Bill Barrett Corporation (BBG)

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Bill Barrett Corporation (BBG)

Q4 2008 Earnings Call Transcript

February 24, 2009 12:00 pm ET


Jennifer Martin – Director, IR

Fred Barrett – Chairman and CEO

Bob Howard – CFO and Treasurer

Joe Jaggers – President and COO


Michael Hall – Stifel Nicolaus

Andrew Ganlet [ph] – AFB [ph]

Peter Seden [ph] – Marcson [ph]

Jeff Robertson – Barclays Capital

John Raguzino [ph] – Wachovia



Good day, ladies and gentlemen, and welcome to the Bill Barrett fourth quarter and full year 2008 results conference call. My name is Clarissa and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the call. (Operator instructions) I would now like to turn the presentation over to your host for today’s call, Miss Jennifer Martin, Director of Investor Relations. Please proceed.

Jennifer Martin

Thank you, Clarissa. Good morning and afternoon, and welcome to Bill Barrett Corporation’s fourth quarter and full year 2008 conference call. Presenting today are Fred Barrett, Chairman and Chief Executive Officer, who will open with an overview; followed by Bob Howard, Chief Financial Officer, who will review financial results; Joe Jaggers, President and Chief Operating Officer, who will discuss our year-end reserve and update you on our development in exploration activities; followed by brief closing comments from Fred Barrett.

A couple of items to mention before we get started. We have prepared a user-controlled slideshow that accompanies our discussion. It is available with the webcast or can be printed from the homepage of our Web site at Look along the left of the page under Current Events and click on fourth quarter and full year results earnings call slides. In addition, we filed our 10-K this morning, which is also available on our Web site.

I do need to remind everyone to read the forward-looking and cautionary statement disclosures on slide two of our presentation, which were also included in our press release today. During our discussion we make reference to discretionary cash flow, which is a non-GAAP measure. Reconciliation to the appropriate GAAP measure was also provided in the press release today.

And with that, I will turn it over to Fred Barrett to get started. Fred?

Fred Barrett

All right. Thank you, Jennifer, and welcome, everyone. Our release this morning was entitled another record year. And despite the dramatic decline in commodity prices in the second half of the year and financial markets that effectively shut down, we were able to execute our development and exploration programs to achieve our targeted results while ending the year with a strong balance sheet and well positioned for the year ahead. As testament to our team, fourth quarter results provided record production and solid cash flow in earnings; superior results to many in our sector; and we achieved this against a backdrop of average regional prices of $3.61 per MMbtu for the quarter, and approximately 5 Bcf of shut-ins during the year.

Our company has demonstrated a very strong track record of delivering growth in good years and in bad, and 2008 was no different. In fact, since our company started up in 2002, we have successfully executed an increased cash flow annually, despite years when average regional natural gas prices were terrible, including 2002 when regional prices averaged $1.97 per MMbtu, and in 2007 when they averaged $3.97 per MMbtu. Since going public in 2004, we have increased discretionary cash flow at an average compounded growth rate of 43%.

In 2008, the strength of our company was again demonstrated by our achievements, which I will summarize. Production growth up 27% from 2007 to 77.6 Bcfe. Discretionary cash flow growth of 71% per share to $9.53. Earnings per share growth of 298%, including our impairment charge to $2.39. Reserved growth, fundamental to growth, and our value up 47%, including price related revisions, this equates to 435% production replacement.

Further, we accomplished this for a record low – all and finding and development cost of $1.76 per Mcfe, among the best in the sector, which translates to a three-year average cost of $1.99 per Mcfe. On top of this metrics, our team made an exciting shale gas discovery in the Paradox Basin, which Joe will update you on further. We continue to maintain our reputation as an exploration company with a full plate of prospects where we will continue to invest and make progress in 2009.

On the financial side during 2008, we set up a long range of production hedged positions; opportunistically closed on the convertible debt deal with attractive terms; and upsized our borrowing base with a strong, reliable syndicate; and, we continue to be in a solid financial position as we begin 2009. We are taking a cautious and calculated approach to 2009. As provided in the release this morning, we have refined our 2009 development program to delay certain completions, intending to gain better pricing exposure for these wells. As a result, our capital budget is now expected to be about $50 million lower and production growth will be reduced to 8% to 12%, compared with 2008. Joe will elaborate on this later as well.

I will now turn the call over to Bob Howard, our CFO. And with that, Bob?

Bob Howard

Thank you, Fred. I’ll reiterate that 2008 was an exceptional year for Bill Barrett in terms of operational and financial results. Clearly, the second half of the year brought challenges. However, we were well positioned to meet these challenges and deliver superior results.

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