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Earnings Analysis: 
Bill Barrett Third Quarter Earnings Call
Author: Albena Toncheva
123jump.com
Last Update: 8:01 AM EST December 08 2006


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The natural gas and oil exploration firm reported revenue of $104.4 million over $71.2 million in the prior year period. The quarterly production grew 25% over the prior year to 12.6 billion cubic feet equivalent. This was achieved despite curtailing production in West Tavaputs from mid-May to mid-August due to lack of processing for high due point gas. Bill Barrett expects the production for 2006 to range between 51 billion and 53 billion cubic feet equivalent, up 29% to 35% over 2005.

 
The management is not going to disclose how many that would be, but the firm could be looking at within the Lake Canyon area proper or from a Wasatch standpoint, anywhere from five to ten wells. The firm is utilizing its 3-D survey in there to help to identify where those would be in addition to the wells that it is drilling there. But it would be at a substitute program. Likewise, the company’s partner in there drilled six Green River wells to date, those are working real good and the firm expects that they would even ramp up over and above where they are at this year with the six Green River wells.

Are the Utes participating in these wells now?

Yes, the Utes are participating in shallow and they will participate in one Wasatch well at least. As the firm moves forward in this program, it will just have to wait and see what the Utes will do.

Are there any marketing issues with this oil and with the oil from Altamont/Bluebell and Brundage Canyon area?

As far as the oil and the capacity and the processing capacity right now, the firm has no preparement as it relates to the oil that it is currently producing. There are plans in the works for both Salt Lake City refinery community there. There is a whole sweet of refineries in Salt Lake City to look at very thirsty upgrading refineries and processing capacities for black wax. Black wax has almost doubled in production over the past several years in this basin. Even the Utes have contemplated at least verbally potential future processing and refinery capacity as it relates to black wax production.

What is the production guidance for 2007?

The company is early in the 2007 planning process, but clearly from what it has seen in Piceance and West Tavaputs, the management sees strong production growth in 2007 and it will be at the 30% level that 2006 increased from 2005. It is too to say anything at this point.

In the Piceance, what has been changed in the last few months that resulted in the higher EUR? Is it completion technique or what have you changed exactly?

The largest part of that improvement is completion techniques. The 3D, three component seismic, is being used now to help high-grade locations. So, there is an element of that involved as well. The firm would anticipate 2007 results to be a continuation of what the firm witnessed in 2006.

What is your total acreage position in the Big George right now, and if you have given any 3P estimates on reserve potential there?

The firm has given Powder River 3P before, especially at the time of the acquisition, but as the firm has gone through the 2007 budgeting process, it plans to update all of its 3P from development project, and it will be releasing that in the January time frame.

The bulk majority of the company’s positions in the Power River Basin are in the Big George fairway. In fact, if you look at it right now anything that the firm is developing or will be developing is in the Big George. The management believes that this is a play that gets it close to a quarter Tcf, if you will, or still running through, and that includes additional upside, additional coal plays and whatnot. The firm has become fourth or fifth largest player in there in the Big George, and when you look at Bill Barrett, it is predominantly Big George.

It is mixed results for the operators, with some encouraging comments about the Gothic Shale from EnCana but some more discouraging ones from Cabot. Can you comment on this?

Of the wells that have been drilled, some of the recent ones in the Gothic as well as other zones were drilled in a position that is geologically dissimilar to where the firm was drilling. The firm is in a little bit different rock type in the Gothic. That is the basics behind where they are drilling and where the firm is going to be drilling.

Can you comment on the nature of the play in Montana, Circus?

Regionally this play has been around for quite some time, the overall Rocky Mountain Overthrust play. If you look down in the Wyoming Overthrust belt, back in the 70''s and 80''s, there are some big fields that were established there. Likewise out in the Canadian Overthrust belt. Circus lies right in between those two regional plays and up to this point, very little drilling had been done in the area and the wells that were drilled in there, drilled by Ameco did encounter free oil and gas shows. The firm expects potentially both oil and gas in there. It is possible that could be a small sour gas in there which would require processing into that and it is similar to those types of plays the Canadian and the Wyoming Overthrust.

You talked about the ramp up that will take place in year-end in the Piceance. Have you given any specific thoughts to the budget for next year, maybe an annualized fourth quarter number or something higher than that?

It is perhaps in the same range or slightly above where the firm expects to be by year-end 2006.

Where would you have to be curtailing inventory between November and March with winter steppes coming into place?

In terms of the steppes and the restrictions, the firm has got indications from the BLM will continue the firm’s West Tavaputs activity. Hence that''s not at risk from steppes and the firm is two rigs there through the winter months. The firm’s Piceance operation is largely on fee lands and hence, there is no impact there. The firm’s other big producers, the Power, will have completed all of its necessary 2007 work on pipelines and in difficult locations before the steppes kick in and plans to get out there in the fall activity in the second quarter when the steppes lift.
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