Rachael Seeley, Editor
Bill Barrett Corp. has agreed to divest the majority of its acreage in the Powder River basin and its remaining position in the Gibson Gulch area in the Piceance basin to undisclosed parties in agreements valued at $757 million.
In one deal, the company will exchange Powder River basin leasehold for acreage in the oil and liquids-rich Wattenberg field in the Denver Julesburg (DJ) basin, in Colorado.
"This positions us to have greater operating control and enables us to accelerate drilling and extract more value from this core area," Scot Woodall, president and chief executive officer of Bill Barrett, said of Wattenberg.
Bill Barrett will add 390 boe/d of net production in that transaction and increase its operated position in Northeast Wattenberg field by 7,856 net acres to 48,700 net acres. The Niobrara and Codell formations are being targeted with horizontal drilling, and total leasehold across the DJ basin will rise to 84,100 net acres.
In the Powder River basin, the company is divesting 46,510 net acres. A portion is being exchanged for Northeast Wattenberg leasehold, and the remainder is being sold. The properties hold 4.2 million boe of proved reserves and produced 1,479 boe/d in the second quarter of 2014.
The deals will reduce Bill Barrett's Powder River position to 17,649 net acres. The remaining acreage produced 170 boe/d in the second quarter and is expected to be sold.
The company has also agreed to sell 12,000 net acres in its Gibson Gulch area in the Piceance basin. The acreage produced 80 MMcfd of gas-equivalent (MMcfed) in the second quarter of 2014, and proved reserves are estimated at 438 bcfe.
Focusing on oil
The deals are expected to increase the proportion of oil in Bill Barrett's production stream to 70% by yearend 2014, compared to 39% in the second quarter. Second-quarter oil production was 11,281 b/d.
The company lowered its full-year production guidance by 1.4 million boe to a range of 9.4-9.8 million boe, citing the effect of asset sales, lower-than-expected performance at certain Wattenberg wells, and unusual winter operating conditions in the Piceance basin.
Bill Barrett has also narrowed the expected range of its 2014 capital expenditure budget to $525-550 million. The revision falls within the upper end of previous guidance estimates due to an increased number of wells planned for its Uinta oil program, in Utah, and the increased working interest in northeast Wattenberg. The company allocated 75% of its budget to the DJ basin.
The company said the $757 million value of its combined deals includes $568 million in cash; the $69 million value of the Wattenberg acreage to be acquired; the $36 million assumption of lease financing obligations by the purchaser of the Piceance basin properties; and $84 million in future firm gas gathering and transportation obligations assumed by the Piceance basin purchaser.
The deals are slated to close by the end of the third quarter. After closing, Bill Barrett expects its net debt will fall to $450 million from $1.1 billion.