Bill Barrett Corporation (BBG)

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Bill Barrett (BBG)

Q3 2012 Earnings Call

November 01, 2012 12:00 pm ET

Executives

Jennifer C. Martin - Vice President of Investor Relations

Fredrick J. Barrett - Co-Founder, Chairman, Chief Executive Officer and President

Robert W. Howard - Chief Financial Officer and Treasurer

R. Scot Woodall - Chief Operating Officer

Analysts

Ryan Oatman - SunTrust Robinson Humphrey, Inc., Research Division

Brian Singer - Goldman Sachs Group Inc., Research Division

David R. Tameron - Wells Fargo Securities, LLC, Research Division

Jeffrey W. Robertson - Barclays Capital, Research Division

Pearce W. Hammond - Simmons & Company International, Research Division

Dan McSpirit - BMO Capital Markets U.S.

Dan McSpirit - BMO Capital Markets Canada

Michael Kelly - Global Hunter Securities, LLC, Research Division

Ryan Todd - Deutsche Bank AG, Research Division

Joseph Patrick Magner - Macquarie Research

David Magruder - Knighthead Capital Management, LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Bill Barrett Corporation Earnings Conference Call. My name is Regina, and I will be your conference operator for today. [Operator Instructions] Later, we will be conducting a question-and-answer session. [Operator Instructions] Today's event is being recorded for replay purposes. I would now like to the conference over to your host for today, Ms. Jennifer Martin, Vice President of Investor Relations. Please go ahead.

Jennifer C. Martin

Thank you, Regina. Hello, everyone, and thank you for joining us today. Presenting today are Fred Barrett, our Chairman, Chief Executive Officer and President, who will start of with opening comments; Bob Howard, our Chief Financial Officer, who will review our financial results; and Scot Woodall, Chief Operating Officer.

A few quick notes as usual before we get started. Our third quarter Form 10-Q was filed yesterday afternoon. It's available on our website under SEC Filings. Second, I need to remind everyone of the forward-looking and other cautionary statements provided in our earnings release yesterday, as well as the press release this morning. In addition, during our conversation, we make reference to discretionary cash flow and adjusted net income, which are non-GAAP measures. Reconciliations to the appropriate GAAP measures may be found in the earnings release, which is posted on the homepage of our website.

Lastly, we will be participating in a couple of upcoming conferences: the Bank of America Merrill Lynch Energy Conference on November 13 and the Bank of America Leveraged Finance Conference on December 5. Both are in Florida, so it will be nice to see you there, or you can join us by webcast as both of those conferences will be webcast. And with that, Fred, I'll turn it over to you to get started.

Fredrick J. Barrett

All right. Well, thank you, Jennifer, and welcome, everyone. It's been a very busy but exciting quarter as we executed on our development oil programs, getting those drill bits into our exploration areas and managing our portfolio to assure financial strength and capital focus on superior returns.

We did exceed market expectations for cash flow at $2.24 per share, with production coming in strong at over 31 Bcfe. Oil production growth continued its trajectory, up 13% sequentially and up 80% compared with the third quarter of last year. Let me make it real clear, we have targeted 80% oil growth for the full year, and I expect to hit that target. Our October net oil production was approximately 9,100 barrels of oil per day. Again, that's 9,100 barrels of oil per day.

We have positive results to report in the DJ, the Uinta and the Powder River Basin deep, and Scot's going to provide more details on those activities. But as a geologist, I always like to add my enthusiasm with what I think is really working. And we have a lot of good things that are really working. In the DJ, Northeast Wattenberg area, the rates at our first 4-well pad look very good, averaging over 400 barrels per day on a 30-day IP. Here, we drilled 2 wells into the "B" bench and 2 wells into the "C" bench of the Niobrara, and we're encouraged to see similar results coming from each of those benches. We have drilled and completed our second 4-well pad, where early results are again encouraging. And we're just finishing up drilling on our third 4-well pad. So we're well along our way in this program. Our results in Northeast Wattenberg, combined with the results from our industry neighbors, and we're watching our neighbors very closely, are confirming the prospectivity and the repeatability of this area.

We do have more to learn as we continue to delineate across our block here in Northwest Wattenberg. But all the activity, ours and our neighbors', are confirming the prospectivity and the repeatability of this area. We recognize the potential for tremendous upside and the downspacing of multiple zones and longer laterals, again, as demonstrated by the adjacent third-party activity. The DJ is a very exciting program, and we're diligently working to optimize our investment there.

In the Uinta oil play, we're also very pleased with the ongoing Wasatch-Green River vertical programs. Now, I have said before that it's this vertical program across the basin that is really the primary thrust of exploitation in that basin. That includes the infill development program in the Blacktail Ridge area, the continued extension of that field, our continued vertical delineation in both the East Bluebell and the South Altamont areas. And personally, I am very pleased with what we're seeing across all of those areas.

Highlighting the third quarter, our early results in the East Bluebell area, where we reported yesterday 4 recent vertical wells that averaged more than 1,000 barrels of oil per day, 24-hour peak rates over 475 barrels per day in terms of 30-day IP rates. In addition, our first vertical well in South Altamont, although it's early, looks exceptionally strong in the lease block that is virtually undeveloped. And by the way, we recognized a number of vertical and horizontal wells recently drilled just south of our South Altamont block that are showing very, very strong rates, both vertically, and some very encouraging-looking horizontal wells in the Upper Wasatch. So I'm going to say more about that here in just a second.

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