Deal puts company on the path to becoming a Niobrara pure-play
In an effort to shed pure gas assets, Bill Barrett Corp. (NYSE: BBG) has agreement to sell its West Tavaputs natural gas property located in the Uinta Basin, Utah to an undisclosed buyer for $371 million. The price includes roughly $46 million for the purchaser’s assumption of the lease financing obligation for compressor units on the property.
CEO and president Scot Woodall comments: “Completing this transaction is consistent with our objectives to partially fund our capital program through asset sales, to end 2013 with total debt less than year-end 2012 and to divest of projects where the company is not actively investing. We are pleased with the value received, which is 5.6 times cash flow (based on second quarter of 2013 field level cash generated) and approximately $5,450 per thousand cubic feet equivalent per day (Mcfe/d) flowing production. Pro forma for this transaction, our long-term debt at June 30, 2013 is reduced from $1,248 million to $877 million, and we expect to exit 2013 with a production split that is approximately 40% oil.”
Cash proceeds of approximately $325 million will be adjusted at closing for an effective date of August 1, 2013 and for transaction costs. Proceeds will be applied to reducing outstanding debt under the company’s revolving credit facility. The transaction includes approximately 35,000 net acres, 300 producing wells, 265 billion cubic feet equivalent net proved reserves (based on year-end 2012) and 68 MMcfe/d net production (based on the second quarter of 2013).
Analysts at Global Hunter Securities (GHS) outlined transaction metrics as $5.5k per flowing Mcf, $10.7k/acre, and $1.22 per Mcfe of 1P reserves. The company’s long-term debt now stands at $877 million pro-forma, from $1,248 million at the end of the second quarter, the analysts continued.
With the sale of these 100% gas assets, the deal puts Bill Barrett Corp. on pace to exit the year at a 40% oil cut, plugs its funding gap through 2014, and puts the company on the path to becoming a Niobrara pure-play, GHS analysts concluded.
Canaccord Genuity analyst Ipsit Mohanty agrees. “Much of BBG's investment thesis now rests on Niobrara development and lower debt levels following potential gas asset divestitures. Niobrara rightfully takes priority ahead of Uinta given better rates of return, but transactions such as UPL's remind us of the valuation embedded in BBG's Uinta acreage.”
The transaction is expected to close before year-end.