Analysts say Wattenberg results show company can operate, make money with lower prices
In its recent third quarter 2014 statement, Denver, CO-based Bill Barrett Corp. (NYSE: BBG) reiterated its efforts to simplify its portfolio and operate as an oil-focused player with sights on the Niobrara. Analysts say the company has showed strong oil growth and economic wells at current, and even lower, prices.
"We have completed our transition to an oil focused company and are well positioned to drive profitable growth going forward,” said president and CEO Scot Woodall, noting that in the third quarter of 2014, the company reduced its net debt position, increased liquidity, simplified its portfolio, and increased profitability per barrel.
Through recent assets sales and an acreage exchange that carried a total value of $757 million, the company has reduced its net debt by $526 million, increased liquidity to $644 million, and increased its key Northeast Wattenberg leasehold position by 20%. The transactions included the sale of the Gibson Gulch natural gas property in the Piceance Basin as well as various leasehold packages in the early stage Powder River Basin.
"Regarding operations, I am very pleased with our team's operational execution in the Northeast Wattenberg. We have drilled 27 mid-length and extended reach lateral wells including nearly 250,000 feet of lateral drilling. We have completed 23 of these wells, including nearly 1,000 fracture stimulation stages that have been done timely and according to plan, with the four remaining wells waiting on completion operations. Further, positive initial results from our first four longer lateral wells continue to demonstrate the quality of our southern acreage position, which we increased by approximately 7,900 net acres during the quarter.
Wunderlich Securities analysts said the results “look better than expected and could get even better,” noting the strong IP rates (770 boe/d) of the first four XRLs came in “nicely ahead of the company's previously stated type curve IPs of ~650 boe/day that generated ~90% rates of return.” More impressive, noted the analysts, is the possibility of an even better showing with XRLs, as “the company expected the 9,000 foot laterals to generate those rates; with the next 20+ XRLs in that longer camp we believe an even bigger uplift could be coming soon.”
The XRL wells in the Niobrara “have as good of IRRs as any play in the US given the relatively lower well costs, oil content and strong productivity,” said the analysts, noting that Bill Barrett “was able to walk through the opportunity in the Niobrara that remains lucrative not only at current oil prices but also down below $60/bbl.”
Looking ahead, Bill Barrett’s Woodall said the company is developing an operations plan for a lower oil price environment. “Our cash flow base is supported by a majority of 2015 oil production hedged at approximately $90 per barrel. At today's strip prices, our key development programs in the DJ and Uinta generate returns well in excess of internal hurdle rates,” he said.
Overall, noted the analysts, “We feel this story continues to be overlooked by investors as a strong Niobrara player with some of the best economics in the US and with Barrett's newly pristine balance sheet we feel it has the ability to fund a strong program for 2015 that remains highly economic given the low-cost/highly productive nature of the Niobrara.”