Exploration & Production | Quarterly / Earnings Reports | Second Quarter (2Q) Update

Bill Barrett Focuses On Core Rockies Ops in 2Q

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   |    Friday,August 01,2014

Bill Barrett Corporation has reported second quarter 2014 results and announced operational updates.

Highlights:

• Total production of 2.62 MMBoe, meeting the upper end of Company guidance and reflecting strong year-over-year production growth from the Denver-Julesburg Basin at 141% and from East Bluebell at 56%
• Oil production of more than 1 million barrels, up 11% sequentially from the first quarter of 2014
• Commodity balanced production with 39% oil, 43% natural gas and 18% NGLs
• Discretionary cash flow of $67.3 million, or $1.40 per diluted common share
• Discretionary cash flow generated per Boe produced up 47% from the second quarter of 2013 as the Company drives improved margins from its core oil development programs
• Accelerated drilling of Northeast Wattenberg extended reach lateral wells with 16 wells spud to date

Chief Executive Officer and President Scot Woodall commented: "In the first half of 2014 our team has demonstrated consistent execution at our core development programs, and we are delivering production growth right on track with our internal plan. In the Northeast Wattenberg, I am very pleased to report that we have been able to accelerate our development drilling of extended reach lateral wells, having drilled (not yet completed) 16 wells to date. In the first half of the year, our drilling program in the DJ Basin included drilling in the higher-gas prone Core Wattenberg and exploratory drilling in the Chalk Bluffs area. We have now directed our focus to the Northeast Wattenberg area, where we have three rigs drilling extended reach lateral wells, which offer the most favorable rates of return. In addition, in East Bluebell we continue to successfully drill our 23,000 acre position where high oil content and low drilling costs support strong rates of return. Oil production is up 20% over 2013 year-to-date, and the Company expects that full year 2014 oil production will meet our internal target of 30% year-over-year growth."

Operations

 Production, Wells Spud and Capital Expenditures

The following table lists production, wells spud and total capital expenditures by basin for the three and six months ended June 30, 2014:

Operating and Drilling Update

In 2014, the Company anticipates participating in approximately 190 gross/100 net development wells of which approximately 120 gross are to be operated by the Company. The Company's drilling program remains flexible to changes throughout the year, particularly if positive well results and technical changes expand opportunities.

The company has updated its E&P sectors, which can be accessed below:

Bill Barrett Using Extended Laterals in DJ Basin Niobrara

Bill Barrett Surpassing Type Curve at Uinta Bluebell Project

Bill Barrett Suspends Piceance Drilling; Looks to Exit Powder River

Operating & Financial Results

Oil, natural gas and natural gas liquids production totaled 2.62 million barrels of oil equivalent in the second quarter of 2014. Total production is down from 3.8 MMBoe in the second quarter of 2013, primarily due to the sale of a natural gas assets and production declines in the Gibson Gulch natural gas program. For the first half of 2014, production totaled 5.06 MMBoe and included 1.95 million barrels of oil.

Oil production averaged 11,281 barrels per day, up 25% from the second quarter of 2013 and up 11% sequentially. Oil production increased to 39% of total production in the second quarter of 2014 compared with 22% in the second quarter of 2013, driving a 47% increase in discretionary cash flow per barrel of oil equivalent produced. The Company achieved high year-over-year production growth from its two core oil programs, with DJ Basin production up 141% and East Bluebell production up 56% as the Company concentrates capital expenditures in these areas.

Product pricing, pre-hedge, was up 40% per Boe compared with the second quarter of 2013, driven by both an increase in commodity prices and a higher proportion of sales coming from oil production. Realized prices, after the effect of hedges, averaged $79.69 per barrel for oil, $4.46 per million cubic feet for natural gas and $31.75 per barrel for NGLs. The Company settled net $8.9 million in cash commodity hedge losses for the second quarter of 2014.

Discretionary cash flow in the second quarter of 2014 was $67.3 million, or $1.40 per diluted common share, up slightly from $65.7 million in the second quarter of 2013. Growth in cash flow was driven by increased oil production, which more than offset the decline in natural gas production (described above), as oil sales have a significantly higher margin than natural gas. Cash operating costs (lease operating expense, gathering transportation and processing expense and production tax expense) per unit were higher in the second quarter of 2014 at $14.23 per Boe compared with the second quarter of 2013 at $11.36 per Boe, due to the higher proportion of oil production, as oil is more costly to produce per unit than natural gas. In addition, interest expense was reduced by 28% in the second quarter of 2014 compared with the prior year period. Discretionary cash flow per Boe was up 47% in the second quarter of 2014 compared with the second quarter of 2013. For the first six months of 2014, discretionary cash flow was $122.6 million or $2.56 per diluted common share, compared with $129.4, or $2.73 per diluted common share, in the first six months of 2013.

Net loss in the second quarter of 2014 was $26.6 million, or $(0.55) per diluted common share, compared with net income of $14.3 million in the second quarter of 2013. The net loss reflected a $46.8 million commodity derivative loss and higher per unit depreciation, depletion and amortization expenses. For the first six months of 2014, the net loss was $39.3 million, or $(0.82) per diluted common share, compared with a net loss of $18.9 million, or $(0.40) per diluted common share, in the first six months of 2013.

Adjusted net loss for the second quarter of 2014 was $8.6 million, or $(0.18) per diluted common share, compared with a loss of $9.1 million, or $(0.19) per diluted common share, in the second quarter of 2013. For the first six months of 2014, the adjusted net loss was $10.8 million, or $(0.23) per diluted common share, compared with a loss of $21.3 million or $(0.45) per diluted common share, in the first six months of 2013. Adjusted net income (loss) removes the effect of unrealized derivative gains and losses and non-recurring charges such as impairment expenses, property sales and certain one-time items.

Debt & Liquidity

At June 30, 2014, the Company had total debt outstanding (principal balance) of $1,116.4 million. Debt outstanding included $250.0 million drawn on its revolving credit facility, $25.4 million in convertible senior notes, $400.0 million in 7.625% senior notes, $400.0 million in 7.000% senior notes and $41.0 million for a lease financing obligation. At quarter-end, the Company had $349.0 million in available capacity on its credit facility, after taking into account a $26.0 million letter of credit.

2014 Operating Guidance

The Company's 2014 operating guidance (please reference "Forward-Looking Statements" below) is unchanged as follows. The Company may update the following guidance as business conditions warrant:

• Capital expenditures of $500 million - $550 million.
• Production of 11.0 million -12.2 million Boe, before the effect of the expected sale of Powder Deep assets.
• Lease operating costs of $62 million - $67 million.
• Gathering, transportation and processing costs of $43 million - $48 million.
• General and administrative expenses, before non-cash stock-based compensation costs, of $48 million - $52 million.