BBG : NYSE : US$24.21
Bill Barrett is a Rocky Mountain exploration and production company with core operating areas in the DJ, Piceance, Powder River, Uinta and Wind River Basins.
All amounts in US$ unless otherwise noted.
Catalyst-heavy 2H13 could impact long term
In probably the last trip before its 3Q call, BBG management spent a few days on the road with us. Based on the discussions, we believe BBG stands at a point where pre-existing concerns about mgmt’s execution and operational abilities could potentially be alleviated in just the next few quarters. Although 2H13 is newsworthy for all E&Ps, very few in our coverage have “game changing” catalysts like BBG. In mgmt’s own admission, now is the time to execute, show results, and earn the same level of acceptance as adjoining neighbors. As expected, key discussions on the trip included 1) plans to derisk Wattenberg, 2) expectations from the Uinta, 3) drilling program for 2014, 4) prospect of the Powder River Basin (PRB), and above all 5) asset sales by YE13.
Mgmt. maintains guidance for ’13 but calls it early for ’14
CFO Bob Howard displayed confidence in management’s plan: 1) In the DJ, BBG is on track to drill 50 wells in 2H13 (65 FY13), including 15 Niobrara C, a few Codell, and one extended lateral (EXL). Included are 15 wells in the southern acreage, which include the EXL in C Bench and some 40-acre downspaced wells. BBG plans to exit ’13 with a backlog of 15 drilled but uncompleted wells. 2) In the Uinta, East Bluebell will probably see increased activity in 2014, in addition to the 80-acre test results in Lake Canyon/ Blacktail Ridge in 1H14. 3) Though mgmt. called it early for ’14, we believe DJ Basin will be the focus, while Uinta will keep prod flat. 4) PRB could become the third leg of oil growth. Finally, 5) BBG intends to complete an asset sale by YE13. We look to 3Q call for a possible announcement.
Investment thesis intact; we increase price target
Improving Niobrara results, acceleration of drilling program, increased margins from East Bluebell and a certainty of asset sale by YE strengthens the investment thesis from our initiation. We reiterate a BUY rating and increase our price target to $32.