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Burlington shares rise on report of ConocoPhillips talks

NEW YORK – Shares of oil and gas producer Burlington Resources Inc. rose more than 7 percent on reports the company is in advanced talks to be acquired for more than $30 billion by ConocoPhillips, the nation’s third-biggest oil company.The Wall Street Journal reported Monday the deal would likely be worth more than $30 billion, and The New York Times said it would be worth more than $31 billion. The Journal cited unidentified people familiar with the matter, while the Times attributed its report to unnamed executives involved in the negotiations.Both Burlington and ConocoPhillips are based in Houston. Spokesmen for both declined to comment.Shares of Burlington Resources jumped $5.38, or 7.1 percent, to $81.47 in afternoon trading on the New York Stock Exchange. Investors drove shares of ConocoPhillips down $2.23 or 3.5 percent, to $60.84.The takeover would be the biggest such transaction in the oil and gas field in several years.Analysts said ConocoPhillips was interested in Burlington Resources’ operations in gas fields in North America, which have gained in value as strong demand pushed prices higher.They said large oil companies, which are enjoying record profits and sitting on huge cash reserves, would look to acquire other independents, such as EnCana Corp., Devon Energy Corp., Anadarko Petroleum Corp., Chesapeake Energy Corp. and Pioneer Natural Resources Co.Analysts said the cost of exploring for oil has risen, making acquisitions the quickest and easiest way for the big players to grow even larger.”It’s cheaper for companies to buy production and reserves on Wall Street than go drill for it,” Fadel Gheit, an analyst with Oppenheimer & Co., said in an interview with The Associated Press. “It’s instant gratification.”Gheit said ConocoPhillips would be paying a very slim premium for Burlington Resources shares, which he said reflected the fact that Burlington shares had already risen 75 percent from the beginning of the year through Friday’s close.A combined ConocoPhillips and Burlington could shave capital spending 5 to 10 percent without hurting production simply by eliminating duplication, he said.JP Morgan analyst Jennifer Rowland said in a note to clients that the transaction, if completed, would nearly double ConocoPhillips’ global natural gas production. However, the energy company had $2.8 billion in available cash at the end of the third quarter, meaning a deal would likely be funded with equity, she said, “which may dilute earnings and returns in the near term.”Goldman Sachs analyst Arjun N. Murti said a deal “would bode well” for most of the exploration and production stocks he watches, particularly those companies focused on North America natural gas production.Talk of a Burlington Resources deal drove prices of other independents and potential acquisition targets higher.Devon shares rose $1.08, or 1.7 percent, to $66.38, while Apache Corp. shares added 95 cents to $70.75, and shares of Anadarko gained $1.50 to $98.2 on the New York Stock Exchange.


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