SOURCE: Bill Barrett Corporation

May 06, 2008 08:00 ET

Bill Barrett Corporation Reports Record First Quarter 2008 Results and Updates Guidance

DENVER, CO--(Marketwire - May 6, 2008) - Bill Barrett Corporation (NYSE: BBG) today reported first quarter 2008 operating results highlighted by:

--  Production up 28% from the prior year period to 18.2 Bcfe
--  Discretionary cash flow up 58% from the prior year period to $108.3
    million, or $2.40 per diluted common share and $5.95 per Mcfe of production
--  Net income up 116% from the prior year period to $30.7 million, or
    $0.68 per diluted common share
--  Successful offering of $172.5 million in convertible senior notes
    providing increased financial flexibility
    

Chairman and Chief Executive Officer, Fred Barrett, commented:

    "We are off to a record start in 2008 with significant growth in
    production that has generated our highest quarterly performance to date
    in terms of revenue per share, discretionary cash flow per share and
    earnings per share. Our development properties continue to perform as
    expected to generate on-going production growth. Our production
    increase was complemented by strong Rocky Mountain regional natural gas
    pricing where we realized an average $8.19 per thousand cubic feet
    equivalent (Mcfe) sales price for the quarter. Better regional natural
    gas pricing, we believe, is a result of generally stronger national
    prices, significantly increased regional pipeline capacity from the REX
    (Rockies Express - West) system that commenced operation in early
    January as well as increased local demand as a result of colder
    regional weather through the winter.

    From our exploration portfolio, we continue to see favorable results
    from our Blacktail Ridge infill oil play and the Lake Canyon extension
    project. We have reached total depth at 17,554 feet at the ultra-deep
    test well at West Tavaputs and will commence completion operations over
    the coming weeks. We look forward to spudding our first horizontal well
    in the Yellow Jacket shale gas prospect during the second quarter and
    to commencing the first of up to four wells targeting Cody shale gas at
    the Circus prospect during the second quarter.

    This solid start puts our Company on track to deliver projected
    production growth of 20% to 28% for 2008; as a result, we are
    narrowing, and slightly raising the top end of, our production guidance
    range to 74 to 78 Bcfe."

Production for the quarter ended March 31, 2008 was 18.2 Bcfe, representing a 28% increase from the first quarter of 2007 and a 6% increase sequentially. Including the effects of the Company's hedging activities, the average sales price realized in the first quarter of 2008 was $8.19 per Mcfe compared with $6.84 per Mcfe in the first quarter of 2007.

Discretionary cash flow (a non-GAAP measure, see page 11) was $108.3 million in the first quarter of 2008, or $2.40 per diluted common share, up 58% compared with the first quarter of 2007. The year-over-year increase was primarily the result of the 28% increase in production and the $1.35 per Mcfe increase in the average realized price, partially offset by higher per unit gathering, transportation and production tax expenses.

Net income was $30.7 million, or $0.68 per diluted common share, for the first quarter of 2008 compared with $14.2 million or $0.32 per diluted common share in the first quarter of 2007. This 116% increase in net income is primarily a result of higher production and a higher per unit profit margin resulting from the increased realized price and reduced lease operating expenses.

OPERATIONS

Production, Wells Spud and Capital Expenditures

The following table lists production, wells spud and total capital expenditures by basin for the first quarter of 2008:

                          First Quarter 2008

Basin           Average Net     Wells         Capital
                Production      Spud        Expenditures
                (MMcfe/d)      (gross)       (millions)
                -----------  -----------    -----------
Uinta               80            10           $37.8
Piceance            83            30            49.9
Powder River        17            73             8.1
Wind River          20             1             7.4
Other               --             1             5.8
                -----------  -----------    -----------
 Total             200           115          $109.0
                ===========  ===========    ===========

First quarter 2008 capital expenditures totaled $109.0 million. The capital budget for 2008 is narrowed to $575-$600 million from $550-$600 million, of which the Company expects to spend approximately 80% on development at its key assets in the Uinta, Piceance and Powder River basins, and approximately 20% on delineation of prior discoveries and new exploration. The Company has 11 rigs currently drilling and anticipates participating in the drilling of 415 to 450 gross wells for the full year 2008, including approximately 230 coalbed methane ("CBM") wells.

Operating and Drilling Update

Uinta Basin, Utah

West Tavaputs - Current net production is approximately 76 million cubic feet per day (MMcfe/d), temporarily constrained by processing capacity until June. On May 1, 2008, the public comment period was closed for the Draft Environmental Impact Statement (EIS) for this property. The Company continues to expect a record of decision during the second half of 2008.

The Company is operating one shallow drilling rig in the area and expects to add two shallow drilling rigs after the winter stipulations period ends in mid-May. The Company recently reached total depth at 17,554 feet at its ultra-deep test well targeting the Pennsylvanian Weber and Mississippian Leadville formations and expects completion results mid-summer 2008.

The West Tavaputs program continues to offer low-risk growth in the shallow zones as well as upside opportunity through the deep potential of the east and west structures, the untested Mancos shale gas interval and the ultra deep zones.

At the end of the first quarter of 2008, the Company had an approximate 99% working interest in production from 101 gross wells in its West Tavaputs shallow and deep programs.

Blacktail Ridge/Lake Canyon – The Company currently has eight producing Wasatch wells and two wells to be completed in the area with current production averaging nearly 1,000 (gross) barrels of oil per day. The Company is operating one rig and is pursuing an infill drilling strategy in the Blacktail Ridge area and a field extension strategy to the southwest within its Lake Canyon acreage.

Piceance Basin, Colorado

Gibson Gulch - Current net production is approximately 88 MMcfe/d. The Piceance program continues to be a key, low-risk, high growth development area for the Company.

The Company has four operating rigs in the area and plans to drill up to 125 development wells in 2008, the majority of which will be on 10-acre densities. To date, 37 wells on 10-acre densities have been completed with positive results.

At the end of the first quarter of 2008, the Company had an approximate 94% working interest in production from 329 gross wells in its Gibson Gulch program.

Powder River Basin, Wyoming

Coal Bed Methane (CBM) - Current CBM net production is approximately 19 MMcfe/d with capacity constrained in the Cat Creek area due to lack of sufficient compressor capacity. The Company currently has four rigs operating in the area and has drilled 81 of the approximate 230 CBM wells in its 2008 program. During 2008, production is expected to gradually increase as wells currently in the de-watering phase begin production and as third-party infrastructure build-outs allow. At the end of the first quarter of 2008, the Company had an approximate 69% working interest in production from 588 gross CBM wells.

Wind River Basin, Wyoming

Cave Gulch/Bullfrog - The Company recompleted the Bullfrog 14-18 Frontier well (63% net revenue interest/94% working interest), where strong production continued during the quarter, and the well is currently producing approximately 9.5 MMcfe/d. The Company has identified two similar recompletion locations near the Bullfrog 14-18 well.

The Cave Gulch deep drilling program was initiated in February 2008 with the spud of the 31-32 well (37% working interest) targeting the Frontier, Muddy and Lakota formations at 17,000-19,000 feet. This well is expected to reach total depth in early June. The Company expects to operate a one-rig continuous program in the area to drill up to three deep wells through 2008.

Paradox Basin, Colorado

Yellow Jacket and Green Jacket - Using a dense 2-dimensional seismic grid, the Company has identified the location of its first Gothic shale horizontal test well (55% working interest), an offset to its initial vertical well, which it plans to spud during the second quarter of 2008. The Company also anticipates drilling one to three additional vertical or horizontal test wells during 2008 to evaluate its extensive acreage holdings in the area.

Montana Overthrust, Montana

Circus - During the second quarter of 2008, the Company will commence a program to drill up to four vertical wells to analyze and test the Cody shale. As reported earlier this year, gas production was established during testing of the Cody shale at the Draco and Leviathan wells in the area. Production from this area will be dependent upon the discovery of commercial quantities of natural gas to support infrastructure build-out. The Company has a 50% working interest in this potential regional resource play.

ADDITIONAL FINANCIAL INFORMATION

Guidance

The Company is updating its 2008 full year guidance as follows:

--  Oil and natural gas production of 74 to 78 Bcfe, up from 70 to 77 Bcfe
--  Lease operating costs per Mcfe of $0.64 to $0.68, narrowed from $0.64
    to $0.70
--  Gathering and transportation costs per Mcfe of $0.54 to $0.59,
    unchanged
--  General and administrative expenses before noncash stock-based
    compensation  between $38 and $40 million, increased from $36 to $38
    million
--  Capital budget narrowed to $575 to $600 million from $550 to $600
    million
    

Commodity Hedges Update

During the first quarter of 2008, the Company had hedges in place for approximately 75% of its natural gas production volumes and approximately 69% of its oil production volumes that resulted in an increase in natural gas revenues of $0.3 million and a reduction in oil revenues of $2.1 million. The net effect reduced the average price received per Mcfe from $8.29 to $8.19.

For the remaining three quarters of 2008, the Company has hedges in place for approximately 40 Bcfe, or approximately 66% to 71% of projected production. It is currently the Company's strategy to hedge 50% to 70% of production through basis at regional sales points on a forward 12-month period in order to reduce the risks associated with unpredictable future natural gas and oil prices and to provide certainty for a portion of its cash flow to support its capital expenditure program.

The following table summarizes swap positions as of April 30, 2008:

                 Natural Gas                   Oil
          -------------------------  -------------------------
                       Weighted
                      Average Swap                 Weighted
            Volume   Price (CIG or    Volume     Average Swap
Period    (MMBtu/d)   PEPL/MMBtu)    (Bbls/d)   Price (WTI/Bbl)

2Q08       120,000       $6.62          575        $73.84
3Q08       120,000        6.62          575         73.84
4Q08       112,707        7.08          575         73.84
1Q09       159,000        7.97          375         74.41
2Q09       119,000        6.78          375         74.41
3Q09       119,000        6.78          375         74.41
4Q09        72,587        7.19          375         74.41

In addition, the Company has hedged certain volumes with collar contracts including: one calendar 2008 natural gas collar for 35,000 MMBtu/d at CIG with a floor of $6.50 and ceiling of $10.00; two calendar 2008 oil collars for 525 barrels of oil per day (Bbls/d) at WTI with a blended floor of $70.48 and blended ceiling of $81.62; and four calendar 2009 oil collars for 350 Bbls/d at WTI with a floor of $83.57 and a ceiling of $122.66.

Debt

During the first quarter of 2008, the borrowing base on the Company's revolving credit facility was increased to $510 million from $385.0 million as a result of the increased year-end proved reserves and was subsequently reduced to $467 million after the Company issued the convertible senior notes. At quarter-end, borrowings outstanding under the facility were $134.0 million, providing $333.0 million in available capacity. As previously announced, in March 2008 the Company successfully completed the offering of $172.5 million of 5% convertible senior notes. The proceeds from this offering were used to pay down the revolving credit facility.

FIRST QUARTER RESULTS WEBCAST AND CONFERENCE CALL

As previously announced, a webcast and conference call will be held later this morning to discuss first quarter 2008 operating and financial results. Please join Bill Barrett Corporation executive management at noon eastern time/10:00 a.m. mountain time for the live webcast, accessed at www.billbarrettcorp.com, or join by telephone by calling 866-742-9716 (832-445-1682 international callers) with passcode 41973231. The webcast will remain available on the Company's website for approximately 30 days, and a replay of the call will be available through May 9, 2008 at call-in number 800-642-1687 (706-645-9291 international callers) with passcode 41973231.


DISCLOSURE STATEMENTS

Forward-looking statements:

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the Company is providing updated 2008 full year guidance, which contains projections for certain 2008 operational and financial results and forward-looking statements regarding the Company's capital expenditure program and exploration and development activities. These forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties. Please refer to the Company's Annual Report on Form 10-K for the year-ended December 31, 2007, filed with the Securities and Exchange Commission on February 27, 2008, and other filings with the SEC, for a description of certain risk factors. Actual results may differ materially from Company projections and can be affected by a variety of factors outside the control of the Company including, among other things, exploration drilling and test results, transportation, processing, availability of third party gathering, market conditions, oil and gas price volatility, risks related to hedging activities, the availability and cost of services and materials, the ability to obtain industry partners to jointly explore certain prospects, the ability to receive drilling and other permits and regulatory approvals, surface access and costs, uncertainties inherent in oil and gas production operations and estimating reserves, unexpected future capital expenditures, competition, risks associated with operating in one major geographic area, the success of Bill Barrett Corporation's risk management activities, governmental regulations and other factors discussed in the Company's reports filed with the SEC. Bill Barrett Corporation encourages readers to consider the risks and uncertainties associated with projections. In addition, the Company assumes no obligation to publicly revise or update any forward-looking statements based on future events or circumstances.


ABOUT BILL BARRETT CORPORATION

Bill Barrett Corporation (NYSE: BBG), headquartered in Denver, Colorado, explores for and develops natural gas and oil in the Rocky Mountain region of the United States. Additional information about the Company may be found on its Website www.billbarrettcorp.com.


                         BILL BARRETT CORPORATION
                      Selected Operating Highlights
                                (Unaudited)

                                                            Quarter Ended
                                                              March 31,
                                                          -----------------
                                                            2008     2007
                                                          ======== ========
Production Data:
                                                          -------- --------
    Natural gas (MMcf)                                      17,332   13,031
    Oil (MBbls)                                                144      190
    Combined volumes (MMcfe)                                18,196   14,171
    Daily combined volumes (MMcfed)                            200      157
                                                          ======== ========
Average Prices (includes effects of realized hedges)
                                                          -------- --------
    Natural gas (per Mcf)                                 $   8.02 $   6.68
    Oil (per Bbl)                                            69.83    51.72
    Combined (per Mcfe)                                       8.19     6.84
                                                          ======== ========
Average Costs (per Mcfe):
                                                          -------- --------
    Lease operating expense                               $   0.51 $   0.62
    Gathering and transportation expense                      0.52     0.36
    Production tax expense                                    0.56     0.39
    Depreciation, depletion and amortization                  2.80     2.89
    General and administrative expense, excluding
     stock-based compensation                                 0.58     0.51



                         BILL BARRETT CORPORATION
                  Consolidated Statements of Operations
                                (Unaudited)

                                                        Quarter Ended
                                                          March 31,
                                                    ----------------------
                                                       2008        2007
                                                    ==========  ==========
                                                    (in thousands, except
                                                      per share amounts)

                                                    ==========  ==========
Operating and Other Revenues:
                                                    ----------  ----------
        Oil and gas production                      $  149,045  $   96,882
        Unrealized derivative loss (1)                  (1,530)          -
        Other                                            1,687       1,498
                                                    ----------  ----------
         Total operating and other revenues            149,202      98,380
                                                    ==========  ==========

                                                    ==========  ==========
Operating Expenses:
                                                    ----------  ----------
        Lease operating                                  9,301       8,840
        Gathering and transportation                     9,399       5,126
        Production tax                                  10,259       5,557
        Exploration                                        641       1,606
        Impairment, dry hole costs and abandonment       1,552       3,598
        Depreciation, depletion and amortization        50,957      39,073
        General and administrative (2)                  10,632       7,278
        Non-cash stock-based compensation (2)            3,583       1,890
                                                    ----------  ----------
         Total operating expenses                       96,324      72,968
                                                    ==========  ==========
Operating Income                                        52,878      25,412
                                                    ==========  ==========
Other Income and Expense:
                                                    ----------  ----------
        Interest and other income                          472         532
        Interest expense                                (3,626)     (2,875)
                                                    ----------  ----------
         Total other income and expense                 (3,154)     (2,343)
                                                    ==========  ==========
Income before Income Taxes                              49,724      23,069
Provision for Income Taxes                              19,016       8,885
                                                    ----------  ----------
Net Income                                          $   30,708  $   14,184
                                                    ==========  ==========


                                                    ==========  ==========
Net Income Per Common Share
        Basic                                       $     0.69  $     0.32
        Diluted                                     $     0.68  $     0.32
                                                    ==========  ==========


                                                    ==========  ==========
Weighted Average Common Shares Outstanding
        Basic                                           44,279      43,932
        Diluted                                         45,225      44,201
                                                    ==========  ==========

(1)   In accordance with FAS No. 133, there is ineffectiveness associated
      with a small portion of the value of hedges entered into for forward
      periods due to slight differences in the delivery point and or timing
      of delivery. During the First Quarter 2008, the Company recorded a
      $1.5 million loss related to this ineffectiveness. This is a non-cash
      charge.

(2)   Management believes the separate presentation of the non-cash
      component of general and administrative expense is useful because the
      cash portion provides a better understanding of cash required for
      general and administrative expenses. Management also believes that
      this disclosure allows for a more accurate comparison to the
      Company's peers who may have higher or lower costs associated with
      equity grants.




                         BILL BARRETT CORPORATION
                  Consolidated Condensed Balance Sheets
                                (Unaudited)

                                                     As of        As of
                                                   March 31,   December 31,
                                                  ------------ ------------
                                                      2008         2007
                                                  ============ ============
                                                       (in thousands)

                                                  ============ ============
Assets:
                                                  -------------------------
        Cash and cash equivalents                 $     60,923 $     60,285
        Other current assets                           108,587       71,142
        Property and equipment, net                  1,252,451    1,195,832
        Other noncurrent assets                         10,940        2,428
                                                  ------------ ------------
                Total assets                      $  1,432,901 $  1,329,687
                                                  ============ ============


                                                  ============ ============
Liabilities and Stockholders' Equity:
                                                  ------------ ------------
        Current liabilities                       $    215,194 $    139,568
        Notes payable under bank credit facility       134,000      274,000
        Convertible senior notes                       172,500            -
        Other long-term liabilities                    161,891      142,608
        Stockholders' equity                           749,316      773,511
                                                  ------------ ------------
                Total liabilities and
                 stockholders' equity             $  1,432,901 $  1,329,687
                                                  ============ ============




                         BILL BARRETT CORPORATION
                  Consolidated Statements of Cash Flows
                                (Unaudited)

                                                    Quarter Ended March 31,
                                                    ----------------------
                                                       2008        2007
                                                    ==========  ==========
                                                        (in thousands)

                                                    ==========  ==========
Operating Activities:
                                                    ----------  ----------
  Net income                                        $   30,708  $   14,184
  Adjustments to reconcile to net cash provided
   by operations:
     Depreciation, depletion and amortization           50,957      39,073
     Impairment, dry hole costs and abandonment costs    1,552       3,598
     Unrealized derivative loss                          1,530           -
     Deferred income taxes                              18,906       8,885
     Stock compensation and other non-cash charges       3,974       2,069
     Amortization of deferred financing costs              248         112
     Gain on sale of properties                           (172)     (1,002)
                                                    ----------  ----------
     Change in assets and liabilities:
         Accounts receivable                           (19,532)        958
         Prepayments and other assets                   (3,114)     (1,483)
         Accounts payable, accrued and other
          liabilities                                   (3,082)    (13,492)
         Amounts payable to oil & gas property
          owners                                        (1,145)      4,316
         Production taxes payable                        4,366       1,636
                                                    ----------  ----------

     Net cash provided by operating activities      $   85,196  $   58,854
                                                    ==========  ==========
Investing Activities:
                                                    ----------  ----------
  Additions to oil and gas properties, including
   acquisitions                                       (114,992)    (87,094)
  Additions of furniture, equipment and other             (605)     (1,432)
  Proceeds from sale of properties                       1,212       1,335
                                                    ----------  ----------

     Net cash used in investing activities          $ (114,385) $  (87,191)
                                                    ==========  ==========
Financing Activities:
                                                    ----------  ----------
  Proceeds from debt                                   199,800      12,000
  Principal payments on debt                          (167,014)          -
  Proceeds from sale of common stock                     1,629         352
  Deferred financing costs and other                    (4,588)        (82)
                                                    ----------  ----------

     Net cash provided by financing activities      $   29,827  $   12,270
                                                    ==========  ==========

                                                    ==========  ==========
Increase (Decrease) in Cash and Cash Equivalents           638     (16,067)

Beginning Cash and Cash Equivalents                     60,285      41,322
                                                    ----------  ----------

Ending Cash and Cash Equivalents                    $   60,923  $   25,255
                                                    ==========  ==========




                         BILL BARRETT CORPORATION
       Reconciliation of Discretionary Cash Flow(1) from Net Income
                                (Unaudited)

                                                    Quarter Ended March 31,
                                                    ----------------------
                                                       2008        2007
                                                    ==========  ==========
                                                    (in thousands, except
                                                      per unit amounts)

                                                    ==========  ==========
Net Income                                          $   30,708  $   14,184

Adjustments to reconcile to discretionary
 cash flow (1)
   Depreciation, depletion and amortization             50,957      39,073
   Impairment, dry hole costs and abandonment costs      1,552       3,598
   Exploration expense                                     641       1,606
   Unrealized derivative loss                            1,530           -
   Deferred income taxes                                18,906       8,885
   Stock compensation and other non-cash charges         3,974       2,069
   Amortization of deferred financing costs                248         112
   Gain on sale of properties                             (172)     (1,002)
                                                    ----------  ----------
Discretionary Cash Flow (1)                         $  108,344  $   68,525
                                                    ==========  ==========

   Per share, diluted                               $     2.40  $     1.55
   Per Mcfe                                         $     5.95  $     4.84

(1) Discretionary cash flow is computed as net income plus depreciation,
    depletion, and amortization, impairment expenses, deferred income
    taxes, dry hole costs and abandonment expenses, exploration expenses,
    non-cash stock-based compensation, losses (gains) on disposals of
    properties, and certain other non-cash charges.  The non-GAAP measure
    of discretionary cash flow is presented because management believes
    that it provides useful additional information to investors for
    analysis of the Company's ability to internally generate funds for
    exploration, development and acquisitions. In addition, discretionary
    cash flow is widely used by professional research analysts and others
    in the valuation, comparison and investment recommendations of
    companies in the oil and gas exploration and production industry, and
    many investors use the published research of industry research analysts
    in making investment decisions. Discretionary cash flow should not be
    considered in isolation or as a substitute for net income, income from
    operations, net cash provided by operating activities or other income,
    profitability, cash flow or liquidity measures prepared in accordance
    with accounting principles generally accepted in the United States of
    America ("GAAP"). Because discretionary cash flow excludes some, but
    not all, items that affect net income and net cash provided by
    operating activities and may vary among companies, the discretionary
    cash flow amounts presented may not be comparable to similarly titled
    measures of other companies.

Contact Information

  • Company contact:
    Jennifer Martin
    Director of Investor Relations
    303-312-8155