Bill Barrett Corporation (BBG)

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Bill Barrett Corp. (BBG)

Q3 2009 Earnings Call

November 3, 2009 12:00 pm ET

Executives

Jennifer Martin – Director, Investor Relations

Fred Barrett – Chairman and Chief Executive Officer

Bob Howard – Chief Financial Officer

Joe Jaggers – President and Chief Operating Officer

Analysts

[Mike Pena - Simmons]

Brian Singer – Goldman Sachs

David Tameron – Wells Fargo Securities

Andrew Gundlach – ASB

Jeff Robertson – Barclays Capital

Kristal Choy – Raymond James

Raymond Deacon – Pritchard Capital Partners

Brian Kuzma – Weiss Multi-Strategies

Presentation

Operator

Welcome to the Third Quarter 2009 Bill Barrett Corporation Earnings Conference Call. (Operator Instructions) I would now like to turn the conference over to your host for today's call, Ms. Jennifer Martin Director of Investor Relations.

Jennifer Martin

Presenting today are Fred Barrett, Chairman and Chief Executive Officer who will open with an overview followed by Bob Howard, Chief Financial Officer, and Joe Jaggers, President and Chief Operating Officer.

I have a couple of items to mention before we get started. We have prepared a few slides for the company in our discussion, which are available with the webcast or it can be printed from the homepage of the website at billbarrettcorp.com. Look along the left side of the homepage under current events and you can click on the earnings call slide. In addition, our third quarter 10-Q was filed this morning and is also available on our website.

I would like to mention that we will be participating in a few upcoming east coast events. We will be at the Boenning & Scattergood SMID Cap Conference in Philadelphia this Monday, November 9, at the Bank of America Credit Conference in New York on December 3, and the Wells Fargo Exploration and Production, Energy Services and Utility Symposium in New York on December 9. We look forward to seeing many of you at those events.

I 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 will make reference to discretionary cash flow and adjusted net income which are non-GAAP measures reconciliations to the appropriate GAAP measures were also provided in the press release today.

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

Fred Barrett

We'll go ahead and start out on slide number three. Our strong operating performance continued through the third quarter positioning the company to realize 13% to 15% production growth for the full year and delivered cash flows well in excess of the 2009 Exploration and Development Capital Program.

I'll summarize a few highlights that Bob and Joe will elaborate on here a little bit later. We have raised the top end of production guidance to 89 Bcfe, a production growth of 13% to 15% is now well ahead of our original expectations of 8% to 12%.

In the third quarter, we produced 22.8 Bcfe, our highest quarterly production to date. We continue to seek out and execute operating efficiencies that are driving down our LOE. While third quarter expenses were up sequentially as expected due to increased work-overs, our LOE guidance for the year is now reduced to $0.53 to $0.54 per Mcfe versus our original estimate of $0.60 to $0.66 per Mcfe.

We're also realizing operating efficiencies under our capital program, not just due to lower service costs industry-wide and have again increased the number of wells we expect to drill in the Piceance to 115 to 120 wells. We have expanded our companywide capital program of such for 2009 to between 170 and 180 wells while maintaining our targeted exploration and development budget of approximately $350 million. And our execution drove particularly strong cash flow in the third quarter at $108 million or $2.39 per share, which by the way was well ahead of our consensus estimates.

I'm very pleased with the strong performance in our key development programs, which remain our largest growth catalyst. In addition, it is the strategy of this company to identify and develop new resource placed through a balance of both the drill bit and through acquisitions when the right strategic opportunity presents itself.

And while exploration of the mainstay of the Bill Barrett culture, realistically it does come with ups and downs as part of the business, a risk that we effectively manage and mitigate through our partnerships and program sell-downs.

During the third quarter we saw a range of exploration results, which Joe will review in more detail. But in short, we met less encouraging results at both our Circus and Hook prospects. And we are currently assessing the future direction of these areas, whereas conversely at Yellow Jacket we're quite encouraged to date by the very large fracture stimulations used on the last two well completions.

These were about double the size of earlier fracs. We have to test these wells for a longer period of time and being careful not to put the cart before the horse, we are seeing better sustained flow rates than on previous wells. As a reminder and as we've said in the past, we only need one of these sizable growth catalysts in our portfolio to work in order to substantially add to the size and value of this company.

Before I turn the call over to Bob and Joe, I will make a few comments on natural gas prices. The fall did not bring the expected decline in Rockies natural gas prices. For October, spot prices have averaged $3.85, well above what we've seen in the past two years. At this point, CIG asked frac within $0.10 of NYMEX on average for the past couple of months. And of interest, the recently posted November CIG index price at $4.32 represents a premium to Henry Hub.

Read the rest of this transcript for free on seekingalpha.com