Bill Barrett Corp. continues to monetize assets to improve its financial situation with a new agreement to sell certain non-core assets in the Uinta Basin to an unaffiliated third party for cash proceeds of approximately $30 million.
The assets produced approximately 1,000 boe/d (63% oil) during the first quarter of 2016 and had estimated proved reserves of two million barrels of oil equivalent (87% proved developed) as of December 31, 2015. Based on the company's internal estimates, the expected 2016 operating cash flow from the divested properties will be less than $2 million based on current strip pricing.
In a statement, Bill Barrett’s CEO and president Scot Woodall commented: "The sale of another portion of our non-core Uinta Basin assets at attractive sale metrics further streamlines our operational portfolio and improves operating metrics. Given the current outlook for commodity prices and a focus on our core DJ Basin assets, we had no development activity planned for this year.”
The sale comes on the heels of a $27 million sale of Uinta assets announced in September 2015.
Proceeds from the most recent transaction will be used to strengthen the company’s balance sheet by adding to its cash position, Woodall said. In a flash note Tuesday, Wunderlich Securities Inc. analyst Jason Wangler detailed the company’s year-end 2015 position. The company “ended 2015 with over $125 million in cash, an undrawn facility and $800 million in term debt.”
“Further, due to BBG's lower spending rates and strong hedge book, we think its relatively small 2016 outspend could give BBG an opportunity to bring in its term debt, which would bode well for the company's future,” Wangler continued.
Continuing its Uinta asset divestitures as the company refocuses on the Niobrara, this sale reduces production from the Uinta region by about 25% given it produced about 4,400 boe/day in 4Q15, Wangler noted. “Importantly, the sale should help make multiple metrics for BBG look better going forward given the high decline rates from the region and the higher cost operations. As such we look for BBG's guidance to potentially improve from the cost side while the production figures may not be significantly impacted.”
Wells Fargo Securities LLC advised Bill Barrett Corp. with respect to the Uinta Basin divestiture process. The transaction is expected to close on or before June 30, 2016, and is subject to customary closing conditions.