Bill Barrett closes in on Niobrara focus with West Tavaputs sale

Narrowing the focus of its portfolio, Bill Barrett Corp. (NYSE: BBG) has closed on its previously announced sale of the West Tavaputs natural gas property located in the Uinta Basin, Utah to affiliates of EnerVest Ltd. for a total adjusted transaction value of $369 million.

Jason Wangler of Wunderlich Securities Inc. called the deal “an important milestone as we believe the company and its management have officially delivered on essentially all goals for 2013 as it continues to actively work in the Niobrara,” noting that investors should now be focused on the Denver, CO-based company’s “solid Niobrara position that so far has been nothing short of impressive.”

Barrett continues to focus the large majority of its capital spending on its Niobrara position while also spending/producing in the Uinta, Powder River and Piceance basins. All of these areas have ample liquids content and generate positive earnings and cash flow; but we believe Barrett is moving more into the Niobrara given its strong economics and ample inventory.

The sale should reduce the company’s debt below $1 billion—closer to a 40% debt-to-cap level, noted Wangler, and, while the company’s credit facility availability was reduced to $625 from $825, he believes the deal generates ample cash to reduce debt and the company’s liquidity position has improved.

Another positive is the advancement of the company’s “gas to liquids” transformation as the West Tavaputs field production stream was 99% natural gas. With this deal, the company’s liquids content moves past 50%, and as Wangler noted, the Niobrara focus makes it likely that the figure will move higher.

Currently, Bill Barrett has four rigs running in the Niobrara drilling on a 40,000 net acre position in the northeast extension. The company also holds 14,000 net acres in the core of the Wattenberg field. With close to 40 wells expected to come online in the near-term, production should increase the nearly 500 boepd results from its initial wells, Wangler concluded.                 


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