Bill Barrett Corporation Announces Reaffirmation of $375 Million Borrowing Base, the Sale of Non-Core Uinta Basin Properties for Cash Proceeds of $27 Million, and Lower 2015 Capital Expenditure Guidance
– Borrowing base under the bank credit facility reaffirmed at $375 million with zero currently drawn
– Sale of non-core Uinta Basin properties for cash proceeds of $27 million enhances liquidity
– DJ Basin rig count being reduced from two rigs to one rig as a result of improvements in drilling and completion operations
– 2015 capital expenditures reduced to $315-$325 million from $320-$350 million as a result of lower XRL well costs and increased drilling and completion efficiencies
– 2015 production guidance range increased to 6.3-6.5 MMBoe from 6.1-6.5 MMBoe
DENVER, Sept. 28, 2015 /PRNewswire/ — Bill Barrett Corporation (the “Company”) (NYSE: BBG) today announced the following corporate update.
The Company announced today that its semi-annual borrowing base review has been completed with the bank group reaffirming the $375 million borrowing base related to its revolving credit facility maturing in April 2020. The credit facility has $375 million of commitments and there are currently no borrowings under the credit facility. As part of the redetermination process, the Company and its lender group agreed to amend the maintenance covenants in the revolving credit facility by replacing the leverage covenant limiting the maximum total debt to trailing twelve month EBITDAX1 ratio of 4.0x with a covenant limiting the maximum senior secured debt to trailing twelve month EBITDAX ratio of 2.5x through March 31, 2018, after which, the leverage covenant reverts to a maximum total debt to trailing twelve month EBITDAX of 4.0x, as of June 30, 2018. In addition, an interest coverage ratio requirement was included, pursuant to which the ratio of EBITDAX to interest expense may not be less than 2.5 to 1.0 for each quarter through March 31, 2018.
The Company also announced that it has entered into a definitive agreement to sell certain non-core Uinta Basin properties for after-tax cash proceeds of approximately $27 million. The transaction is expected to close on or before November 30, 2015, with an effective date of September 1, 2015, and is subject to customary closing conditions and post-closing purchase price adjustments. The properties produced approximately 470 Boe/d during August 2015, had estimated proved reserves of 11 million barrels of oil equivalent (“MMBoe”) (9% proved developed) as of December 31, 2014 and included 17,632 net acres. Based on the Company’s internal estimates, the sale price amounts to over 10x estimated 2016 operating cash flow (excluding general and administrative expense) based on current strip pricing. The sale of the properties will not result in a reduction of the Company’s borrowing base related to its revolving credit facility.
Chief Executive Officer and President Scot Woodall commented, “We are pleased with the support of our lender group and believe that the reaffirmation of our borrowing base in the current commodity price environment is a testament to the high quality nature of our XRL assets. In addition, the sale of non-core properties at attractive metrics enhances our already strong liquidity position and further strengthens the balance sheet. We are well-positioned and remain focused on the items in our control as we retain the financial and operational flexibility to quickly adapt as conditions warrant. We remain financially well-positioned with an undrawn credit facility, a notable cash position, and favorable hedges that provide the financial capacity to navigate the current macro-economic environment.”
Reflecting much improved drilling efficiencies, the Company will accomplish its planned activities in the Northeast (“NE”) Wattenberg area for the remainder of the year with a one-rig drilling program. The Company will reduce its operated rig count from two rigs to one rig after completing current drilling operations on a multi-well extended reach lateral (“XRL”) pad. This reduction is attributable to the continued improvement in XRL drilling and completion efficiencies in the DJ Basin that also results in realized cost savings. It is now anticipated that 2015 capital expenditures will approximate $315-$325 million, which is below the low-end of the previous guidance range of $320-$350 million. This is primarily a result of drilling times for XRL wells being reduced from an average of 17 days to approximately 10 days, associated cost reductions that have lowered well costs by 10% to approximately $5.6 million, and the timing of certain well completions. It is expected that 40 gross (39 net) XRL wells will be drilled in the NE Wattenberg area in 2015 compared to a previous estimate of 35-40 gross (28-32 net) XRL wells. The increase is attributable to the improved drilling efficiency and also higher working interests due to other owners in the wells electing to go non-consent. Reflecting the efficiency improvement, it is expected that approximately 30 XRL wells can be drilled per rig on an annual basis compared to a previous estimate of 20 XRL wells per rig. Based on the performance of the XRL drilling program, 2015 production guidance is being increased to 6.3-6.5 MMBoe from 6.1-6.5 MMBoe.
Mr. Woodall further stated, “We have worked diligently this year to reduce costs, increase our operational efficiency and improve returns in a challenging macro-economic environment and our operational team has responded to this challenge. Our focus on operational execution has resulted in a reduction of the time to drill an XRL well by 40%, including a recent best-in-class well that was drilled in 7.5 days. This operational focus results in improved capital efficiency, decreased capital expenditures for this year and lower operating costs, while allowing us to increase our 2015 production guidance range. As we look ahead to 2016, we are running a variety of operating plan scenarios and considering a range of commodity price assumptions to determine the appropriate level of capital spending as we look to preserve liquidity given the outlook for commodity prices.”
Capital expenditures for the remainder of 2015 are expected to be funded internally through operating cash flow, cash on hand, non-core asset divestitures and borrowings under the revolving credit facility.
The Company has not issued any shares under its previously announced “at-the-market” equity offering program and does not anticipate currently utilizing it due to market conditions.