Acquisition expected to be a near-term positive as it increases position in Niobrara oil window
By Oil & Gas Financial Journal staff
On July 12, Denver-based Bill Barrett Corp. (NYSE: BBG) announced the signing of a purchase and sale agreement with a Texas American Resources Co. affiliate to acquire Denver-Julesburg (DJ) Basin properties targeting Niobrara oil for $150 million.
The acquired properties are located within and near the Wattenberg Field and near the Hereford area, close to the Colorado-Wyoming border, and include a preliminary estimate of 7 million barrels of oil equivalent (MMboe) net proved reserves, roughly 650 boe/d net production and approximately 28,000 net acres of mineral leasehold, primarily on fee lands. The production and reserves largely are comprised of 55% oil and 45% of high Btu liquids rich natural gas. Current production is predominantly from the Codell and Niobrara formations.
Purchase price for the acreage in Laramie and Weld Counties works out to roughly $5,357 per acre. If $50 million is allocated to production and reserves, unproven acreage would be valued at $3,571 per acre, noted Global Hunter Securities in a note to investors July 13.
Fred Barrett, chairman, CEO and president of Bill Barrett said the acquisition builds on the company’s two year effort to build its DJ Niobrara oil position where the company now holds more than 67,000 net acres.
“With this acquisition, we have established a new, sizable DJ play that includes exploitation opportunity within the existing Wattenberg development area and a sizable exploration acreage position, where we intend to test the Niobrara through horizontal drilling this year,” said Barrett.
Global Hunter expects the acquisition will prove to be a "near-term positive" for the company as it increases its foothold in the DJ Niobrara oil window and provides current production and oily reserves.
The company has been working to shore up the oil component of its portfolio. It made a similar "bolt-on" acquisition of Uinta Basin oil assets for $120 million in May.
Capital expenditures for 2011 associated with DJ Basin acquisition, which is expected to close in the third quarter of 2011, are estimated to reach $35 million.