Company reasonably able to estimate the possible loss, if any, or range of loss in this lawsuit. Accordingly, there has been no reserve established for this matter.

The Company and its former affiliate, El Paso Natural Gas Company, have also been named as defendants in two class action lawsuits styled Bank of America, et al. v. El Paso Natural Gas Company, et al., Case No. CJ-97-68, and Deane W. Moore, et al. v. Burlington Northern, Inc., et. al., Case No. CJ-97-132, each filed in 1997 in the District Court of Washita County, State of Oklahoma and subsequently consolidated by the court. Plaintiffs contend that defendants underpaid royalties from 1983 to the present on natural gas produced from specified wells in Oklahoma through the use of below-market prices, improper deductions and transactions with affiliated companies and in other instances failed to pay or delayed in the payment of royalties on certain gas sold from these wells. The plaintiffs seek an accounting and damages for alleged royalty underpayments, plus interest from the time such amounts were allegedly due. Plaintiffs additionally seek the recovery of punitive damages. The plaintiffs have not specified in their pleadings the amount of damages they seek from the Company. However, through pre-trial discovery, plaintiffs have provided defendants with alternative theories of recovery claiming monetary damages of up to $263.6 million in principal, plus interest, punitive damages and

attorney’s fees. The Company believes it has substantial defenses to these claims and is vigorously asserting such defenses. The Company and El Paso Natural Gas Company have asserted contractual claims for indemnity against each other. The court has certified the plaintiff classes of royalty and overriding royalty interest owners, and the parties are proceeding with pre-trial discovery. It is anticipated that this matter will be scheduled for trial during 2004. The Company currently does not believe that an unfavorable outcome is probable nor, in the event of an unfavorable outcome, is the Company reasonably able to estimate the possible loss, if any, or range of loss in these lawsuits. Accordingly, there has been no reserve established for this matter.

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, including: claims for personal injury and property damage, claims challenging oil and gas royalty, ad valorem and severance tax payments, claims related to joint interest billings under oil and gas operating agreements, claims alleging mismeasurement of volumes and wrongful analysis of heating content of natural gas and other claims in the nature of contract, regulatory or employment disputes. None of the governmental proceedings involve foreign governments.

The Company has established reserves for certain legal proceedings which are included in Other Liabilities and Deferred Credits on the Consolidated Balance Sheet. The establishment of a reserve involves an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible that the Company could incur additional loss with respect to those matters in which reserves have been established of up to approximately $25 million to $30 million in excess of the amounts currently accrued. Future changes in the facts and circumstances could result in actual liability exceeding the estimated ranges of loss and the amounts accrued.

While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these legal proceedings through settlement or adverse judgment will not have a material adverse effect on the consolidated financial position or results of operations of the Company, although cash flow could be significantly impacted in the reporting periods in which such matters are resolved.

6. LONG-TERM DEBT

The fair value of the Company’s long-term debt at March 31, 2004 and December 31, 2003 was approximately $4,500 million and $4,483 million, respectively, based on quoted market prices.

7. SEGMENT AND GEOGRAPHIC INFORMATION

The Company’s reportable segments are U.S., Canada and Other International. The Company is engaged principally in the exploration for and the development, production and marketing of natural gas, crude oil, and NGLs. The accounting policies for the segments are the same as those disclosed in Note 1 of Notes to Consolidated Financial Statements included in the Company’s 2003 Form 10-K.

The following tables present information about the Company’s reportable segments.


	First Quarter 2004
					Other
	U.S.		Canada		International		Total
	(In Millions)
Revenues	$	614	$	506	$	188	$	1,308
Depreciation, depletion and amortization		81		130		60		271
Income before income taxes		356		231		82		669
Properties — net		3,722		5,207		1,469		10,398
Capital expenditures		179		351		33		563
Goodwill	$	—	$	968	$	—	$	968


	First Quarter 2003
					Other
	U.S.		Canada		International		Total
	(In Millions)
Revenues	$	555	$	526	$	47	$	1,128
Depreciation, depletion and amortization		74		109		14		197
Income before income taxes and cumulative effect of change in accounting principle		309		296		10		615
Properties — net		3,563		4,544		1,039		9,146
Capital expenditures		213		284		97		594
Goodwill	$	—	$	864	$	—	$	864

The following is a reconciliation of income before income taxes and cumulative effect of change in accounting principle for reportable segments to consolidated income before income taxes and cumulative effect of change in accounting principle.


	First Quarter
	2004			2003
	(In Millions)
Income before income taxes and cumulative effect of change in accounting principle for reportable segments	$	669		$	615
Corporate expenses		54			48
Interest expense		71			64
Other expense (income) — net		(3	)		4

Consolidated income before income taxes and cumulative effect of change in accounting principle	$	547		$	499

The following is a reconciliation of capital expenditures for reportable segments to consolidated capital expenditures.


	First Quarter
	2004		2003
	(In Millions)
Total capital expenditures for reportable segments	$	563	$	594
Corporate administrative capital expenditures		5		3

Consolidated capital expenditures	$	568	$	597

The following is a reconciliation of segment net properties to consolidated amounts.


	March 31,
	2004		2003
	(In Millions)
Properties—net for reportable segments	$	10,398	$	9,146
Corporate properties—net		88		98

Consolidated properties—net	$	10,486	$	9,244

8. ASSET RETIREMENT OBLIGATIONS

On January 1, 2003, the Company adopted SFAS No. 143, Asset Retirement Obligations. During the first quarter of 2003, the Company recorded a net-of-tax cumulative effect of change in accounting principle charge of $59 million ($95 million before tax). The asset retirement obligations of $443 million are included on the Consolidated Balance Sheet in Other Liabilities and Deferred Credits. Accretion expense is included in Depreciation, Depletion and Amortization expense on the Company’s Consolidated Statement of Income.

The following table reflects the changes of the asset retirement obligations during the first quarter of 2004.


	(In Millions)
Carrying amount of asset retirement obligations as of December 31, 2003	$	442
Liabilities settled during the period		(3	)
Current period accretion expense		7
Revisions in estimated cash flows		(3	)

Carrying amount of asset retirement obligations as of March 31, 2004	$	443

9. GOODWILL

All of the Company’s goodwill is assigned to the Canadian reporting unit which consists of all of the Company’s Canadian subsidiaries. The following table reflects the changes in the carrying amount of goodwill during the first quarter of 2004 as it relates to the Canadian reporting unit.


	(In Millions)
Balance-December 31, 2003	$	982
Changes in foreign exchange rates during the period		(14	)

Balance-March 31, 2004	$	968

10. INCOME TAXES

The Company’s effective income tax rate increased to 35 percent for the period ended March 31, 2004 from 20 percent for the year ended December 31, 2003. The year ended December 31, 2003 included a tax benefit of $203 million or 13 percent related to the reduction in the Canadian federal income tax rate.

11. RETIREMENT BENEFITS

The Company’s U.S. pension plans are non-contributory defined benefit plans covering all eligible U.S. employees. The benefits are based on years of credited service and final average compensation. Effective January 1, 2003, the Company amended its U.S. pension plan to provide cash balance benefits to new employees. U.S. employees hired before January 1, 2003, were given the choice to remain in the prior plan or accrue future benefits under the cash balance formula. Contributions to the tax qualified plans are limited to amounts that are currently deductible for tax purposes. Contributions are intended to provide not only for benefits attributed to service-to-date but also for those expected to be earned in the future. Burlington Resources Canada (Hunter) Ltd. also provides a pension plan and postretirement benefits to a closed group of employees and retirees.

The Company provides postretirement medical, dental and life insurance benefits for a closed group of retirees and their dependents. The Company also provides limited retiree life insurance benefits to employees who retire under the pension plan. The postretirement benefit plans are unfunded, therefore, the Company funds claims on a cash basis.

The Company’s net periodic benefit cost for its U.S. plans is comprised of the following components.


	First Quarter
	Pension						Postretirement
	Benefits						Benefits
	2004			2003			2004		2003
	(In Millions)
Benefit cost for the plans includes the following components
Service cost	$	3		$	2		$	—	$	—
Interest cost		3			3			1		1
Expected return on plan asset		(3	)		(3	)		—		—
Recognized net actuarial loss		1			1			—		—

Net benefit cost	$	4		$	3		$	1	$	1

During the first quarter of 2004, the Company contributed $4 million to its U.S. pension plans. The Company expects to contribute a total of $11 million to its U.S. pension plans during 2004. The assumptions used in the valuation of the Company’s retirement plans and the target investment allocations have not changed since December 31, 2003.

12. STOCK SPLIT

On January 21, 2004, the Company’s Board of Directors announced a 2-for-1 split on the Company’s Common Stock in the form of a share distribution, subject to shareholder approval of an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 325 million to 650 million. On April 21, 2004, shareholders approved the amendment. As a result, the stock split is payable on June 1, 2004 to shareholders of record on May 5, 2004. The pro forma effect on the March 31, 2004 balance sheet is to reduce Paid-in Capital by $2 million and increase Common Stock by $2 million. Common shares outstanding, giving retroactive effect to the stock split at March 31, 2004 and December 31, 2003 are 397 million and 395 million, respectively. Pro forma earnings per share, giving retrospective effect to the stock split are as follows.


	First Quarter
	2004		2003
Basic EPS — as reported (pre-stock split)	$	1.79	$	1.34
Basic EPS — pro forma (post-stock split)		0.90		0.67
Diluted EPS — as reported (pre-stock split)		1.78		1.33
Diluted EPS — pro forma (post-stock split)	$	0.89	$	0.67

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Outlook

The Company strives to achieve both production growth and sector-leading financial returns when compared to certain other independent oil and gas exploration and production companies. Achieving this requires continuous development of natural gas and crude oil reserves to fuel growth, while maintaining focus on cost structure and capital efficiency. The Company has a goal to achieve between 3 and 8 percent average annual production growth and expects to generate cumulative production growth of 20 percent over the three-year period beginning in 2004. The Company expects to achieve production volume growth at the top of the 3 to 8 percent range in 2004. This production growth is expected to be driven by steady production growth in North America and accelerating production growth from several international projects. The Company expects second quarter production volumes to average between 2,606 and 2,804 MMCFE per day and expects full year 2004 production volumes to average between 2,695 and 2,903 MMCFE per day. The Company also expects costs and expenses, on a unit basis in 2004, to be essentially in the range of year 2003’s costs and expenses, except for Depreciation, Depletion and Amortization (DD&A). DD&A expense is expected to be higher primarily due to higher production volumes and higher rates resulting from international start-up projects and the weakening of the U.S. dollar.

Commodity prices are impacted by many factors that are outside of the Company’s control. Historically, commodity prices have been volatile and the Company expects them to remain that way in the future. Commodity prices are affected by supply, market demands, overall economic activity, weather, pipeline capacity constraints, inventory storage levels, basis differentials and other factors. As a result, the Company cannot accurately predict future natural gas, NGLs and crude oil prices, and therefore, it cannot determine what impact increases or decreases in production volumes will have on future revenues or net operating cash flows. However, based on the estimated range of average daily natural gas production in 2004, the Company estimates that a $0.10 per MCF change in natural gas prices would have an impact on full year 2004 revenues of approximately $68 to $73 million. Also, based on the estimated range of average daily crude oil production in 2004, the Company estimates that a $1.00 per barrel change in crude oil prices would have an impact on full year 2004 revenues of approximately $27 to $30 million.

Finding and developing sufficient amounts of natural gas and crude oil reserves at economical costs are critical to the Company’s long-term success. Currently, the Company expects to spend approximately $1.5 billion of capital for oil and gas activities, excluding acquisitions, in 2004 but may increase its spending if it can do so efficiently. The current level of spending is roughly the same as recent years. However, the Company expects to spend approximately $5 billion of capital from 2004 through 2006 in order to achieve its goal of generating cumulative production growth of 20 percent over this three-year period.

Financial Condition and Liquidity

The Company’s total debt to total capital (total capital is defined as total debt and stockholders’ equity) ratio at March 31, 2004 and December 31, 2003 was 40 percent and 41 percent, respectively. Based on the current price environment, management believes that the

Company will generate sufficient cash from operations to fund its 2004 capital expenditures, excluding any major acquisition(s). At March 31, 2004, the Company had $1,027 million of cash and cash equivalents on hand.

The Company had credit commitments in the form of revolving credit facilities (“revolvers”) as of March 31, 2004. The revolvers are comprised of agreements for $600 million, $400 million and Canadian $390 million (U.S. $298 million). The $600 million revolver expires in December 2006 and the $400 million and Canadian $390 million revolvers expire in December 2004 unless renewed by mutual consent. The Company has the option to convert the outstanding balances on the $400 million and Canadian $390 million revolvers to one-year and five-year plus one day term notes, respectively. Under the covenants of the revolvers, Company debt cannot exceed 60 percent of capitalization (as defined in the agreements). The revolvers are available to cover debt due within one year, therefore, commercial paper, credit facility notes and fixed-rate debt due within one year are generally classified as long-term debt. At March 31, 2004, there were no amounts outstanding under the revolvers and no outstanding commercial paper. In 2001, the Company’s Board of Directors (“Board”) authorized the Company to redeem, exchange or repurchase up to an aggregate of $990 million principal amount of debt securities.

Net cash provided by operating activities during the first quarter of 2004 increased $153 million over the same period in 2003 primarily due to higher net income resulting from higher production volumes. Key drivers of net operating cash flows are commodity prices, production volumes and costs. Although realized commodity prices were relatively flat, production volumes on a gas equivalent basis increased 14 percent, resulting in increased revenues of $175 million over 2003.

In December 2000, the Company’s Board authorized the repurchase of up to $1 billion of the Company’s Common Stock. Through April 30, 2003, the Company had repurchased $816 million of its Common Stock under the program authorized in December 2000. In April 2003, the Company’s Board voted to restore the authorization level to $1 billion effective May 1, 2003. During the first quarter of 2004, the Company repurchased approximately 1.6 million shares of its Common Stock for approximately $90 million and, as of March 31, 2004, has authority to repurchase an additional $672 million of its Common Stock under the current authorization. Since December 2000, the Company has repurchased approximately 25 million shares of its Common Stock for approximately $1.1 billion.

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 these 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 or uncertainties that will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

Capital Expenditures


	First Quarter							(%)
					Increase			Increase
	2004		2003		(Decrease)			(Decrease)
	($ In Millions)
Oil and gas
Development	$	368	$	321	$	47			15	%
Exploration		93		124		(31	)		(25	)
Acquisitions		74		103		(29	)		(28	)

Total oil and gas		535		548		(13	)		(2	)
Plants and pipelines		27		39		(12	)		(31	)
Administrative and other		6		10		(4	)		(40	)

Total capital expenditures	$	568	$	597	$	(29	)		(5	)%

The Company’s consolidated capital expenditures were down 5 percent compared to the first quarter of 2003. The Company utilizes a disciplined approach to capital spending. Excluding acquisitions, the Company’s capital spending related to internal development and exploration is up 4 percent compared to the first quarter of 2003. However, at the current capital spending levels, the Company believes that spending is sufficient to add adequate reserves and achieve the target of 3 to 8 percent average annual production growth. Capital expenditures in 2004, excluding proved property acquisitions, are expected to be approximately $1.5 billion, essentially the same as 2003. Capital expenditures in 2004 are expected to be primarily for internal development and exploration of oil and gas properties which are expected to be 3 percent higher than 2003. Capital expenditures are expected to be funded from internally generated cash flows.

Dividends

On April 21, 2004, the Company’s Board declared a quarterly common stock cash dividend of $0.15 per share on a current-share basis, or $0.075 per share on a post-split basis, with record and payment dates of June 10, 2004 and July 9, 2004, respectively.

On January 21, 2004, the Company’s Board announced a 2-for-1 split on the Company’s Common Stock in the form of a share distribution, subject to shareholder approval of an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 325 million to 650 million. On April 21, 2004, shareholders approved the amendment. As a result, the stock split is payable on June 1, 2004 to shareholders of record on May 5, 2004.

Application of Critical Accounting Policies

undeveloped and developed leaseholds should be classified separately from oil and gas properties, and included as intangible assets on the Company’s consolidated balance sheets. Historically, the Company, like many other oil and gas companies, has included oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves as part of the oil and gas properties, even after SFAS No. 141 and No. 142 became effective. This matter was referred to the Emerging Issues Task Force (“EITF”) in late 2003. At the March 2004 meeting, the EITF reached a consensus that mineral rights for mining companies should be accounted for as tangible assets. However, this issue as it pertains to oil and gas companies is still under consideration by the EITF. The Company will continue to monitor this issue and classify its oil and gas mineral rights held under lease and other contractual rights representing the right to extract such reserves as oil and gas properties until further guidance is provided.

Results of Operations – First Quarter 2004 Compared to First Quarter 2003

The Company reported net income of $354 million or $1.78 diluted earnings per common share in first quarter 2004 compared to net income of $269 million or $1.33 diluted earnings per common share in 2003. Net income in 2003 included a net-of-tax cumulative effect of change in accounting principle charge of $59 million or $0.29 diluted earnings per common share related to the adoption of SFAS No. 143, Asset Retirement Obligations. See Note 8 of Notes to Consolidated Financial Statements for more information.

Below is a discussion of prices, volumes and revenue variances.

Price and Volume Variances


	First Quarter							%			Increase
					Increase			Increase			(Decrease)
	2004		2003		(Decrease)			(Decrease)			(In Millions)
Price variance
Natural gas sales prices (per MCF)	$	5.31	$	5.29	$	0.02			—	%	$	4
NGLs sales prices (per Bbl)		22.08		22.07		0.01			—			—
Crude oil sales prices (per Bbl)	$	29.57	$	29.74	$	(0.17	)		(1	)%		(1	)

Total price variance											$	3

Volume variance
Natural gas sales volumes (MMCF per day)		1,953		1,872		81			4	%	$	49
NGLs sales volumes (MBbls per day)		66.9		63.7		3.2			5			8
Crude oil sales volumes (MBbls per day)		82.4		39.3		43.1			110	%		118

Total volume variance											$	175

Revenue Variances


	First Quarter							%
					Increase			Increase
	2004		2003		(Decrease)			(Decrease)
	($ In Millions)
Revenues
Natural gas	$	944	$	885	$	59			7	%
NGLs		134		127		7			6
Crude oil		222		105		117			111
Processing and other		8		11		(3	)		(27	)

Total revenues	$	1,308	$	1,128	$	180			16	%

Revenues

The Company’s consolidated revenues increased $180 million in the first quarter of 2004. Higher revenues were primarily due to higher sales volumes, resulting in increased revenues of $175 million, which represent 97 percent of the total increase in revenues. Revenue variances related to commodity prices and sales volumes are described below.

Price Variances

Commodity prices are one of the key drivers of earnings and net operating cash flow generation. However, during the first quarter of 2004, realized commodity prices were essentially flat compared to the same quarter last year. Higher commodity prices contributed $3 million to the increase in revenues in the first quarter of 2004. Average natural gas prices, including a $0.01 realized gain per MCF related to hedging activities, increased $0.02 per MCF during the quarter resulting in increased revenues of $4 million. Average crude oil prices, including a $0.32 realized loss per barrel related to hedging activities, decreased $0.17 per barrel in the first quarter, resulting in reduced revenues of $1 million.

Volume Variances

Sales volumes are another key driver that impact the Company’s earnings and net operating cash flow. Higher sales volumes in the first quarter of 2004 resulted in increased revenues of $175 million. Average crude oil sales volumes increased 43.1 MBbls per day in the first quarter of 2004, resulting in increased revenues of $118 million. The increase in crude oil sales volumes was primarily due to higher production from the Cedar Creek Anticline and new project start-ups after first quarter 2003 in offshore China, Algeria, and Ecuador. Average natural gas sales volumes increased 81 MMCF per day in the first quarter of 2004, resulting in increased revenues of $49 million. Average natural gas sales volumes increased primarily due to higher production from the purchase of an additional interest in CLAM in the Dutch offshore sector, and the East Irish Sea. Average NGLs sales volumes increased 3.2 MBbls per day in the first quarter of 2004, resulting in higher revenues of $8 million quarter over quarter. Average NGLs sales volumes increased primarily due to increased production in the Fort Worth Basin.

Below is a discussion of total costs and other income — net.

Total Costs and Other Income — Net


	First Quarter									%
							Increase			Increase
	2004			2003			(Decrease)			(Decrease)
	($ In Millions)
Costs and other income — net
Taxes other than income taxes	$	59		$	48		$	11			23	%
Transportation expense		110			99			11			11
Operating costs		131			102			29			28
Depreciation, depletion and amortization		277			203			74			36
Exploration costs		60			68			(8	)		(12	)
Administrative		48			42			6			14
Interest expense		71			64			7			11
(Gain)/loss on disposal of assets		8			(1	)		9			900
Other expense (income) — net		(3	)		4			(7	)		(175	)

Total costs and other income — net	$	761		$	629		$	132			21	%

Total costs and other income—net increased $132 million in the first quarter of 2004. The increase in total costs and other income—net was primarily due to items discussed below. The increase in exchange rates during the first quarter of 2004 impacted certain costs and expenses by $31 million compared to the same period last year. Changes in foreign currencies versus the U.S. dollar could impact costs and expenses in future periods. However, at this time, the Company cannot predict what impact the exchange rates will have on costs and expenses in the future.

DD&A expense increased $74 million primarily due to higher production and higher unit-of-production rates on the Canadian and Other International properties which have higher rates than the average unit-of-production rates for the Company.

Operating costs increased $29 million primarily due to higher well operating costs related to operations in Other International and Canada. Transportation expense increased $11 million also primarily due to operations in Other International and Canada. Taxes other than income taxes increased $11 million primarily due to higher production taxes resulting from higher crude oil and natural gas revenues. Interest expense increased $7 million primarily due to lower capitalized interest being incurred on capital projects during the first quarter of 2004.

The increases in costs and expenses discussed above were partially offset by lower exploration costs. Exploration costs decreased $8 million primarily due to lower exploratory dry hole costs of $15 million partially offset by higher geological and geophysical and other expenses of $7 million.

Income Tax Expense

Income tax expense increased $22 million in the first quarter of 2004. The increase in income tax expense was primarily due to higher pretax income of $48 million. The Company recorded lower tax benefits of $7 million in the first quarter of 2004 related to interest deductions allowed in both the U.S. and Canada on transactions associated with cross-border financing.

ITEM 3. Quantitative and Qualitative Disclosures about Commodity Risk

Substantially all of the Company’s crude oil and natural gas production is sold on the spot market or under short-term contracts at market sensitive prices. Spot market prices for domestic crude oil and natural gas are subject to volatile trading patterns in the commodity futures market, including among others, the New York Mercantile Exchange (“NYMEX”). Quality differentials, worldwide political developments and the actions of the Organization of Petroleum Exporting Countries also affect crude oil prices.

There is also a difference between the NYMEX futures contract price for a particular month and the actual cash price received for that month in a North America producing basin or at a North America market hub, which is referred to as the “basis differential.” Basis differentials can vary widely depending on various factors, including but not limited to, local supply and demand.

The Company utilizes over-the-counter price and basis swaps as well as options to hedge its production in order to decrease its price risk exposure. The gains and losses realized as a result of these price and basis derivative transactions are substantially offset when the hedged commodity is delivered. Under certain circumstances, the Company also uses price swaps to convert natural gas sold under fixed-price contracts to market sensitive prices.

The Company uses a sensitivity analysis technique to evaluate the hypothetical effect that changes in the market value of crude oil and natural gas may have on the fair value of the Company’s derivative instruments. For example, at March 31, 2004, an assumed 10 percent adverse movement in commodity prices (an increase in the underlying commodities prices) would result in a $45 million increase in the fair value of the net liabilities related to commodity hedging activities.

For purposes of calculating the hypothetical change in fair value, the relevant variables include the type of commodity, the commodity futures prices, the volatility of commodity prices and the basis and quality differentials. The hypothetical change in fair value is calculated by multiplying the difference between the hypothetical price (adjusted for any basis or quality differentials) and the contractual price by the contractual volumes.

ITEM 4. Controls and Procedures

Under the supervision and with the participation of certain members of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company completed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe that the disclosure controls and procedures were effective as of the end of the period covered by this report with respect to timely communicating to them and other members of management responsible for preparing periodic reports all material information required to be disclosed in this report as it relates to the Company and its consolidated subsidiaries.

The Company’s management does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some person or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Accordingly, the Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, the Company’s management has concluded, based on their evaluation as of the end of the period, that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.

There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 2003 Annual Report on Form 10-K.

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

See Note 5 of Notes to Consolidated Financial Statements.

ITEM 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Issuer Purchases of Equity Securities (1)


					(c)		(d)
	(a)				Total Number of		Approximate Dollar
	Total		(b)		Shares Purchased as		Value of Shares that
	Number of		Average		Part of Publicly		May Yet Be Purchased
	Shares		Price Paid		Announced Plans or		Under the Plans or
Period	Purchased		per Share		Programs		Programs
	(In Thousands, Except per Share Amounts)
January 1, 2004 - January 31, 2004		500	$	57.15		500	$	733,612
February 1, 2004 - February 29, 2004		475		55.87		475		707,075
March 1, 2004 - March 31, 2004		575		60.77		575	$	672,132

Total		1,550	$	58.10		1,550

(1) In December 2000, the Company announced that its Board of Directors (“Board”) authorized the repurchase of up to $1 billion of the Company’s Common Stock. Through April 30, 2003, the Company had repurchased $816 million of its Common Stock under the program authorized in December 2000. In April 2003, the Company announced that its Board voted to restore the authorization level to $1 billion effective May 1, 2003.

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
3.1		Certificate of Incorporation of Burlington Resources Inc. as amended April 21, 2004 to reflect an increase in the authorized common shares to 650,000,000

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.

31.1		Rule 13a-14(a)/15d-14(a) Certification executed by Bobby S. Shackouls, Chairman of the Board, President and Chief Executive Officer of the Company

31.2		Rule 13a-14(a)/15d-14(a) Certification executed by Steven J. Shapiro, Executive Vice President and Chief Financial Officer of the Company

32.1		Section 1350 Certification

32.2		Section 1350 Certification

* Exhibit incorporated by reference.

B. Reports on Form 8-K

On January 22, 2004, the Company filed on Form 8-K, pursuant to Item 5, press releases relating to the election of additional members to the Board, the creation of the Office of the Chairman and the announcement of the 2-for-1 stock split and furnished on Form 8-K, pursuant to Item 12, Results of Operations and Financial Condition, and Item 9, Regulation FD Disclosure, a press release announcing its earnings results for the fourth quarter and full fiscal year 2003.

Items 3, 4 and 5 of Part II are not applicable and have been omitted.

SIGNATURES

     Pursuant to the requirements 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/ STEVEN J. SHAPIRO
Steven J. Shapiro
Executive Vice President and Chief Financial Officer

By   /S/ JOSEPH P. McCOY
Joseph P. McCoy
Vice President, Controller and Chief Accounting Officer

Date: May 7, 2004

INDEX TO EXHIBITS


Exhibit		Nature of Exhibit
3.1		Certificate of Incorporation of Burlington Resources Inc. as amended April 21, 2004 to reflect an increase in the authorized common shares to 650,000,000

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.

31.1		Rule 13a-14(a)/15d-14(a) Certification executed by Bobby S. Shackouls, Chairman of the Board, President and Chief Executive Officer of the Company

31.2		Rule 13a-14(a)/15d-14(a) Certification executed by Steven J. Shapiro, Executive Vice President and Chief Financial Officer of the Company

32.1		Section 1350 Certification

32.2		Section 1350 Certification

* Exhibit incorporated by reference.

EX-3.1 2 h15157exv3w1.htm CERTIFICATE OF INCORPORATION, AS AMENDED exv3w1

EXHIBIT 3.1

BURLINGTON
RESOURCES

CERTIFICATE OF INCORPORATION

BURLINGTON RESOURCES INC.

As Amended Through April 21, 2004

CERTIFICATE OF INCORPORATION
OF
BURLINGTON RESOURCES INC.

ARTICLE 1. NAME

The name of this corporation is Burlington Resources Inc.

ARTICLE 2. REGISTERED OFFICE AND AGENT

The address of the initial registered office of this corporation is Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, State of Delaware 19081, and the name of its initial registered agent at such address is The Corporation Trust Company.

ARTICLE 3. PURPOSES

The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE 4. SHARES

4.1 Authorized Capital. The total authorized stock of this corporation shall consist of 650,000,000 shares of common stock having a par value of $.01 per share and 75,000,000 shares of preferred stock having a par value of $.01 per share.

4.2 Issuance of Preferred Stock in Series. The preferred stock may be issued from time to time in one or more series, the shares of each series to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as are stated and expressed herein or in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors.

4.3 Authority of the Board of Directors. Authority is hereby expressly granted to the Board of Directors of this corporation, subject to the provisions of this Article 4 and to the limitations prescribed by law, to authorize the issue of one or more series of preferred stock, and with respect to each such series to fix by resolution or resolutions providing for the issue of such series the number of shares of such series, the voting powers, full or limited, if any, of the shares of such series and the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series of preferred stock shall include, but not be limited to, the determination or fixing of the following:

(a) The number of shares of such series;

(b) The designation of such series;

(c) The dividend on the shares of such series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable

on any other class or classes or on any other series of any class or classes of stock of this corporation and whether such dividends shall be cumulative or noncumulative;

(d) Whether the shares of such series shall be subject to redemption by this corporation and, if made subject to such redemption, the times, prices, rates, adjustments, and other terms and conditions of such redemption;

(e) The terms and amounts of any sinking fund provided for the purchase or redemption of the shares of such series;

(f) Whether or not the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of stock of this corporation and, if provision be made for conversion or exchange, the times, prices, rates, adjustments, and other terms and conditions of such conversion or exchange;

(g) The extent, if any, to which the holders of the shares of such series shall be entitled to vote with respect to the election of directors or otherwise, including the right to elect a specified number or class of directors, the extent, if any, to which the holders of the shares of such series shall have (i) separate voting rights with respect to the matters solely affecting the preferences, rights or powers of such series but not so affecting the common stock or the entire class of preferred stock and (ii) on a pro rata basis with other shares of preferred stock having voting rights, voting rights with respect to matters solely affecting the preferences, rights or powers of the entire class of preferred stock but not so affecting the common stock, the number or percentage of votes required for certain actions, and the extent to which a vote by class or series shall be required for certain actions;

(h) The restrictions, if any, on the issue or reissue of any preferred stock;

(i) The amount or amounts payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation prior to any payment or distribution of the assets of the corporation to any class or classes of stock of the corporation ranking junior to the preferred stock;

(j) Whether, and the extent to which, any of the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of any such series may be made dependent upon facts ascertainable outside this Certificate of Incorporation or of any amendment hereto, or outside the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors, provided that the manner in which such facts shall operate upon the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of such series is clearly and expressly set forth in the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors;

(k) The extent, if any, to which any committee of the Board of Directors may fix the designations and any of the preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the shares of such series relating to dividends, redemption, dissolution, any distribution of assets of this corporation or the conversion into or exchange of such shares for shares of any other class or classes of stock of this corporation or any other series of the same or any other class or classes of stock of this corporation, or fix the number of shares of any such series or authorize the increase or decrease in the shares of such series; and

(1) Any other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable, which shall not adversely affect any other class or series of preferred stock at the time outstanding and which shall not be inconsistent with the provisions hereof.

4.4 Dividends. Subject to any preferential rights granted to any series of preferred stock, the holders of shares of the common stock shall be entitled to receive dividends, out of the funds of this corporation legally available therefor, at the rate and at the time or times, whether cumulative or noncumulative, as may be provided by the Board of Directors. The holders of shares of the preferred stock shall be entitled to receive dividends to the extent provided by the Board of Directors in designating the particular series of preferred stock. The holders of shares of the common stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this section.

4.5 Voting. The holders of shares of the common stock, on the basis of one vote per share, shall have the right to vote for the election of members of the Board of Directors of this corporation and the right to vote on all other matters, except those matters on which the holders of a separate class or series of this corporation’s stock are entitled to vote separately by class or series. To the extent provided by resolution or resolutions of the Board of Directors providing for the issue of a series of preferred stock, the holders of each such series of preferred stock shall have the right to vote for the election of members of the Board of Directors of this corporation and the right to vote on all other matters, except those matters on which the holders of a separate class or series of this corporation’s stock are entitled to vote separately by class or series.

ARTICLE 5. INCORPORATOR

The name and mailing address of the incorporator are as follows:

Andrew Bor

1900 Washington Building

Seattle, Washington 98101

ARTICLE 6. DIRECTORS

The powers of the incorporator shall terminate upon the filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware. The names and mailing addresses of the persons whom are to serve as Directors until the first annual meeting of stockholders or until their successors are elected and qualify are:


		James W. Becker		999 Third Avenue
				Seattle, Washington 98101

		Luino Dell’Osso, Jr.		999 Third Avenue
				Seattle, Washington 98101

ARTICLE 7. BY-LAWS

The Board of Directors shall have the power to adopt, amend or repeal the By-Laws of this corporation, subject to the power of the stockholders to amend or repeal such By-Laws. The stockholders having voting power shall also have the power to adopt, amend or repeal the By-Laws for this corporation.

ARTICLE 8. ELECTION OF DIRECTORS

Except as may be otherwise required by the By-Laws, written ballots are not required in the election of Directors.

ARTICLE 9. PROVISIONS FOR A COMPROMISE OR ARRANGEMENT

Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.

ARTICLE 10. PREEMPTIVE RIGHTS

No preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of this corporation.

ARTICLE 11. CUMULATIVE VOTING

The right to cumulate votes in the election of Directors shall not exist with respect to shares of stock of this corporation.

ARTICLE 12. AMENDMENTS TO CERTIFICATE OF INCORPORATION

This corporation reserves the right to amend or repeal any of the provisions contained in this Certificate of Incorporation in any manner now or hereafter permitted by law, and the rights of the stockholders of this corporation are granted subject to this reservation.

ARTICLE 13. LIMITATION OF DIRECTOR LIABILITY

To the full extent that the Delaware General Corporation Law, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors, a director of this corporation shall not be liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any amendment to or repeal of this Article 13 shall not adversely affect any right or protection of a director of this corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

ARTICLE 14. ACTION BY STOCKHOLDERS WITHOUT A MEETING

Any action by stockholders of this corporation shall be taken at a meeting of stockholders and no action may be taken by written consent of stockholders entitled to vote upon such action.

ARTICLE 15. SPECIAL VOTING REQUIREMENTS

In addition to any affirmative vote required by law, this Certificate of Incorporation, any agreement with any national securities exchange or otherwise, any “Business Combination” (as hereinafter defined) involving this corporation shall be subject to approval in the manner set forth in this Article 15.

15.1 Definitions

For the purposes of this Article 15:

(a) “Affiliate” and “beneficial owner” are used herein as defined in Rule 12b-2 and Rule 13d-3, respectively, under the Securities Exchange Act of 1934 as in effect on May 25, 1988 (the “1934 Act”). The term “Affiliate” as used herein shall exclude this corporation, but shall include the definition of “Associate” as contained in said Rule 12b-2.

(b) An “Interested Stockholder” is a person other than (i) the corporation or (ii) Burlington Northern Inc., a Delaware corporation (“BNI”), as long as BNI continues to own at least a majority of the stock of this corporation entitled to vote for the election of directors (“Voting Stock”) and there has been no Change in Control of BNI since May 25, 1988, who is (A) the beneficial owner of ten percent or more of the Voting Stock or (B) an Affiliate of this corporation which (1) at any time within a two-year period prior to the record date for the vote on a Business Combination was the beneficial owner of ten percent or more of the Voting Stock, or (2) at the completion of the Business Combination will be the beneficial owner of ten percent or more of the Voting Stock.

(c) A “Person” is a natural person or a legal entity of any kind, together with any Affiliate of such person or entity, or any person or entity with whom such person, entity or any Affiliate has any agreement or understanding relating to acquiring, voting or holding Voting Stock.

(d) A “Disinterested Director” is a member of the Board of Directors of this corporation (other than the Interested Stockholder) who was a director prior to the time the Interested Stockholder became an Interested Stockholder, or any director who was recommended for election by the Disinterested Directors. Any action to be taken by the Disinterested Directors shall require the affirmative vote of at least two-thirds of the Disinterested Directors.

(e) A “Business Combination” is (i) a merger or consolidation of this corporation or any of its subsidiaries with an Interested Stockholder; (ii) the sale, lease, exchange, pledge, transfer or other disposition (A) by this corporation or any of its subsidiaries of all or a Substantial Part of the corporation’s Assets to an Interested Stockholder, or (B) by an Interested Stockholder of any of its assets, except in the ordinary course of business, to this corporation or any of its subsidiaries; (iii) the issuance of stock or other securities of this corporation or any of its subsidiaries to an Interested Stockholder, other than on a pro rata basis to all holders of Voting Stock of the same class held by the Interested Stockholder pursuant to a stock split, stock dividend or distribution of warrants or rights; (iv) the adoption of any plan or proposal for the liquidation or dissolution of this corporation proposed by or on behalf of an Interested Stockholder; (v) any reclassification of securities, recapitalization, merger or consolidation or other transaction which has the effect, directly or indirectly, of increasing the proportionate share of any Voting Stock beneficially owned by an Interested Stockholder; or (vi) any agreement, contract or other arrangement providing for any of the foregoing transactions.

(f) A “Substantial Part of the corporation’s Assets” shall mean assets of this corporation or any of its subsidiaries in an amount equal to twenty percent or more of the fair market value, as determined by the Disinterested Directors, of the total consolidated assets of this corporation and its subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is made.

(g) A “Change in Control” shall be deemed to occur (i) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 Act), directly or indirectly, of securities of BNI representing twenty percent or more of the stock of BNI entitled to vote for directors of BNI, (ii) upon the first purchase of BNI’s common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by BNI), (iii) upon the approval by BNI’s stockholders of a merger or consolidation, a sale or disposition of all or substantially all of BNI’s assets or a plan of liquidation or dissolution of BNI, or (iv) if, during any period of two consecutive years, individuals who at the beginning of such period constitute the BNI board of directors cease for any reason to constitute at least a majority thereof, unless the election or nomination for the election by BNI’s stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

15.2 Vote Required for Business Combinations

The affirmative vote of not less than fifty-one percent of the Voting Stock, excluding the Voting Stock of an Interested Stockholder who is a party to the Business Combination, shall be required for the adoption or authorization of a Business Combination, unless the Disinterested Directors determine that:

(a) The Interested Stockholder is the beneficial owner of not less than eighty percent of the Voting Stock and has declared its intention to vote in favor of or to approve such Business Combination: or

(b) (i) The fair market value of the consideration per share to be received or retained by the holders of each class or series of stock of this corporation in a Business Combination is equal to or greater than the consideration per share (including brokerage commissions and soliciting dealer’s fees) paid by such Interested Stockholder in acquiring the largest number of shares of such class of stock previously acquired in any one transaction or series of related transactions, whether before or after the Interested Stockholder became an Interested Stockholder and (ii) the Interested

Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance provided by this corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

15.3 Information Requirements

In the event any vote of holders of Voting Stock is required for the adoption or approval of any Business Combination, a proxy or information statement describing the Business Combination and complying with the requirements of the 1934 Act shall be mailed at a date determined by the Disinterested Directors to all stockholders of this corporation whether or not such statement is required under the 1934 Act. The statement shall contain any recommendations as to the advisability of the Business Combination which the Disinterested Directors, or any of them, may choose to state and, if deemed advisable by the Disinterested Directors, an opinion of an investment banking firm as to the fairness of the terms of such Business Combination. Such firm shall be selected by the Disinterested Directors and be paid a fee for its services by this corporation as approved by the Disinterested Directors.

15.4 Amendment

No amendment to this Certificate of Incorporation shall amend, alter, change or repeal any of the provisions of Article 14 or of this Article 15 unless such amendment shall receive the affirmative vote of not less than fifty-one percent of the Voting Stock, excluding the Voting Stock of any Interested Stockholder as defined in Section 15.1 of this Article 15.

OTHER AMENDMENTS

1. Series A Junior Participating Preferred Stock

Section 1. Designation and Amount. There shall be a series of Preferred Stock, par value $.01 per share, of the Company which shall be designated as “Series A Junior Participating Preferred Stock,” par value $.01 per share, and the number of shares constituting such series shall be 3,250,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company.

Section 2. Dividends and Distributions.

(A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock in preference to the holders of shares of Common Stock, par value $.01 per share (the “Common Stock”), of the Company and any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of January, April, July, and October in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock

in an amount per share (rounded to the nearest cent) equal to the greater of (a) $25, or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Company shall at any time after December 16, 1998 (the “Rights Declaration Date”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Company shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $25 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof.

Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding

Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company.

(C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a “default period”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors.

(ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of shareholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock.

(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the Chairman of the Board or the

President and Chief Executive Officer of the Company. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Company. Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders.

(iv) In any default period, the holders of Common Stock, and other classes of stock of the Company if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.

(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the Restated Certificate of Incorporation or By-laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Restated Certificate of Incorporation or By-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors.

(D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions.

(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not:

(i) Declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;

(ii) Declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) Redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or

(iv) Purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.

Section 6. Liquidation, Dissolution or Winding Up.

(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received per share, the greater of 100 times $200 or 100 times the payment made per share of Common Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “Adjustment Number”). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.

(B) In the event there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.

(C) In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc. If the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property then in any such event the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount

by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event.

Section 8. Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable.

Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Company’s Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.

Section 10. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. (Added December 15, 1988 and amended January 4, 1999)

EX-31.1 3 h15157exv31w1.htm CERTIFICATION OF BOBBY S. SHACKOULS - SECTION 302 exv31w1

Exhibit 31.1

CERTIFICATIONS

I, Bobby S. Shackouls, certify that:

1. I have reviewed this report on Form 10-Q of Burlington Resources Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.



Date: May 7, 2004		/S/ BOBBY S. SHACKOULS
		Bobby S. Shackouls
		Chairman of the Board, President and Chief Executive Officer

EX-31.2 4 h15157exv31w2.htm CERTIFICATION OF STEVEN J. SHAPIRO - SECTION 302 exv31w2

Exhibit 31.2

CERTIFICATIONS

I, Steven J. Shapiro, certify that:

1. I have reviewed this report on Form 10-Q of Burlington Resources Inc.;

(b) Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.



Date: May 7, 2004		/S/ STEVEN J. SHAPIRO
		Steven J. Shapiro
		Executive Vice President and Chief Financial Officer

EX-32.1 5 h15157exv32w1.htm CERTIFICATION PURSUANT TO SECTION 906 exv32w1

Exhibit 32.1

Section 1350 Certification

The undersigned, Bobby S. Shackouls, Chairman of the Board, President and Chief Executive Officer of Burlington Resources Inc. (“Company”), hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2004 (the “Report”) (1) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company.

/S/ BOBBY S. SHACKOULS
Dated: May 7, 2004 Bobby S. Shackouls
Chairman of the Board, President and Chief Executive Officer

This certification shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Burlington Resources Inc. and will be retained by Burlington Resources Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 6 h15157exv32w2.htm CERTIFICATION PURSUANT TO SECTION 906 exv32w2

Exhibit 32.2

Section 1350 Certification

The undersigned, Steven J. Shapiro, Executive Vice President and Chief Financial Officer of the Company, hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended March 31, 2004 (the “Report”) (1) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company.

/S/ STEVEN J. SHAPIRO
Dated: May 7, 2004 Steven J. Shapiro
Executive Vice President and Chief Financial Officer

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	BURLINGTON RESOURCES INC.
	(Registrant)
	By	/S/ STEVEN J. SHAPIRO
		Steven J. Shapiro
		Executive Vice President and Chief Financial Officer


	By	/S/ JOSEPH P. McCOY
		Joseph P. McCoy
		Vice President, Controller and Chief Accounting Officer



		/S/ BOBBY S. SHACKOULS
Dated: May 7, 2004		Bobby S. Shackouls
		Chairman of the Board, President and Chief Executive Officer