DENVER, CO, Nov. 3, 2009 (Marketwire) --
DENVER, CO -- (Marketwire) -- 11/03/09 -- Bill Barrett Corporation (NYSE: BBG) today reported third quarter 2009 operating results highlighted by:
-- Production of 22.8 Bcfe, up 16% from the prior year period and up 3%
sequentially
-- Discretionary cash flow of $107.7 million, or $2.39 per diluted common
share and $4.73 per Mcfe
-- Net income of $0.7 million, or $0.02 per diluted share, and adjusted
net income of $7.9 million, or $0.18 per diluted share
-- Increased borrowing base on credit facility to $630 million following
October bank redetermination
-- Encouraging results to date at Yellow Jacket prospect from larger
fracture stimulations
Chairman and Chief Executive Officer Fred Barrett commented: "Our team has met the challenges of a difficult market head-on throughout 2009. Third quarter and year-to-date results reflect increased production as well as growth in discretionary cash flows. Exploration and development expenditures will be well within discretionary cash flows for the year and will deliver production growth of 13% to 15%. As a result, we have further increased production guidance for 2009 to 88.0 to 89.0 billion cubic feet equivalent (Bcfe; see page 5 for details.) Year-to-date, we have been busy evaluating multiple projects on the exploration front and, not surprisingly, we have had both encouraging and disappointing results. At Yellow Jacket, we are encouraged with the performance to date from our two latest horizontal well completions. Our exploration strategy is to target large scale, repeatable resource plays like Yellow Jacket. However, in the Circus and Pine Ridge prospects, results to date do not appear to meet these criteria, and we have expensed our exploration wells in these areas. Into the fourth quarter, we continue to benefit from operating and drilling efficiencies in core areas, favorable hedge positions and a very strong balance sheet.
"As 2009 nears a close, we are positioning ourselves for 2010. In October 2009, our borrowing base was increased and our lender commitments returned to the levels prior to our July debt offering, providing a solid $573 million in liquidity. To date, we have 55.9 Bcfe hedged for 2010 at an average floor price of $7.43 per thousand cubic feet equivalent (Mcfe) and will opportunistically add to these positions. While we are currently preparing our 2010 plan, we expect to align our capital program with cash flows while delivering continued production growth. Our exceptional financial strength will allow us to be flexible over the coming months as we continue to monitor market conditions. In addition, we are working hard to deliver key growth catalysts such as the EIS process at West Tavaputs and resolution with stakeholders in our Cottonwood Gulch area."
Third quarter 2009 natural gas and oil production totaled 22.8 Bcfe, up 16% from 19.6 Bcfe in the third quarter of 2008 and up 3% from 22.1 Bcfe in the second quarter of 2009. For the first nine months of 2009, production totaled 67.0 Bcfe, an increase of 17% compared with the first nine months of 2008. Despite a significant decline in natural gas and oil market prices in the third quarter of 2009 compared with the third quarter of 2008, the Company was able to realize strong production revenue through its effective hedging program. The Company's commodity hedging program increased its third quarter 2009 natural gas and oil revenues by $69.8 million, or more than $3.00 per Mcfe. Including the effects of hedging activities, the average sales price realized in the third quarter of 2009 was $7.03 per Mcfe, down from $7.86 per Mcfe in the third quarter of 2008 yet up from $6.64 per Mcfe in the second quarter of 2009.
Discretionary cash flow (a non-GAAP measure, see page 12) in the third quarter of 2009 was $107.7 million, or $2.39 per diluted common share, up 2% from $105.6 million, or $2.34 per diluted common share, in the third quarter of 2008. Higher production, a $0.07 per Mcfe decline in lease operating expense and a $0.40 per Mcfe decline in production taxes drove the increased discretionary cash flow. These benefits more than offset an $0.83 per Mcfe decline in the average realized price from $7.86 to $7.03 and a $0.19 per Mcfe increase in gathering and transportation expenses. (See per unit metrics on page 8.) The decline in lease operating expense is primarily due to lower water handling costs at West Tavaputs, and the lower production tax expense is primarily a result of significantly lower wellhead prices. Higher gathering and transportation expenses relate to natural gas processing charges and increased firm transportation charges with expansion of the Rockies Express Pipeline system. During the third quarter of 2009, the Company elected to process and sell natural gas liquids from the Piceance Basin, and the higher processing fees were more than offset by proceeds from the sale of resulting natural gas liquids. Discretionary cash flow for the first nine months of 2009 was $345.2 million, or $7.69 per diluted common share, up 5% compared with $327.3 million, or $7.24 per diluted common share, in the first nine months of 2008.
Net income in the third quarter of 2009 was $0.7 million, or $0.02 per diluted common share, compared with $35.3 million, or $0.78 per diluted common share, in the prior year period. Net income included a $12.3 million unrealized commodity derivative loss and a nominal gain on property sales. Adjusting for these items, tax effected, adjusted net income (a non-GAAP measure, see page 12) was $7.9 million, or $0.18 per diluted common share, compared with $29.3 million, or $0.65 per diluted share, in the prior year period. For the first nine months of 2009, net income was $37.7 million, down from $99.1 million in the first nine months of 2008, and adjusted net income was $63.0 million, down from $95.5 million in the first nine months of 2008. Net income includes dry hole costs of $17.7 million for the third quarter of 2009 (related to three exploratory areas, details provided below) and $27.1 million for the first nine months of 2009, or $10.4 million and $16.5 million after tax, respectively.
DEBT AND LIQUIDITY
The Company ended the third quarter of 2009 with $33.0 million drawn on its revolving credit facility and had outstanding 5% Convertible Senior Notes in the principal amount of $172.5 million and 9.875% Senior Notes due 2016 in the principal amount of $250.0 million. In October 2009, the Company's borrowing base under its bank credit facility increased to $630.0 million from $537.5 million with commitments of $592.8 million. Currently, $20 million is drawn on the credit facility, providing $572.8 million in available borrowing capacity. The Company has significant liquidity available from cash flows from operations and the credit facility to fund its planned capital programs.
OPERATIONS
Production, Wells Spud and Capital Expenditures
The following table lists production, wells spud and total capital expenditures by basin for the three and nine months ended September 30, 2009:
Three Months ended Nine Months ended
September 30, 2009 September 30, 2009
----------------------------- -------------------------
Average Capital Average Capital
Net Wells Expendi- Net Wells Expendi-
Production Spud tures Production Spud tures
Basin (Mmcfe/d) (gross) (millions) (Mmcfe/d)(gross)(millions)
--------- --------- --------- --------- ------- -------
Piceance 99 41 $ 57.5 98 81 $ 203.2
Uinta 91 0 16.9 91 16 80.1
Powder River (CBM) 36 11 2.5 32 23 11.4
Wind River 21 0 0.3 24 0 1.7
Other 1 1 8.7 1 6 32.1
--------- --------- --------- --------- ------- -------
Total 248 53 $ 85.9 245 126 $ 328.5
========= ========= ========= ========= ======= =======
Third quarter 2009 capital expenditures totaled $85.9 million, bringing the total spent to $328.5 through the third quarter of 2009, including the $60 million Cottonwood Gulch acquisition. Exploration and development capital expenditures are expected to be less than discretionary cash flow and allocated approximately 80% to 85% to development projects at the Company's key assets in the Piceance, Uinta and Powder River basins and approximately 15% to 20% to delineation of prior discoveries and on-going exploration activities. The Company has three rigs currently drilling, all of which are operating in the Piceance Basin, as well as a smaller rig operating in the Powder River Basin. As a result of improved drilling efficiencies, mainly in the Piceance Basin, the Company anticipates participating in the drilling of 170 to 180 total wells for the full year 2009, up from the previous estimate of 165 to 175 wells. This includes approximately 40 to 45 coal bed methane (CBM) wells.
Operating and Drilling Update
Piceance Basin, Colorado
Gibson Gulch - Current net production is approximately 102 million cubic feet equivalent per day (MMcfe/d) and the Company anticipates a 2009 exit rate of approximately 107 MMcfe/d. Piceance operations continue to improve. Year-to-date drilling times have averaged seven days spud-to-spud compared with 11 days one year ago. As a result, the Company expects improved costs on a per well basis and now plans to drill a 115 to 120 well program in the area for 2009. The Company currently has 140 MMcf/d gross operating compression capacity in the area and anticipates adding an additional 22 MMcf/d of capacity during 2010. The Gibson Gulch program continues to be a key, low-risk, high growth development area for the Company and offers flexibility to adjust the number of active rigs dependent upon the Company's capital strategy.
At September 30, 2009, the Company had an approximate 96% working interest in production from 506 gross wells in its Gibson Gulch program.
Cottonwood Gulch - The Company has a 90% working interest in 40,300 undeveloped acres in Cottonwood Gulch. The Company continues to work with stakeholders to arrive at a mutually satisfactory resolution of matters related to responsible development of this area.
Uinta Basin, Utah
West Tavaputs - Current net production is approximately 83 MMcfe/d, and the Company anticipates a 2009 exit rate of approximately 74 MMcfe/d. The Company has completed its 2009 drilling and completions program and continues to work with the BLM and other stakeholders toward approval of the Record of Decision on the Environmental Impact Statement for full-field development at West Tavaputs, which is targeted for the first half of 2010.
In the shallow development drilling program (Wasatch/Mesaverde), 40-acre density drilling continues successfully at Peter's Point, and the Company remains encouraged by 20-acre density results at Prickly Pear. The West Tavaputs program offers low-risk growth in the shallow Mesaverde and Wasatch zones as well as upside opportunity through the Mancos shale.
At September 30, 2009, the Company had an approximate 97% working interest in production from 167 gross wells in its West Tavaputs shallow and deep programs.
Blacktail Ridge/Lake Canyon - Currently in the combined area, there are 19 operated wells with gross production capacity of approximately 3,600 barrels of oil equivalent per day (Boepd), most of which were returned to production during the quarter following completion of additional natural gas gathering capacity. In the first quarter of 2010, additional gathering and compression capacity is scheduled to be completed by a third party, which should provide sufficient capacity for the Company's anticipated 2010 program. The Company anticipates initiating new drilling activity near year-end and maintaining a one-rig program in the area through 2010. The working interests in this area range from 19% to 100%.
Hook - In the deep Hook prospect (50% working interest) targeting the Manning Canyon shale, the Company drilled and completed its first horizontal well, the State 16H. The well flowed natural gas at a sub-commercial rate and was expensed as a dry hole in the third quarter of 2009. Although the well was not commercial, the Company will conduct further analysis of a longer horizontal section and improved completion techniques, building on the knowledge gained from this initial well, and will consider a second horizontal well in the area. Also during the third quarter of 2009, the Company expensed the costs associated with the second shallow well into the Juana Lopez horizon as well as the Woodside well previously drilled.
Powder River Basin, Wyoming
Coal Bed Methane (CBM) - Current CBM net production is approximately 35 MMcf/d, and the Company anticipates a 2009 exit rate of approximately 38 MMcf/d. Drilling activity recommenced in August 2009 with the end of seasonal wildlife stipulations, and the Company expects its 2009 drilling program for the area to include participation in a total of 40 to 45 CBM wells. Development of this area requires dewatering of wells, which takes an average of six to 12 months.
At September 30, 2009, the Company had an approximate 73% working interest in production from 644 gross CBM wells.
Wind River Basin, Wyoming
Cave Gulch/Bullfrog/Cave Gulch Deep - Current net production from the area is approximately 18 MMcfe/d, including the Bullfrog 14-18 recompletion well (94% working interest) that continues to be a strong producer. The Company anticipates a 2009 exit rate of approximately 13 MMcf/d.
Paradox Basin, Colorado
Yellow Jacket - At the Yellow Jacket shale gas discovery (55% working interest), targeting the Gothic shale, the Company continued to adjust completion techniques in order to improve well performance. All wells are now completed. The most recent completion technique was applied to one full lateral and one-half lateral and included substantially larger fracture stimulations than used on earlier well completions. To date, flow rates are encouraging. The larger completion of the full Koskie 13H-27 wellbore has been on production for 38 days at an average rate of 2.1 MMcf/d, and the well is currently flowing 2.4 MMcf/d. The one-half lateral completion of the Neely 13H-18 well has produced for 12 days at an average rate of 2.3 Mmcf/d and is currently producing 2.1 MMcf/d. The Company will continue to monitor data from these wells before designing its 2010 capital program for the area. The Company currently has seven wells on production producing 5.7 MMcf/d (gross) and approximately 312,000 gross and 141,000 net undeveloped acres in the prospect.
Pine Ridge/Salt Flank - During the third quarter of 2009, the Company completed testing the first well in its Pine Ridge exploration prospect, a structural salt flank play. The well was drilled in 2008 to approximately 10,000 feet targeting the Cutler and Honaker Trail formations. The well did not produce commercial quantities of gas and was expensed as a dry hole during the third quarter of 2009. The Company has several prospects in the salt flank play.
Montana Overthrust, Montana
Circus - During the third quarter, the Company completed testing three vertical wells drilled during 2008 targeting the Cody shale. Well results varied but were non-commercial and included gas flows up to 1.1 MMcf/d, oil flows up to 117 bopd and significant quantities of water. As a result, four vertical wells in the area were expensed during the third quarter of 2009.
