Barrett selling part interest in gas holdings
Bill Barrett Corp. said Thursday it has agreed to sell what eventually will amount to about a quarter interest in its natural gas holdings south of Silt.
The sale is part of a $335 million deal with Vanguard Natural Resources, LLC, that also includes natural gas assets in the Powder River and Wind River basins in Wyoming.
The deal, expected to close by the end of the year, reflects Denver-based Bill Barrett’s recent shift toward seeking to produce oil rather than natural gas at a time when oil prices are high and gas prices low.
The company suspended its drilling in Garfield County this year as prices for natural gas liquids such as propane and butane softened, and it has been concentrating on oil opportunities in Utah and eastern Colorado.
Still, Bill Barrett indicates it considers what it calls its Gibson Gulch asset in Garfield County to be highly valuable. Fred Barrett, company chairman, chief executive officer and president, said in a news release that the Vanguard transaction “pegs the pre-sale market value of our Gibson Gulch asset at approximately $1 billion, which I believe has not been recognized in the (stock) market.”
Under the deal, Vanguard will acquire an initial 18 percent Gibson Gulch working interest that will grow to 26 percent by 2016. Bill Barrett will continue to retain control over operations of the Gibson Gulch holdings.
As of Sept. 30, the company owned about a 98 percent working interest in production from 935 wells in Gibson Gulch, it says. That production is currently 149 million cubic feet equivalent per day. That figure includes not just natural gas but natural gas liquids and some oil.
Fred Barrett said proceeds from the sale will be used to reduce debt in the short term “and to fund our low-risk reinvestment opportunities.”
Houston-based Vanguard is traded on the New York Stock Exchange, as is Bill Barrett.
Bill Barrett, which after the market’s close Wednesday also reported losses for the third quarter and year to date, saw its stock drop from around $23 Wednesday to a little more than $21 Thursday.
Vanguard, which on Thursday reported a third-quarter loss but a profit for the year’s first nine months, saw its stock price close Thursday at $29.72, virtually unchanged from the opening of the day.
Vanguard’s website says it is “focused on the acquisition and development of mature, long-lived oil and natural gas properties.” It has holdings in several states.
The company’s president and CEO, Scott W. Smith, said in a news release that the assets it is acquiring provide desirable characteristics including “a mature, developed production base” and predictable operating costs.
Bill Barrett also owns some 40,000 acres of leases west of Rifle on the Roan Plateau. That acreage, not part of the sale, continues to be tied up in litigation over the Bureau of Land Management’s 2008 leasing of a total of about 55,000 acres in the Roan Plateau area. Bill Barrett is appealing a federal judge’s order this year setting aside the BLM plan leading to that leasing so the agency can address issues raised by environmental groups.
Fred Barrett said its sale of non-core, lower-growth assets “is part of a prudent long-term strategy to optimize our portfolio and focus investment dollars in programs that offer the highest returns and best long-term growth profile.”
The company this week said it has drilled four “particularly strong” oil wells in the Uinta Basin of northeast Utah, averaging 1,000 barrels per day of 24-hour peak production per well and with 30-day averages of 476 barrels of day. It said it also recently drilled four successful oil wells in eastern Colorado.
In a conference call with investors Thursday, Vanguard officials indicated Bill Barrett had no plans at this point to resume drilling in the Silt area until around 2016. They said higher natural gas prices are in the forecast starting around then.
Vanguard officials said they’re bearish on long-term natural gas prices, and now is a good time to buy natural gas assets at cheaper prices. They indicated they’re looking forward to seeing drilling by Bill Barrett resume in its proven natural gas holdings south of Silt once prices adequately rebound.
They also voiced interest in buying more Bill Barrett assets should the company be willing to sell them.