Bill Barrett Corp. (NYSE: BBG) plans to resume its extended reach lateral (XRL) development program in the Denver-Julesburg (DJ) Basin during the third quarter of 2016. The move comes after the Denver, CO-based company idled its only rig in the Niobrara in the first quarter of the year.
The company expects up to 12 gross XRL wells will spud prior to the end of year and will be placed on initial production in the first quarter of 2017. The company projects that its 2016 capital expenditures will now be at the high end of its previously disclosed guidance range of $75-$100 million to account for the additional drilling activity.
"We believe that lower demonstrated well costs and operating expenses, combined with a narrowing DJ Basin oil price differential, will generate a competitive rate-of-return in the current commodity price environment. While the increased activity will not impact our 2016 production, it builds increasing operational momentum as we move in to 2017. We remain positioned to be cash flow positive this year even at the upper end of our capital expenditure guidance range, allowing us to preserve the strength of our liquidity position,” said Bill Barrett CEO and president Scot Woodall.
Noting company management had foreshadowed incremental activity in the second half of the year during its Q2 call, analysts at Seaport Global Securities said the news is not surprising.
In a note Monday, the analysts detailed the improved well costs on XRLs ($4.25 million vs. $4.75 million previously), and lower DJ differentials ($3-$5/bbl, down from $5-$7/bbl). The focus now, said the analysts, will be on “what the restart does to 2017 numbers – both growth and level of outspend are important.”