Buh-bye Bill Barrett

In 2005, Bill Barrett Corp. burned off a natural gas well pit south of Silt.

In 2005, Bill Barrett Corp. burned off a natural gas well pit south of Silt.

Denver’s Bill Barrett Corp. To Sell Some Properties, Pay Debt

NEW YORK (AP) – Bill Barrett Corp. announced several deals on Tuesday that will net it about $568 million in cash and help lower its debt.

The Denver-based oil and gas company said it is selling properties in the Powder River Basin, which is located in Montana and Wyoming, and the Piceance Basin in Colorado. Bill Barrett also said it will acquire some property in the Northeast Wattenberg area in Colorado as part of the deals. The company values the total transactions at $757 million …

… Some of the properties Bill Barrett is selling will be bought by oil and gas company Vanguard Natural Resources LLC. Houston-based Vanguard said it plans to buy the Piceance Basin assets from Bill Barrett for $525 million. That deal is expected to close by Oct. 1 …

Vanguard Natural (VNR) to Acquire Certain Piceance Basin Assets from Bill Barrett (BBG)

Vanguard Natural Resources (Nasdaq: VNR) announced it has entered into a definitive agreement to acquire natural gas, oil and natural gas liquids (“NGLs”) assets in the Piceance Basin in Colorado for a purchase price of $525 million from Bill Barrett Corporation (NYSE: BBG). The properties consist of approximately 12,000 net acres that are currently producing approximately 67 MMcfe per day, after consideration of ethane rejection, with approximately 76% natural gas, 5% oil and 19% NGLs. The effective date of the acquisition is July 1, 2014 and the Company anticipates closing this acquisition on or before October 1, 2014.

Scott W. Smith, President and Chief Executive Officer, commented, “With this acquisition we are acquiring the balance of the working interest in properties where we first established a non-operated position in December of 2012. We will be taking over operations of 950 producing wells in a very large, prolific natural gas basin with an established infrastructure in place and multiple pipeline outlets to market our production. As the operator and majority interest owner in the assets, we can now govern the pace of development of both recompletion opportunities and development drilling projects to take advantage of positive changes in market conditions. This is an excellent addition to our Rockies natural gas platform and we look forward to continuing to grow in this area in the future” …

These are a few highlights from today’s Daily Sentinel article, Barrett sheds GarCo assets by Dennis Webb:

A Piceance Basin natural gas developer founded by someone who helped pioneer modern-day drilling in the area has sold its remaining producing local properties …

… It leaves BBC to focus on oil-based development there and in northeastern Utah’s Uinta Basin, completing the company’s transition from a gas- to oil-focused company at a time when oil prices continue to be stronger than for gas. BBC’s commodity mix is now more than 70 percent oil …

… The transactions did not include BBC’s federal oil and gas leases atop the Roan Plateau west of Rifle. That acreage is tied up in a lawsuit involving environmental groups and the federal government, and possible settlement talks reportedly could result in BBC agreeing to be reimbursed to give up at least some of its holdings there.

Denver-based BBC was co-founded in 2002 by its namesake, Bill Barrett, who retired from the company in 2006. In 1988 he founded Barrett Resources Corp., and in the 1990s, that company played a leading role in using hydraulic fracturing to begin unlocking natural gas from sandstone formations in western Garfield County, a practice that since has led to more than 10,000 wells being drilled in the county.

Barrett Resources was purchased in 2001 by Williams, which later spun off its oil and gas operations into WPX Energy, currently the largest gas producer in the Piceance.

BBC went on to develop its Gibson Gulch property into one currently producing about 80 million cubic feet equivalent of gas per day, and it is selling its interest in about 950 wells there. Houston-based Vanguard will have a 78 percent average interest in those wells with its acquisition.

In a conference call with analysts, Woodall said the Gibson Gulch sale “I think was not expected.”

But he said given the company’s confidence in the results of its oil projects, it was time to sell its remaining assets there to provide the opportunity to further invest in those core holdings.

BBC hasn’t drilled locally for a few years as it has turned its attention to oil. In 2012, it announced a $335 million deal under which Vanguard acquired an 18 percent Gibson Gulch [south of Silt] interest that was to escalate to 26 percent by 2016, and also bought BBC gas assets in Wyoming …

…Vanguard’s investor relations representative, Lisa Godfrey, said the company will be looking at doing maintenance and workover work on existing wells next year, and in 2016 will look at the potential for drilling opportunities

The sale includes 94 undeveloped well locations in areas with proven gas reserves.

Vanguard operates in nine states. Its business model is to purchase more mature wells that still may have 15 or 20 years of reserves left, Godfrey said. She said that even at today’s gas prices, there’s a great rate of return for Vanguard on the Piceance wells.

Vanguard differs from BBC in that it’s a master limited partnership rather than a corporation, and doesn’t have to pay corporate taxes.

“As production decreases the economics aren’t there (for corporations) but they still have profitable percentages for a partnership without those corporate taxes,” Godfrey said.

Also, when production on wells meets certain decline rates, corporations need to pursue liquidity to pay for other projects, Godfrey said.

She said Vanguard also likes the opportunity that can come if gas market conditions improve.

“Overall we’re excited to do another deal with Barrett. We definitely think with natural gas there can be more positive upside,” she said.

The BCC deal is just the latest to occur in the Piceance as some companies exit the area in search of greater financial yields in liquids-based areas, and other companies swoop in to buy local gas holdings at a discount given the commodity’s current lower price. Some other deals have included Antero Resources selling its Piceance holdings to Ursa Resources, and PDC Energy exiting the Piceance with a sale to Caerus Oil and Gas.

Earlier this year, WPX sold a $355 million interest in 2,680 Piceance wells drilled before 2009 to Legacy Reserves LP, in part to help WPX pay for its drilling program this year.

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