Bill Barrett Corp. executives said Wednesday the company will be on the lookout for acquisition opportunities during the year, primarily in the company's traditional backyard of the Rocky Mountains, but outside the Rockies, "we'll take a look at it," CEO Fred Barrett told financial analysts.
Producing properties could be attractive for acquisition, executives said, but ideally they would have additional upside potential. Joint venture opportunities in the Rockies could be appealing, too, they said. The focus will be on oil, though, as opposed to natural gas, with emerging fields or existing fields ripe for further technology application both attractive, the executives said.
Last year the company's natural gas and oil production totaled 96.5 Bcfe in 2010, up 8% from 89.7 Bcfe in 2009. Growth was predominantly from Gibson Gulch in the Piceance Basin, up 32% from 2009. Bill Barrett also marked a 53% increase in oil production, primarily due to increased development drilling at Blacktail Ridge. Including the effects of hedging and natural gas liquids (NGL) recovery, the average realized sales price in 2010 was $7.07/Mcfe, nearly flat with the 2009 average of $7.10. The 2010 hedging program increased gas and oil revenues by net $135.3 million, or $1.40/Mcfe.
Proved reserves at year-end were 1.1 Tcfe, up 16% from 964.8 Bcfe at year-end 2009.
"We realized record cash flows despite an environment of low natural gas prices and certain higher costs," the CEO said. "We achieved solid growth while keeping capital spending in line with cash flow. We grew reserves at an impressive all-in finding and development cost of $1.84/Mcfe and ended the year with our revolving credit facility undrawn and with the company in a very strong financial position."
Net income for 2010 was $80.5 million, or $1.75/share, compared with $50.2 million, or $1.12/share, in 2009. The increase was mainly due to lower derivatives losses and lower impairment, dry hole and abandonment expenses in 2010. Adjusted net income for 2010 was $78.6 million, $1.71/share, compared with $82.7 million, $1.84/share, in 2009.
The company's program for this year includes capital spending of $525-565 million (before acquisitions, if any), which includes approximately $50 million in facilities and other project costs to ramp up activity at West Tavaputs and up to 15% of expenditures for exploration activities. Oil and natural gas production is expected to be 103-107 Bcfe, up 7-11% from 2010.
"Going into 2011, we are well positioned to generate solid growth in production and reserves from our key development projects while pursuing several new prospects on the exploration front," Barrett said. "We are excited to accelerate activity at West Tavaputs and Blacktail Ridge, each of which offers growth from development plans as well as upside potential.
"We plan to drill and test a handful of new exploration prospects located throughout the Rocky Mountain region, while we continue our pursuit of Hornfrog and Cottonwood Gulch, each of which have the potential to be sizable extensions of existing programs. At the same time, we continue to consider growth through acquisition, as we evaluate a range of Rocky Mountain opportunities."
During the conference call executives were reluctant to discuss exploration opportunities in detail given competitive concerns.
Bill Barrett said it anticipates drilling about 215 gross development wells in 2011, including about 30 coalbed methane (CBM) wells. The development program will be focused on growth in production and reserves as well as driving operating efficiencies at West Tavaputs. In 2011 the company also plans a "robust" exploration program that will include the testing and drilling of several new prospects. Bill Barrett has five rigs drilling at development programs and expects to commence exploration drilling in the second quarter.
In the Uinta Basin at West Tavaputs net production is about 57 MMcfe/d. Here the company plans to drill about 100 wells this year. The 2011 program includes two rigs through the year drilling eight-10 wells per drill pad.
In Blacktail Ridge/Lake Canyon current net production is about 2,300 boe/d. Bill Barrett said it expects to operate one rig in the area for 2011 and add a second rig during the third quarter. The company has identified four horizons that may be conducive to horizontal drilling. It expects to participate in drilling up to 50 wells in the area in this year, including 17 wells operated by its partner in Lake Canyon.
At the Hornfrog gas prospect southeast of West Tavaputs Bill Barrett continues to produce from two wells completed in September. The company said it intends to drill four wells in the area in 2011 as part of a drill-to-earn program for a 55% working interest in up to 30,700 gross acres.
In Colorado in the Piceance Basin at Gibson Gulch net production is about 132 MMcfe/d. During 2011 the company plans to operate one rig in the area through the second quarter and then discontinue drilling for the remainder of the year. The Gibson Gulch program serves as a "swing area" as Bill Barrett can substantially modify the drilling program in conjunction with broader capital plans. Due to the focus at West Tavaputs, activity in this area is to be slowed.
In the Powder River Basin in Wyoming CBM net production is about 35 MMcf/d, and in 2011 Bill Barrett said it plans to participate in drilling a minimal program in the area of approximately 30 wells.
In Wyoming's Wind River Basin at McRae Gap the company has identified about 90,800 net undeveloped acres within its acreage position in the area that it considers prospective for shale oil. In the fourth quarter Bill Barrett drilled a horizontal exploration well into the lower bench of the Niobrara Shale at approximately 8,200 feet depth with an approximate 3,200-foot lateral.
And in Colorado's Paradox Basin at the Yellow Jacket shale gas prospect (100% working interest), the company continues to produce from three wells. Bill Barrett is seeking a partner and expects to resume exploration drilling in the area. The Yellow Jacket and Green Jacket prospects include about 484,275 gross and 370,200 net undeveloped acres.
©Copyright 2011 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.