Current BBG Stock Info

BBG adds second rig in the DJ – company likely to exit Utah, put the capital into the DJ: Crawford

Bill Barrett Corporation (ticker: BBG) reported production at the high end of its initial Q2 guidance—with cumulative volumes of 1.53 MMBOE for the second quarter. The company’s anticipated production was between 1.45 and 1.55 MMBOE. The company indicated that it achieved capital expenditures of $59 million, well beneath the company’s Q2 guidance range of $65 to $75 million.

The company also succeeded in further reducing its DJ basin oil price differential to $2.16 per barrel, a 55% reduction from Q2 of 2016. The company continued the trend with a decreased lease-operating-expense of $3.61 per BOE, 32% lower than Q2, 2016.

During Q2, BBG operated one drilling rig for the majority of the quarter, and added a second rig in June. BBG spud eight extended reach lateral wells and one mid-reach lateral. The company completed four extended reach laterals and ten mid-reach laterals in its DJ basin assets, and another nine wells in the Uinta oil program.


During Q2, the company averaged 14,456 BOEPD out of its DJ assets. The previously mentioned four completed extended reach laterals and ten completed mid-reach laterals were all on initial flow back during Q2.

For 2017, BBG has averaged 6.5 days to drill an extended reach lateral. One notable extended reach well was drilled in 5.1 days. The cost to drill and complete an extended reach well was approximately $4.5 million—including the cost of higher proppant loads and tighter stage spacing.

Looking forward

The company has kept its outlook for capital expenditures in the range of $255 and $285 million. It expects that its third quarter capital expenditures will be between $65 and $75 million. The full-year production is expected to be between 6.0 and 6.5 MMBOE, with Q3 accounting for between 1.55 and 1.65 MMBOE.

The company also anticipates that it will fund its 2017 capital program with cash on hand.

BBG continues to advance its completion program in order to optimize production, with its most recent base design incorporating approximately 1,500 pounds of sand per lateral foot, and stage spacing between 100 and 140 feet.

Bill Barrett Corp. Q2, 2017 Q&A

Q: You noted that BBG’s CapEx was at the low end of the guidance, is that due to less activity or is that a function of service inflation, or another driver?

William Crawford, senior vice president of treasury and finance: I would say that the activity levels are the same. So, we are track to drill the same number of wells and put on the same number of wells that’s as in our initial guidance. When we set the initial guidance, set our per well capital kind of at the high end, thinking cost inflation, and then also didn’t know how much more money we were going to spend on the enhanced completions and moving the sand from a 1,000 to 1,500 and moving to stage pacing from 170 feet down to 120 feet to 100 feet. So, there was some room in our numbers to kind of implement some of those changes as well as the projection on service cost inflation and so far to the first half of the year we’ve spent less. And so, I think we’ve done a good job of managing those costs.

Q: In regards to Utah, and the recompletions there, the lower tests, are those combining to make it something that might be more attractive for you all to keep in-house or how has that changed your thoughts about potentially divesting that, that asset?

William Crawford: I don’t think it changed too much wells, I mean we still think that the primary focus of the company is the DJ Basin and we like the results that we’re getting there and think that’s the best use of our capital, but obviously when you get positive results in the last wells we drilled there, we exceeded our expectations, our recompletions exceed our expectations, the differentials are great.

So, we like the basin, but probably at some point, it’s still going to be in the best interest of the company to probably exit Utah and put the capital into the DJ.

Bill Barrett Corp. is presenting at EnerCom’s The Oil & Gas Conference® 22

BBG will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22.

The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors.  The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.

Analyst Commentary

KLR Group

We are increasing our BBG target price $1 to $8 per share due to lower operating expense. Bill Barrett’s mid-cycle capital yield of 115%-120% is below the industry median cash recycle ratio of ~140%. Our ’17 production expectation of ~6.34 Mmboe is in the upper half company guidance (6-6.5 Mmboe).
NE Wattenberg extended lateral (XRL) execution has lowered capital intensity ~30% the past two years
Bill Barrett is conducting a two-rig program and plans to drill 70-75 XRL wells (~80% WI) this year. Approximately 80% of Northwest Wattenberg acreage is suitable for XRL development.
Extended reach Niobrara B/C wells (~9,500’ laterals, 50-60 frac stages, ~1,250 lbs. of proppant per ft.) have produced ~240 Mboe the first two years and should recover ~675 Mboe for a cost of ~$4.5 million. Barrett commences gas lift within weeks after placing wells on production to improve early well performance.
Greater completion proppant intensity:
Barrett is completing a 14-well pad (four XRL, 10 medium-length laterals) in the northern area along with five-well and six-well XRL pads in the western area (~1,500 lbs. of proppant per foot, 100-140 frac stage spacing). The company is drilling an eight-well XRL pad in the central area.
Drilling inventory:
Assuming XRL development of the western half of the company’s acreage is viable and 120-acre spacing (~10,000’ laterals, ~500’ offset), Barrett has ~700 locations in Niobrara B/C and Codell with ~250 Mmboe of net resource potential (almost 10 years of drilling inventory, ~70% WI).

Morning Brief Note:
Bill Barrett reported recurring 2Q17 EPS of ($0.17), above our ($0.18) estimate due to slightly higher liquids production. Production in 2Q17 of ~1.53 Mmboe (~59% oil, ~21% gas, ~20% NGLs) was ~1% above our ~1.52 Mmboe (~58% oil, ~22% gas, ~20% NGLs) estimate and the consensus forecast. Preliminarily, we expect production to be in the upper half of 3Q/17 (1.55-1.65 Mmboe) and ’17 guidance (6-6.5 Mmboe). DJ Basin net production increased ~2% q/q to ~14.4 Mboepd and Uinta Basin net production increased ~34% to ~2.3 Mboepd (~89% oil).  

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