Bill Barrett (BBG) to merge with Fifth Creek Energy, launch 21M-share offering

HighPoint Resources (formed through the combination of Bill Barrett Corporation and Fifth Creek Energy) is a Denver-based exploration and production company focused on the development of oil and natural gas assets located in the Denver-Julesburg Basin of Colorado.

• http://www.hpres.com/

• Bill Barrett prices 21 mln shares of common stock for gross proceeds of $105 mln
• The name Bill Barrett goes back a long way in the state of Colorado and in the industry. It epitomizes the Rocky Mountain region’s successful development of its oil and gas resources for many decades–named for the legendary oilman and genuine wildcatter.

  

 

Bill Barrett agrees to a strategic business combination with Fifth Creek Energy Company in a transaction valued at approximately $649 million 

Bill Barrett and Fifth Creek will each become subsidiaries of a newly formed holding company, which will become the publicly listed and traded holding company for the combined Bill Barrett and Fifth Creek. In the transaction, Bill Barrett's stockholders will exchange their Bill Barrett common stock for New BBG common stock on a 1-for-1 basis, and Fifth Creek's current sole owner will receive 100 million shares of the New BBG's common stock. Highlights:

• Creates premier DJ Basin focused company with a highly contiguous and complementary acreage position that is conducive to XRL development 
• Pro forma proved reserves of 168 million barrels of oil equivalent (MMBoe) (69% oil) as of December 31, 2016 and pro forma third quarter of 2017 production of approximately 24 MBoe/d (64% oil) 
• Acquisition adds approximately 81,000 net acres and approximately 2,900 Boe/d (72% oil) of production located in the Hereford Field area of rural northern Weld County, Colorado
• Hereford Field drilling results are among the highest rate oil wells drilled in the DJ Basin with seven wells averaging 1,052 Boe/d (84% oil) (two-stream basis) during their initial thirty days of production
• Initial 2018 plans are to operate three drilling rigs on the combined acreage with anticipated 2018 production of 11-12 MMBoe (~65% oil) and capital expenditures of $500-$600 million
• The transaction is expected to close late in the first quarter or early in the second quarter of 2018. 

Long trade : BBG +33% (10/17)

• Oct. 27: #37; vol. 1.2 M   +33%
• Oct. 30: #97; vol. 950K

 

** 1 month later **

Bill Barrett beats by $0.11, beats on revs 

• Reports Q3 (Sep) loss of $(0.08) per share, excluding non-recurring items, $0.11 better thanthe Capital IQ Consensus of ($0.19); revenues rose 34.4% year/year to $67.87 mln vs the $61.23 mln Capital IQ Consensus.
• Production sales volumes of 1.92 MMBoe in Q3, which increased 26% sequentially; Oil production sales volumes of 1.2 MMBbls, which increased 33% sequentially and represents 63% of total production volumes.   

Long trade : BBG +60% (9/17)

Bill Barrett (BBG) reported earnings on Thur 2 March 17 (a/h)

** charts before earnings **

 

** charts after earnings **

Bill Barrett misses by $0.06, misses on revs:

• Reports Q4 (Dec) loss of $0.18 per share, excluding non-recurring items, $0.06 worse than the Capital IQ Consensus of ($0.12); revenues rose 10.8% year/year to $51.6 mln vs the $66.47 mln Capital IQ Consensus.
• 2017 capital budget of $255-$285 million incorporates:
  • the addition of a drilling rig during the second quarter and will be funded with operating cash flow and cash on hand and we will maintain an undrawn credit facility. This will result in annual production growth of approximately 7% at the mid-point, pro forma for asset divestitures. The increased activity translates into very strong production growth for 2018 that is anticipated to be 30%-50% higher than 2017, with a greater increase in oil volumes.
• 2017 Production of 6.0-6.5 MMBoe
  • Represents a production level that is approximately 7% higher at the mid-point than pro forma 2016 production sales volumes of 5.8 MMBoe, excluding assets divested in 2016.
  • Production is estimated to be approximately 60-65% oil, 20% natural gas and 15-20% NGLs. First quarter of 2017 production is expected to approximate 1.35-1.45 MMBoe, which represents lower sequential production from the fourth quarter of 2016, in part, due to no new wells being placed on production during the fourth quarter of 2016 and the timing of wells being placed on flowback during the first quarter of 2017.
  • Lease operating expense of $27-$30 million Cash general and administrative expense of $30-$33 million Gathering, transportation and processing costs of $2-$3 million Unused commitment for firm natural gas transportation charges of $18-$19 million
• Commodity Hedges Update
  • For 2017, 6,846 barrels per day of oil is hedged at an average WTI price of $58.47 per barrel and 10,000 MMBtu/d of natural gas is hedged at an average NWPL price of $2.96 per MMBtu.
  • For 2018, 2,616 barrels per day of oil is hedged at an average WTI price of $55.00 per barrel and no natural gas hedges in place.

Long trade : BBG +20% (11/16)

Long trade : BBG +30% (3/16)