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Bill Barrett Raises Production Outlook

Stronger prices for oil and natural gas liquids (NGL) have prompted Bill Barrett Corp. to increase its 2011 spending with a focus on its liquids-rich Gibson Gulch program, the company said. Production guidance has also been raised.

Denver-based Bill Barrett said it expects to produce 106-110 Bcfe this year, representing year-over-year growth of 10-14%. The company said it plans to continue development drilling at Gibson Gulch in the Piceance Basin, as well as benefit from faster drilling times at West Tavaputs in the Uinta Basin. NGL and oil prices have risen 17% and 19%, respectively, since November 2010 when Bill Barrett put its initial 2011 development program in place (see Daily GPI, Feb. 24).

"In response to today's higher oil and liquids price environment, we believe that maintaining two rigs in our Gibson Gulch program will provide increased value from this lower-risk development asset," said CEO Fred Barrett. "We will direct a solid portion of our capital in 2011 toward our NGL and oil projects, including our goal to continue to expand our Blacktail Ridge oil program [in the Uinta Basin] where we have recently added a second rig. Higher price realizations, improved operating efficiencies and strong returns at these plays improve operating cash flow and position us for very strong growth in 2012."

Based on current commodity futures prices, Gibson Gulch oil production and NGL processing revenues are expected to account for more than 50% of the company's pre-hedge revenue from the area, which provides an estimated return on drilling and completion capital of more than 50%. The updated 2011 program includes running two rigs in Gibson Gulch from April through year-end and is expected to add about 3 Bcfe to 2011 production as well as provide potential for 20%-plus production growth in 2012.

The additional activity is expected to provide operating efficiencies that are expected to reduce total lease operating expenses and gathering, processing and transportation expenses by 3 cents/Mcfe for 2011. The increase in the 2011 capital budget can be funded with an undrawn revolving line of credit.

The company's full-year guidance before acquisitions has been modified to include production of 106-110 Bcfe; lease operating expenses of 56-60 cents/Mcfe; gathering, processing and transportation expenses of 89-93 cents/Mcfe; general and administrative expenses of $45-47 million, which is unchanged; and capital expenditures of $625-645 million.

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