This summary is based on the fourth quarter fiscal 2006 earnings call conducted by Bill Barrett Corp. (BBG: chart) on February 27, 2007.
Key Investors Issues:
- In the fourth quarter, the company produced 14.2 Bcfe, a 15% increase over the fourth quarter 2005 and a 13% improvement sequentially.
- For the full year 2006, the company produced 52.1 Bcfe, a 32% improvement over 2005.
- For the fourth quarter 2006, the company realized an average price of $6.21 per Mcfe and generated 61.6 million in cash flow or $1.39 per share.
- For 2006, cash flow was nearly $239 million, a 22% increase over 2005 with fourth quarter gas prices 52% lower than those in 2005.
- Net income and cash flow were lower in the quarter compared with a year ago.
- Cash flow per share only dropped by 25% from last year due to the company’s strong hedge position, increased production and lower production taxes.
The company generated net income of $11 million or 25 cents per share in the quarter.
- Net income and earnings per share dropped sequentially due to the large gains on sale on properties that occurred in the previous quarter.
- For 2006, net income was a record $62 million.
- The company had earnings per share of $1.40, representing a 155% improvement over 2005.
Cash operating cost continued to trend downwards.
Gathering production taxes and G&A totaled a $1.70 per Mcfe in the quarter, a 21% improvement over last quarter, primarily due to lower G&A and lower production taxes, which fell based on the company’s production mix in lower gas prices.
Cash operating cost dropped from $2.27 full year 2006 to $1.90 in 2005, again primarily due to lower production taxes. The management expects the downward trend in unit operating cost to continue due to operational efficiencies and increased production.
CapEx totaled nearly $377 million for 2006.
This included $332 million to drill compete wells and facilities, $34 million for leasehold acquisitions, $9 million on G&G cost and $2 million for FF&E. Furthermore, the company spent an additional $79 million for the CH4 acquisition that does not include the $37 million of non-cash deferred taxes.
Bill Barrett received $78 million in proceeds in 2006 including $31 million from Storm Cat for certain Powder River Basin divestiture. The company invested this capital budget and returned $2.44 organic F&D, a remarkable achievement given the company’s continued investment in exploration and land acquisition.
The company currently has a $188 million outstanding its revolving credit facility.
Bill Barrett expects to increase its bank buying capacity to $360 million based on year-end 2006 reserve level, so, the company has plenty of liquidity for this year and well into next year.
The company is approximately 65% hedged for 2007 and 27% for 2008, and will continue to add hedges at opportunistic spikes in commodity prices.
Bill Barrett continues to be committed to maintaining a conservative balance sheet that provides the company with flexibility and liquidity for its growth strategy. The company is reviewing longer-term financing alternatives including high yield, term debt and equity link as a matter and the management plans to be opportunistic about other financing alternatives as the market presents them. However, given the expected proceeds from the Williston sales, the company’s current hedged volume and expected cash flow from production growth is sufficient, flexibility and liquidities finance the capital requirements through 2007 and beyond in using debt.
Williston sale is on the market being marketed by Scotia Waterous and the company expects to have the data room open in March and close the sale by June. Without giving specific numbers, the company expects to receive proceeds well exceeding $100 million.
In the company’s five years of operation, the track record of growth has been primarily through the drill bit with year-end 2006 reserves at 428 Bcfe.
Production in 2006 was 52.1 Bcfe nearly an eightfold increase over 2002. The company has enjoyed 52% and 47% compounded annual growth in reserves and production respectively over the past five years. Currently Bill Barrett is producing north of 145 million cubic feet equivalent per day on a net basis that does exclude the Williston. The company ran its proven reserve at year-end ‘06 price of $4.46 per MMBtu, a price 42% below year-end 2005, yet the company still had 26% growth in reserves year-over-year.
Combined growth of proved, probable, and possible resources grew to 2 Tcfe in 2006.
Over 1.6 Tcfe is associated West Tavaputs, Piceance, CBM development programs which provide the company with repeatable low-risk long-term visible production growth. A majority of the remaining 3P resources are associated with the Asian program West Tavaputs steep, Gate Gold steep, and Lake Canyon areas.
