|
Article Excerpt
OPERATOR: Good day, ladies and gentlemen, and welcome to the Bill Barrett fourth quarter and full year 2008 results conference call. My name is Carissa, and I'll be your coordinator for today.
I would now like to turn the presentation over to your host for today's call, Ms. Jennifer Martin, Director of Investor Relations. Please proceed.
JENNIFER MARTIN, DIRECTOR OF IR, BILL BARRETT CORPORATION: Thank you, Carissa. Good morning and afternoon and welcome to Bill Barrett Corporation's fourth quarter and full year 2008 conference call. Presenting today are Fred Barrett, Chairman and Chief Executive Officer, who will open with an overview. Followed by Bob Howard, Chief Financial Officer, who will review financial results, Joe Jaggers, President and Chief Operating Officer, who will discuss our year-end reserves and update you on our development and exploration activities, followed by brief closing comments from Fred Barrett.
A couple of items to mention before we get started. We have prepared a user controlled slide show that accompanies our discussion. It is available with the webcast or can be printed from the homepage of our website at www.BillBarrettCorp.com. Look along the left of the page under current events and click on fourth quarter and full year results, earnings call slides.
In addition, we filed our 10-K this morning which is also available on our website. I do need to remind everyone to read the forward-looking and Cautionary Statements disclosures on Slide 2 of our presentation which were also included in our Press Release today. During our discussion, we make reference to discretionary cash flow which is a non-GAAP measure. Reconciliation to the appropriate GAAP measure was also provided in the Press Release today. And with that, I'll turn it over to Fred Barrett to get started. Fred?
FREDRICK BARRETT, CHAIRMAN AND CEO, BILL BARRETT CORPORATION: Well thank you, Jennifer and welcome everyone. Our release this morning was entitled "Another Record Year", and despite the dramatic decline in commodity prices in the second half of the year and financial markets that effectively shut down, we were able to execute our development and exploration programs to achieve our targeted results while ending the year with a strong balance sheet and well-positioned for the year ahead. As testament to our team, fourth quarter results provided record production and solid cash flow and earnings, superior results to many in our sector. And we achieved this against a backdrop of average regional prices of $3.61 per MMBtu for the quarter and approximately 5 Bcf of shut-ins during the year.
Our Company has demonstrated a very strong track record of delivering growth in good years and in bad, and 2008 was no different. In fact, since our Company started up in 2002, we have successfully executed an increased cash flow annually, despite years when average regional natural gas prices were terrible, including 2002 when regional prices averaged $1.97 per MMBtu and 2007 when they averaged $3.97 per MMBtu. Since going public in 2004, we have increased discretionary cash flow at an average compounded growth rate of 43%.
In 2008, the strength of our Company was again demonstrated by our achievements which I will summarize. Production growth up 27% from 2007 to 77.6 Bcfe; discretionary cash flow growth up 71% per share to $9.53; earnings per share growth of 298% including our impairment charge to $2.39; reserve growth fundamental to growth in our value up 47% including price-related revisions. This equates to 436% production replacement. Further, we accomplished this for a record low all in finding and development cost of $1.76 per Mcfe, among the best in the sector which translates into a three year average cost of $1.99 per Mcfe.
On top of these metrics, our team made an exciting shale gas discovery in the Paradox Basin, which Joe will update you on further. And we continue to maintain our reputation as an exploration Company with a full plate of prospects where we will continue to invest and make progress in 2009.
On the financial side during 2008, we set up long range production hedge positions, opportunistically closed on a convertible debt deal with attractive terms, and upsized our borrowing base with a strong reliable syndicate. And we continue to be in a solid and secure financial position as we begin 2009.
We are taking a cautious and calculated approach to 2009. As provided in the release this morning, we have refined our 2009 development program to delay certain completions, intending to gain better pricing exposure for these wells. As a result, our capital budget is now expected to be about $50 million lower and production growth will be reduced to 8% to 12% compared with 2008. Joe will elaborate on this later, as well. I'll now turn the call over to Bob Howard ,our CFO. And with that, Bob?
ROBERT HOWARD, CFO, BILL BARRETT CORPORATION: Okay, thank you, Fred. I'll reiterate that 2008 was an exceptional year for Bill Barrett in terms of operational and financial results. Clearly, the second half of the year brought challenges; however we were well positioned to meet these challenges and deliver superior results.
Slide 4 summarizes our results for the full year, versus the prior year, and for the fourth quarter compared with both the fourth quarter of 2007 and the third quarter of 2008. Our quarterly results demonstrated continued production growth achieving record levels, continued operating efficiencies, and our ability to sustain cash flows through our hedging program despite declining prices. Oil and gas production for the quarter of 224 million cubic feet equivalent per day was up 19% over the fourth quarter of 2007 and up 5% sequentially. Fourth quarter commodity prices were weak and during the quarter first of month CIG Rocky Mountain natural gas prices averaged $3.61 per MMBtu, down from $5.90 per MMBtu in the third quarter. The realized price was significantly higher than the regional market price, as we realized $6.86 per Mcf for the quarter.
We were able to do this for a couple of reasons. First, our hedge positions increased natural gas revenues by $53.9 million, which increased our realized natural gas price by $2.77 per Mcf. And second as a reminder, we have high BTU content gas, approximately 1.1 million BTU's per Mcf, which increases the Mcf sales price of our gas. And just to note, inclusive of oil sales, our average realized sales price was $6.96 per Mcfe for the quarter, which compares favorably to the fourth quarter of 2007 when our average realized price was $6.19 per Mcfe, but down from the third quarter 2008 to realized price of $7.86 per Mcfe.
Our production expenses consisting of lease operating expenses, gathering and transportation costs and production taxes, improved to $1.39 per Mcfe which is down 25% sequentially. Lower fourth quarter costs are the result of increased efficiencies, fewer well work overs and lower compressor maintenance costs, as well as significantly lower production taxes due to a lower wellhead or pre-hedge sales price.
Total production expenses per unit were comparable to...
|
