BBG adds second rig in the DJ – company likely to exit Utah, put the capital into the DJ: Crawford
Bill Barrett Corporation (ticker: BBG) reported production at the high end of its initial Q2 guidance—with cumulative volumes of 1.53 MMBOE for the second quarter. The company’s anticipated production was between 1.45 and 1.55 MMBOE. The company indicated that it achieved capital expenditures of $59 million, well beneath the company’s Q2 guidance range of $65 to $75 million.
The company also succeeded in further reducing its DJ basin oil price differential to $2.16 per barrel, a 55% reduction from Q2 of 2016. The company continued the trend with a decreased lease-operating-expense of $3.61 per BOE, 32% lower than Q2, 2016.
During Q2, BBG operated one drilling rig for the majority of the quarter, and added a second rig in June. BBG spud eight extended reach lateral wells and one mid-reach lateral. The company completed four extended reach laterals and ten mid-reach laterals in its DJ basin assets, and another nine wells in the Uinta oil program.
Operations
During Q2, the company averaged 14,456 BOEPD out of its DJ assets. The previously mentioned four completed extended reach laterals and ten completed mid-reach laterals were all on initial flow back during Q2.
For 2017, BBG has averaged 6.5 days to drill an extended reach lateral. One notable extended reach well was drilled in 5.1 days. The cost to drill and complete an extended reach well was approximately $4.5 million—including the cost of higher proppant loads and tighter stage spacing.
Looking forward
The company has kept its outlook for capital expenditures in the range of $255 and $285 million. It expects that its third quarter capital expenditures will be between $65 and $75 million. The full-year production is expected to be between 6.0 and 6.5 MMBOE, with Q3 accounting for between 1.55 and 1.65 MMBOE.
The company also anticipates that it will fund its 2017 capital program with cash on hand.
BBG continues to advance its completion program in order to optimize production, with its most recent base design incorporating approximately 1,500 pounds of sand per lateral foot, and stage spacing between 100 and 140 feet.
Bill Barrett Corp. Q2, 2017 Q&A
Q: You noted that BBG’s CapEx was at the low end of the guidance, is that due to less activity or is that a function of service inflation, or another driver?
William Crawford, senior vice president of treasury and finance: I would say that the activity levels are the same. So, we are track to drill the same number of wells and put on the same number of wells that’s as in our initial guidance. When we set the initial guidance, set our per well capital kind of at the high end, thinking cost inflation, and then also didn’t know how much more money we were going to spend on the enhanced completions and moving the sand from a 1,000 to 1,500 and moving to stage pacing from 170 feet down to 120 feet to 100 feet. So, there was some room in our numbers to kind of implement some of those changes as well as the projection on service cost inflation and so far to the first half of the year we’ve spent less. And so, I think we’ve done a good job of managing those costs.
Q: In regards to Utah, and the recompletions there, the lower tests, are those combining to make it something that might be more attractive for you all to keep in-house or how has that changed your thoughts about potentially divesting that, that asset?
William Crawford: I don’t think it changed too much wells, I mean we still think that the primary focus of the company is the DJ Basin and we like the results that we’re getting there and think that’s the best use of our capital, but obviously when you get positive results in the last wells we drilled there, we exceeded our expectations, our recompletions exceed our expectations, the differentials are great.
So, we like the basin, but probably at some point, it’s still going to be in the best interest of the company to probably exit Utah and put the capital into the DJ.
Bill Barrett Corp. is presenting at EnerCom’s The Oil & Gas Conference® 22
BBG will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22.
The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors. The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.
