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Bill Barrett Corp. (BBG) had a lot to say Sept. 28, starting with the news that it has a definitive agreement to sell noncore Uinta Basin properties to an undisclosed buyer for about $27 million.
The sale should improve Bill Barrett’s per unit lease operating expense (LOE) in addition to liquidity.
The company said it also plans to reduce capex while maintaining growth, cut a Niobrara rig and that its borrowing base will remain at $375 million.
The Uinta sale includes 17,632 net acres. The properties produced about 470 barrels of oil equivalent per day (boe/d) during August and had estimated proved reserves of 11 MMboe (9% proved developed) as of year-end 2014.
Based on its internal estimates, the Denver company said its sale price amounts to more than 10 times estimated 2016 operating cash flow excluding general and administrative expense, based on current strip pricing.
Bill Barrett holds about 160,000 net acres in the Uinta’s Green River and Wasatch formations. In the second quarter of 2015, the basin produced of 5,330 boe/d.
The transaction is expected to close by Nov. 30, with an effective date of Sept. 1, and is subject to customary closing conditions and post-closing purchase price adjustments.
The sale of the properties will not result in a reduction of the company's borrowing base related to its revolving credit facility, the release said. Bill Barrett said a semi-annual review by lenders already maintained its borrowing base of $375 million related to its revolving credit facility maturing in April 2020.
That was partly due to the company’s excellent hedging position, said David Tameron, senior analyst, Wells Fargo Securities.
The company said its liquidity stands at $450 million and consists of $101 million cash and short term investments with zero drawn on revolving credit facility.
The company plans to reduce 2015 capex to $315-$325 million. That’s below the low-end of the previous guidance range of $320-$350 million. Tameron said Bill Barrett will likely operate on a $175 million budget in 2016.
However, production at the midpoint of its guidance will move slightly higher, to 6.4 MMboe from 6.3 MMboe, Tameron said.
The company said the decrease in its capex is a result of reduced drilling times for multi-well extended reach lateral (XRL) wells in the Northeast Wattenberg area in the Denver-Julesburg (D-J) Basin.
The company will decrease its operated rig count in the Wattenberg to one rig from two rigs after completing its current drilling operations on the XRL pad, the release said.
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