This one has been on my Watch List for years. We will publish a profile on it next month. - Dan
Bill Barrett Corp: Accretive M&A; Refocused on Core Assets
Drew Venker, CFA – Morgan Stanley
September 16, 2014 10:59 PM GMT
Highly accretive asset sales and exchange narrows focus and improves outlook for execution. Raising our price target to $29.
More than the market expected. Highly accretive asset sales and a nice bolt-on Wattenberg swap for BBG. The deals check multiple boxes, including being accretive, expanding Wattenberg acreage to improve working interest and control, and meaningfully improving the balance sheet. We raise our NAV to $29 from $23 to reflect the accretion of the deals, which is largely driven by the sale of the company's entire Piceance position for $525 MM. We had previously valued company-wide PDP gas reserves at only $211 MM.
Event details. Bill Barrett announced multiple transactions with several purchasers: 1) the sale of 46,150 net acres in the Powder River Basin for $160 MM in total consideration; 2) an exchange for 7,856 net bolt-on acres in the southern block of the company's NE Wattenberg valued at $69 MM; and 3) the sale of its remaining 12,000 net acres (80 MMcfe/d of net production) in the Piceance Basin for $525 MM. Total production from the transactions equates to approximately 14,800 Boe/d (~30% liquids) sold, net of 390 Boe/d from the Wattenberg assets. Management also adjusted guidance for the sale, slightly lowering prior gas guidance, while also increasing capex to the upper end of guidance and adjusting expenses for divestitures.
Transaction Metrics. Metrics on the PRB transaction works out to $1,214/acre assuming 1,479 Boe/d of production valued at $75,000 per flowing Boe/d and assuming the $69 MM value for the exchanged Wattenberg assets is applied here. This compares to recent acquisitions by SM Energy and MDU resources for around $4,000/acre. The Piceance assets were sold for $6,560 per MMcfe/d, which compares favorably to previous sales by Bill Barrett at $5,200 per MMcfe/d. Lastly, the Wattenberg swap implies $5,500/net acre (ex. production), in-line with the recent acquisition by Bonanza Creek.
BBG
Re: BBG
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group