Denver-based Bill Barrett Corp. saw its production leap 42% from the second quarter of 2005 to 12.2 Bcfe in the second quarter of 2006, or an average of 134 MMcfe/d. For the first six months of 2006 production increased 49% over the year-ago period to 25.3 Bcfe.
Net of the effects of hedging, the average sales price realized in the second quarter of 2006 was $6.42/Mcfe compared to a realized price of $6.31/Mcfe in the second quarter of 2005.
The results follow a record-setting first quarter (see NGI, May 15).
“We are extremely pleased with our recent performance,” said CEO Fred Barrett. “We established a new deep Lakota discovery at Bullfrog with the 33-19 [well], closed a strategic acquisition, and achieved our production guidance despite curtailments. We look to carry this momentum through the rest of the year as we execute our development and exploration programs. The industry is facing challenges with recent short-term natural gas price volatility, but we feel we have positioned our portfolio of development and exploration projects for long-term sustainable growth. Meanwhile, to ensure we maintain financial flexibility, we have added several hedges and streamlined our 2006 planned capital spending.”
During a conference call with analysts Tuesday, Barrett said the company is dealing with higher costs for rigs and services by hedging judiciously and high-grading prospects. This is particularly true in the Piceance Basin. Referring to the Lakota discovery, Barrett noted that this is the fourth consecutive quarter in which Barrett has announced an exploration success. “I couldn’t be more pleased with the exploration and development performance we’ve achieved so far in 2006,” he said.
Barrett said the company has a coalbed methane drilling inventory of four to five years. Plans for this year include the divestiture of about 7 Bcfe of proved reserves deemed to be non core. Closing is expected by the end of the third quarter.
In the Wind River Basin, the Bullfrog 33-19 exploration well (93% working interest), which was drilled to 19,432 feet, was successfully completed in the Lakota formation. The well, an offset to the Bullfrog 14-18 Muddy discovery, tested at rates of 5 MMcfe/d gross after clean-up from its fracture stimulation and currently is producing 4 MMcfe/d gross. Based on log results, the company has identified additional potential uphole in the Muddy and Frontier formations, both of which are behind pipe.
The company also reported that its production from the West Tavaputs area in the Uinta Basin has been curtailed over the past few months due to construction of gas processing facilities owned by a third-party processor. The completion of these facilities was delayed from an expected in-service date of June 1 to Aug. 15.
Because Bill Barrett’s gas in this area is high in natural gas liquids, it does not meet the specifications of the interstate pipeline system and, therefore, cannot be transported at full capacity until processing facilities are completed by the third-party processor. The company estimates that nearly 0.5 Bcfe of second quarter 2006 production was curtailed. The company currently is producing approximately 29 MMcfe/d gross from the area. Prior to this curtailment in May, the company produced at rates as high as 49 MMcfe/d gross in West Tavaputs.
In the second quarter Bill Barrett produced 38 MMcfe/d from the Piceance Basin, 29 MMcfe/d from the Wind River Basin, 39 MMcfe/d from the Powder River Basin, 21 MMcfe/d from the Williston Basin and 7 MMcfe/d from other areas.
Discretionary cash flow (a non-GAAP measure) was $51.6 million for the second quarter of 2006, compared to $34.7 million in the second quarter of 2005. For the first six months of 2006, discretionary cash flow was $122.9 million, an 85% increase from the previous-year period. Net income for the second quarter of 2006 was $8.2 million, compared to a net loss of $15.9 million in the second quarter of 2005. Net income for the first six months of 2006 was $30.3 million, compared to a net loss of $12.8 million in the previous year. Earnings per share were 19 cents in the second quarter of 2006, compared to a loss per share of 37 cents in the second quarter of 2005. Earnings per share were 70 cents for the first six months of 2006, compared to a loss per share of 30 cents in the first six months of 2005.
In the second quarter of 2006, net capital expenditures totaled $178.1 million, which was composed of $93.8 million for the acquisition of producing properties, undeveloped properties and land; $89.3 million for drilling, development and exploration of natural gas and oil properties; $0.6 million for geologic and geophysical costs; and $0.7 million for equipment and other expenditures, which was offset by $6.3 million received from industry partners pursuant to joint exploration agreements.
Bill Barrett recently added a CIG index gas swap of 15,000 MMBtu/d for September through October at a price of $6.52. Cashless collars for oil and gas production also were added for 2007 and 2008 production. For 2007 35,000 MMBtu/d of gas production has a floor of $6.75 and ceiling of $9.10. For 2008 the same volume has a floor of $6.50 and ceiling of $10. The index in both cases is CIG. Bill Barrett also hedged 200 b/d of oil production with a floor of $70 and ceiling of $84.94 for 2007, and 500 b/d at a floor of $70 and ceiling of $80.15. WTI is the index.
Bill Barrett said it anticipates participating in the drilling of up to 416 gross wells for the full year 2006, including 259 coalbed methane wells. The company’s previously announced capital budget of $350 million is net of proceeds anticipated to be received from joint exploration partners and excludes the $80 million cash acquisition cost for CH4 Corp (see NGI, April 17). However, the company currently estimates it will spend less than its capital budget as it continues efforts to bring its capital budget in line with operating cash flow.
The company reiterated its previous guidance for 2006 production of 46.5 to 49.5 Bcfe.
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