Bill Barrett Corporation Reports Third Quarter 2016 Financial and Operating Results

DENVER, Nov. 3, 2016 /PRNewswire/ -- Bill Barrett Corporation (the "Company") (NYSE: BBG) reports third quarter of 2016 financial and operating results, including these highlights:

• Production sales volumes of 1.6 MMBoe (65% oil)
• DJ Basin oil price differential narrowed to $2.21 per barrel, representing a 54% sequential improvement from the second quarter of 2016
• LOE averaged $3.06 per Boe, representing a 42% sequential improvement from the second quarter of 2016
• LOE guidance lowered to $29-$31 million from $31-$34 million to reflect cost reductions and the sale of higher operating cost properties in the Uinta Basin
• 2016 capital expenditures expected to total approximately $100 million; anticipate cash flow to be in excess of capital expenditures for the year
• Extended reach lateral ("XRL") development program in the Denver-Julesburg ("DJ") Basin resumed with up to 15 gross wells expected to spud prior to year-end
• Completed sale of Uinta Basin properties for net cash proceeds of approximately $30 million
• Exited the quarter financially well positioned with a cash position of $174 million and an undrawn credit facility that provides additional liquidity

Chief Executive Officer and President Scot Woodall commented, "Our team has done an excellent job of maintaining positive financial and operational momentum in a challenging environment, which translated into solid results for the third quarter. Production sales volumes were near the upper end of guidance and EBITDA was better than expected as DJ Basin oil price differentials improved and we are seeing continued improvement in costs across the spectrum. Our XRL development program resumed in September and we have spud six wells with plans to spud up to 15 gross XRL wells by the end of the year. This results in an increasing production profile as the wells begin contributing to production during 2017. We are seeing consistent results across our acreage and our operations team has incorporated several new concepts that we believe will translate into improved well performance. The XRL drilling program generates attractive economic returns in the current commodity price environment and we are pursuing further capital efficiency measures designed to improve well costs and enhance economic returns. We continue to efficiently invest our capital and expect cash flow to be in excess of capital expenditures based on current internal projections. Our liquidity remains strong with a significant cash position, an undrawn credit facility and a solid hedge position."

OPERATING AND FINANCIAL RESULTS

The following table summarizes certain operating and financial results for the third quarter of 2016 and 2015 and the second quarter of 2016:

Oil, natural gas and natural gas liquids ("NGL") production totaled approximately 1.6 million barrels of oil equivalent ("MMBoe") in the third quarter of 2016 and was at the upper end of the guidance range of 1.5-1.6 MMBoe. Lower production sales volumes relative to the comparable 2015 period were primarily the result of non-core asset sales in the DJ Basin and Uinta Basin that were completed during 2015 and 2016.

Third quarter of 2016 production was 65% oil, 18% natural gas and 17% NGLs, which is consistent with guidance.

Cash operating costs (lease operating expense ("LOE"), gathering, transportation and processing costs and production tax expense) averaged $5.81 per Boe in the third quarter of 2016, down 26% compared to the second quarter of 2016, when average cash operating costs were $7.85 per Boe.

LOE averaged $3.06 per Boe in the third quarter of 2016, a 42% improvement to the second quarter of 2016 and 46% lower than the third quarter of 2015. LOE for the DJ Basin averaged $2.45 per Boe in the third quarter of 2016 compared to $3.74 per Boe in the second quarter of 2016 and $3.96 per Boe in the third quarter of 2015. The reduction in total LOE was primarily a result of an improvement in operating efficiencies, the DJ Basin becoming a greater component of corporate operations, and the sale of Uinta Basin properties that had a higher operating cost component. LOE per Boe is anticipated to be higher in the fourth quarter of 2016 relative to the third quarter due to greater seasonal operating costs that are typically experienced during colder months.

Production taxes are expected to approximate 8% of pre-hedge revenue for the fourth quarter of 2016.

Debt and Liquidity

At September 30, 2016, the principal debt balance was $718.8 million, while cash and cash equivalents were $174.3 million, resulting in net debt (principal balance of debt outstanding less the cash and cash equivalents balance) of $544.5 million. Cash and cash equivalents were reduced subsequent to the end of the quarter as the Company made regularly scheduled interest payments of approximately $26 million related to its Senior Notes due 2019 and 2022.

The Company's semi-annual borrowing base review was completed in October 2016 with the lenders setting a borrowing base of $300 million, a 10% reduction due to the sale of non-core assets and the effect of a lower derivative position. There were no changes to the terms or conditions of the credit facility and there are no borrowings outstanding. The revolving credit facility has $274 million in available capacity, after taking into account a $26 million letter of credit.

Uinta Basin Asset Sale

The Company closed the sale of certain non-core assets located in the Uinta Basin on July 14, 2016, for net cash proceeds of approximately $30 million. The proceeds from the sale were used for general corporate purposes and to enhance the Company's liquidity position.

Capital Expenditures

Capital expenditures ("capex") for the third quarter of 2016 totaled $8.1 million as the Company did not operate a drilling rig for much of the quarter and no wells were completed. The DJ Basin XRL drilling program resumed during September and 3 XRL wells spud prior to the end of the quarter. Capex for the third quarter consisted of $4.6 million for drilling, $1.4 million for leaseholds, and $2.1 million for infrastructure and corporate assets.

OPERATIONAL HIGHLIGHTS

DJ Basin

• Produced an average of 14,543 Boe/d (62% oil) in the third quarter of 2016, which represents an increase of 3% from the second quarter of 2016 and an increase of 11% from the third quarter of 2015, pro forma for asset sales.
• Oil volumes averaged 8,989 Bbls/d during the third quarter of 2016, an increase of 5% from the second quarter of 2016 and an 18% increase from the third quarter of 2015, pro forma for asset sales.
• The XRL drilling program resumed in September and 6 wells have spud, including 3 wells that spud in October. No wells were completed during the quarter. Current plans are to drill up to 15 wells and complete 5 of the wells during the remainder of the year.
• Efficiencies have been maintained since resuming the program as drilling times averaged approximately 8 days per well (spud to rig release) for the most recent wells.
• Drilling and completion costs for the most recent drilling and spacing unit ("DSU") are expected to average $4.25 million per well, which incorporates an increased proppant loading of approximately 1,350 pounds of sand per lateral foot. The Company continues to pursue additional capital efficiency measures designed to improve drilling and completion costs and enhance economic returns.
• The following provides a synopsis of the current DSU activity: 
  • Section 5-62-22 - the DSU is located within the central area of NE Wattenberg and includes 15 XRL wells that began initial flowback in April 2016. The wells are performing consistently during initial flowback and have not yet reached an initial peak rate.
  • Section 4-62-9 - the DSU is located within the southern area of NE Wattenberg and includes 8 XRL wells that began initial flowback in June 2016. The wells are performing consistently during initial flowback and have not yet reached an initial peak rate.
  • Section 4-62-20 - the DSU is located within the southern area of NE Wattenberg and includes 5 XRL wells that recently finished drilling to the Niobrara "B", Niobrara "C" and Codell horizons. It is expected that the wells will be completed in late 2016 and placed on initial flowback in early 2017. The wells will incorporate increased proppant of approximately 1,350 pounds of sand per lateral foot.
  • Section 5-62-27 - the DSU is located within the central area of NE Wattenberg and includes 9 XRL wells that will target the Niobrara "B" and Niobrara "C" horizons. Drilling operations have commenced and it is expected that the wells will be completed during the first quarter of 2017 and placed on initial flowback during the second quarter of 2017. This DSU will include a combination of wells that incorporates enhanced proppant loading and monobores.
• DJ Basin oil price differentials averaged $2.21 per barrel during the third quarter of 2016, a 54% improvement from the second quarter of 2016 average of $4.82 per barrel and a 70% decrease from the third quarter of 2015 average of $7.43 per barrel. The Company's oil pricing continues to benefit from having no firm takeaway capacity commitments as regional infrastructure has improved. The fourth quarter of 2016 oil differential is expected to average approximately $3.00 per barrel less than WTI.
• DJ Basin LOE averaged $2.45 per barrel during the third quarter of 2016, a 34% improvement from the second quarter of 2016 average of $3.74 per barrel and a 38% decrease from the third quarter of 2015 average of $3.96 per barrel. The reduction in LOE was primarily a result of an improvement in operating efficiencies.

Uinta Oil Program

Production sales volumes averaged 2,457 Boe/d (83% oil) during the third quarter of 2016. The Company expects to have minimal activity related to the Uinta Basin for the remainder of 2016.

2016 OPERATING GUIDANCE

The Company is providing the following update to its 2016 operating guidance. See "Forward-Looking Statements" below.

• Capital expenditures of approximately $100 million, which was updated to reflect drilling activity associated with the XRL drilling program that resumed in September 2016. 
  • Assumes up to 15 XRL wells are spud and 5 wells are completed prior to the end of the year
  • Anticipate being free cash flow positive as cash flows from operations are expected to exceed capital expenditures
• Production of 6.0-6.2 MMBoe, with the low end of guidance increased to reflect actual production sales volumes for the first nine months of 2016.
• LOE of $29-$31 million, decreased from $31-$34 million to reflect cost reductions and the sale of higher operating cost properties in the Uinta Basin.
  • LOE per Boe is anticipated to be higher in the fourth quarter of 2016 relative to the third quarter due to greater seasonal operating costs that are typically experienced during colder months
• General and administrative expenses of $30-$33 million, unchanged
• Gathering, transportation and processing costs of $2-$4 million, unchanged

COMMODITY HEDGES UPDATE

Generally, it is the Company's strategy to hedge 50%-70% of production on a forward 12-month to 18-month basis to reduce the risks associated with unpredictable future commodity prices to provide certainty for a portion of its cash flow and to support its capital expenditure program.

The following table summarizes the hedge position as of November 3, 2016:

Realized sales prices will reflect basis differentials from the index prices to the sales location.

UPCOMING EVENTS

Third Quarter Conference Call and Webcast

The Company plans to host a conference call on Friday, November 4, 2016, to discuss the results and management's outlook for the future. The call is scheduled at 10:00 a.m. Eastern time (8:00 a.m. Mountain time). Please join the webcast conference call live or for replay via the Internet at www.billbarrettcorp.com, accessible from the home page. To join by telephone, call (855) 760-8152 ((631) 485-4979 international callers) with passcode 1407243. The webcast will remain on the Company's website for approximately 7 days and a replay of the call will be available through November 11, 2016 at (855) 859-2056 ((404) 537-3406 international) with passcode 1407243.

DISCLOSURE STATEMENTS

Forward-Looking Statements

All statements in this press release, other than statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as expects, forecast, guidance, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements herein; however, these are not the exclusive means of identifying forward-looking statements. In particular, the Company is providing "2016 Operating Guidance," which contains projections for certain 2016 operational and financial metrics. Additional forward-looking statements in this release relate to, among other things, future capital expenditures, costs, projects and opportunities.

These and other forward-looking statements in this press release are based on management's judgment as of the date of this release and are subject to numerous risks and uncertainties. Actual results may vary significantly from those indicated in the forward-looking statements. Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC, and other filings, including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, all of which are incorporated by reference herein, for further discussion of risk factors that may affect the forward-looking statements. The Company encourages you to consider the risks and uncertainties associated with projections and other forward-looking statements and to not place undue reliance on any such statements. 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, develops oil and natural gas in the Rocky Mountain region of the United States. Additional information about the Company may be found on its website www.billbarrettcorp.com.

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SOURCE Bill Barrett Corporation