Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  
TRANSCRIPT SPONSOR
Better Than AdSense

Bill Barrett (NYSE:BBG)

Q4 2006 Earnings Call

February 27, 2007 12:30 pm ET

Executives:

William Crawford – Manager, Investor Relations

Fredrick Barrett – Chairman, Chief Executive, President

Joe Jaggers – Chief Operating Officer, President

Lynn Boone Henry – Vice President – Reservoir Engineering

Analysts:

David Cameron – Wachovia Securities

Brian Singer – Goldman Sachs

Raymond Deacon – BMO Capital Markets

Vivelle Molchana[?] – Raymond James

Presentation

Operator

Good afternoon. My name is Tamera, and I will be your conference operator today. At this time I would like to welcome everyone to the Bill Barrett Q4 and year end 2006 conference call. Operator instructions. Mr. Crawford, you may begin your conference.

William Crawford, Manager, Investor Relations

Thank you, Tamera. Good morning and welcome to Bill Barrett Corporation's conference call to review Q4 and year end 2006 operating and financial results, and to update you on our current operating activities. My name is Bill Crawford, Manager of Investor Relations. With me today are Fred Barrett, Chairman, and Chief Executive Officer, Joe Jaggers, Chief Operating Officer and President, and Lynn Boone Henry, Vice President for Planning and Reserves. Furthermore, our next conference call should include our recently announced CFO, Bob Howard, a man who needs no introduction to the great majority of you. We warmly welcome Bob back.

I will begin by giving a brief review of our financial results for Q4 and full year 2006.

These were announced before the market opened today in a press release, which may be found on our website or through various financial news sources. We plan to file our Form 10-Q for 2006 with the SEC soon.

For this conference call, we have also provided a slideshow which may be found on our website, www.billbarrettcorp.com and as an exhibit to our Form 8-K filed with the SEC. Following the brief financial review, Fred will provide a summary of our 2006 accomplishments and year-end reserves and resources and then Joe will provide an operational update on our development projects and then we’ll hand it back to Fred with an update on our exploration projects and company outlook. We expect these discussions to last about 30 minutes, and as Tamara said, we will follow with a question and answer session.

Before we begin, please note that forward looking statements and cautionary statement disclosures on slide two of our presentation and was also included in our press release. Please note that during our discussion we make reference to discretionary cash flow, and finding and development costs which are non-GAAP measures. The reconciliation to the appropriate GAAP measures was provided on the press release.

We are again pleased to report strong results for Q4 and full year 2006, which are shown on slide three and are unaudited. In Q4, we produced 14.2 BCFE, a 15% increase over Q4 2005 and a 13% improvement on Q3 2006. For the full year 2006, we produced 52.1 BCFE, a 32% improvement over 2005.

For Q4 2006, we realized an average price of $6.21 per MCFE, and we generated $61.6 million in cash flow, or $1.39 per share. For 2006, cash flow was nearly $239 million, a 22% increase over 2005. Please note that in Q4 2006, gas prices were 52% lower than those in 2005 so our net income and cash flow were lower in Q4 2006 than in 2005, however cash flow per share only dropped by 25% in Q4 2006 compared to 2005 due to our strong hedge position, increased production and lower production taxes.

We generated net income of $11 million or $0.25 per diluted share in Q4 2006. Net income and EPS dropped from Q3 2006 due to the large gains on sale of properties that occurred in Q3. For 2006, net income was a record $62 million. We had EPS of $1.40, a 155% improvement over 2005. Our cash operating costs continue to trend downwards. LOE, gathering production taxes and G&A totaled $1.70 per MCFE in Q4 2006, a $0.21 improvement over last quarter, primarily due to lower G&A and lower production taxes which fell based on our production mix and lower gas prices.

Our cash operating costs dropped from $2.27 full year 2006 to $1.90 in 2005, again primarily due to lower production taxes. We expect the downward trend in unit operating costs to continue due to operational efficiencies and increased production. Our capex totaled nearly $377 million for 2006, including $332 million to drill complete wells and facilities, $34 million for leasehold acquisitions, $9 million on G&G costs and $2 million for FS&E.

Furthermore, we spent an additional $79 million for the CH4 acquisition, that does not include the $37 million of non-cash deferred taxes. We received $78 million in proceeds in 2006 including $31 million from Storm Cat for certain Powder River Basin divestiture. We invested this capital budget and returned $2.44 organic F&D, a remarkable achievement given our continued investment in exploration and land acquisitions. Please see the press release for reconciliation of F&D.

As noted on slide four, we ended the year with and currently have $188 million outstanding under our revolving credit facility. We expect to increase our bank line capacity to $360 million based on year end 2006 reserve levels, so we’ve plenty for this year and well into next year. We are approximately 65% hedged for 2007 and 27% for 2008 and we’ll continue to add hedges at opportunistic spikes in commodities prices. We continue to be committed to maintaining a conservative balance sheet that provides us with flexibility and liquidity for our growth strategy.

We review long-term financial alternatives including high-yield term debt and equity links as a matter of course and we will always be opportunistic about other financing alternatives as the market presents them. However, given our expected proceeds from the Williston sale, our current hedged volume and expected cash flow from production growth with sufficient flexibility and liquidity to finance our capital requirements through 2007 and beyond using debt.

Just a quick word about the Williston sale before I turn it over to Fred. It is on the market, being marketed by [Scotia Watchress?] and we expect to have the data room open in March and close the sale by June. Without giving specific numbers, we do expect to receive proceeds well exceeding $100 million. Fred?

Fredrick Barrett, Chairman, Chief Executive, President

Thank you, Bill, and thank you all for joining us today. 2006 was truly an exciting and record year for the company. When we formed Bill Barrett in January of 2002 we opened our doors on the basis of becoming the premier E&P company in the Rockies. Our execution in 2006 is a reflection of that strategy. As you look at slide give, in our five years of operations, our track record of growth has been primarily through the drill bit with year end 2006 reserves at 428 BCFE. Production in 2006 was 51.2 BCFE, nearly an eight-fold increase over 2002. We have enjoyed 52% and 47% compounded annual growth in reserves and production respectively over the past five years. Note that currently we are producing north of 145 million CFE per day on a net basis. That does exclude the Williston.

We ran our crude reserves at year end 2006 price of $4.46 per MMBTU, a price level 42% below year end 2005, yet we sill had 26% growth in reserves YoverY. Had we run our reserves at a more current price, our proven reserve volumes would have been much higher. As you look at slide six, one of the achievements I am most proud of is our combined growth of proved, probable and possible resources. We have increased to TCFE in 2006. Over 1.6 TCFE is associated with our West Tavaputs, Piceance and CBM development programs, programs which we feel provide the company with repeatable, low-risk, long-term visible production growth.

A majority of the remaining 3D resources are associated with our delineation programs, the West Tavaputs Deep, Gave Gulch Deep and Lake Canyon areas. Almost everyone knows that the Rockies is blessed with a tremendous resource base. It’s the region where more giant fields have been found in any other region in the lower 48 over the past 10-15 years. As we continue to leverage the expertise of our veteran team, our land exposure in the Rockies, utilizing existing technology and pushing the envelope with new technologies and ideas, we are poised to continue building on our track record of exploration discoveries.

We expose our investors to what I believe is a substantial portion of the Rockies resource base, with upwards of 10 TCFE unrisked potential in our exploration portfolio.

As we look at 2007, we plan to spend $425-450 million with about 70-80% devoted to our development programs and the rest allocated to exploration. I will give a brief update on a number of these exploration programs. Before this, Joe Jaggers will bring us up to date on our development programs. Joe?

Joe Jaggers, Chief Operating Officer, President

Thank you, Fred. I’ll try to anticipate the time that it takes for these slides to pop up and I hope your view is real time as we speak through them. I’ll provide a brief update of our major development projects beginning at West Tavaputs. The field has had an exceptional year during 2006 in virtually all regards. Our production increased 209% averaging 49.4 million CFE net during December 2006. We’re currently producing at our installed compression capacity 75 million cubic feet per day gross and have two additional compression units scheduled for installation during March.

These will bring our installed capacity to 95 million cubic feet per day and the next compressors are scheduled for mid year and these will bring our compression capacity to over 130 million cubic feet per day. Our contracted gas processing has been increased to 120 million CFE per day and we are negotiating additional processing and transportation.

This additional capacity I might add will provide us with alternative markets and on trans-Colorado, REX and CIG. Reserves have increased to 146 BCFE, an increase of 96% and our total 3P at West Tavaputs now stands at 796 BCFE.

We spud 30 wells in 2006 and plan 32 during 2007. Our second delineation for the deep discovery of 2005, the 2-12 well will be completed in early March. It’s worth noting that the well drilled in 69 days compared to 137 day averages of the previous two wells, a 50% improvement in total days. We’re on track to receive a record decision on our EIS sometime in the last quarter of 2007 or Q1 2008. My final point on West Tavaputs is as the plot shows, 2006 was a large increase in production and production is forecast to continue to increase strongly in 2007 in the following two years.

Turning to the Piceance Basin, which was the first slide to come up early, unfortunately, but our Piceance Basin development project at Gibson Gulch also had an outstanding growth year in 2006. Our production increased 179%, averaging 4.47 million CFE net during December 2006. Our reserves increased to 146 BCFE, up 27% from 2005 and our 3P now stands at 700 BCFE. Much of this improvement in production rates and reserves can be attributed to improved well performance that averaged 1.5 BCFE per well during Q3 2006. Our most recent quarter with sufficient production history to forecast reliable EURs.

We spud 68 wells during the year and plan to increase this to 96 wells during 2007. We will test increased well density to 10 acres in several field pilots during the year based on our gas and place determinations for the acreage in our well EURs, we are optimistic about the success of increased density. Finally, as the plot indicates, we forecast continued strong growth in 2007 and the following two years.

The Powder River CBM production which will appear soon was lower during 2006, averaging 19.2 million CFE over the year. During 2006 we assimilated the CH4 assets we acquired, reduced our drilling activity and experienced Wyodack declines that exceeded our Big George production growth. During 2007 we are laying the groundwork to reverse the decline and reinitiate growth and 2008/2009 are expected to be strong production growth years in the Powder River.

Our Cat Creek pilot is producing now and production is expected to grow throughout 2007. We continue development work at Palm Tree, Pine Tree, Willow Creek, Pumpkin Creek and Dead Horse, all very promising Big George producing areas. At year end 2006, our reserves stood at 26 BCFE and 3P resources at 204 BCFE.

During 2006 we spud 99 wells and plan to increase that to 229 during 2007, laying the groundwork for production growth I previously mentioned.

The final update I’ll provide is to the Rockies Express pipeline. Barrett owns firm capacity on the line and we’ll be in a position to source gas to it from either the Piceance or West Tavaputs areas. The first segment of the line, the Cheyenne, which is indicated on the slide to begin service January 2007 is in fact now operating. The next phase with service to the mid continent we are informed is on schedule for January 2008. This segment provides important interconnects to several major pipelines including NNG and GPL, ANR and PEPL. These access high volume markets in Minnesota, Wisconsin, Michigan and Illinois.

The final segment to Ohio is also on schedule, with Lebanon, Ohio planned for January 2009 and Clarington scheduled for mid-year. This segment again accesses major pipelines just as Transco, Columbia and Texas Eastern with their traditionally high value markets. The total installed capacity on the line is 1.5-1.8 BCF per day, an increase of some 25% on Rockies export capacity and a significant step towards improving overall Rockies basis. I’ll now turn the presentation back to Fred for an update on our exploration and company outlook.

Fredrick Barrett

All right, well thank you, Joe, and for the last part of my discussion as Joe mentioned I’d like to refer you to slide number 11 and bring you up to date on a number of our high potential exploration programs and do this before I give a brief wrap up here.

First, let me say that as a testament to the quality and the potential of our exploration programs, we received nearly $80 million over the last three years in cash and properties for joint exploration agreements and some minor divestitures from high-quality industry partners. Our sell down strategy allows us to maintain operatorship with a substantial working interest while accelerating our exposure to production and reserves on the initial wells at little to no cost.

We classify our exploration portfolio in two delineation programs where we have established discoveries and are drilling offset wells to determine the scope and scale of the play and secondly in the new exploration programs where albeit we have been building acreage positions over the past several years and have only recently finished drilling or preparing to drill over the coming weeks and months.

As it relates to our delineation programs, as Joe already mentioned, one of these areas, the exciting Deep West Tavaputs program in the Uinta Basin which adds a whole new dynamic in the way of reserves and production to the shallow program in that area. Another delineation program where we are beginning to commercialize our success is the Lake Canyon area, the top bullet point on slide number 11.

We and are partners are 100% successful with the first seven wells drilled, which include #6 Green River and #1 Wasatch well. You’ll recall that our industry partner is operating in the shallow Green River program. We are in the process of completing the first two offsets to our original Lake Canyon discovery, the #1 BLB which has produced over 25,000 barrels of oil in 10 months from the Wasatch formation.

We are too early in the completion phase on our latest Wasatch wells to disclose any reliable information, but we expect to have results from these wells over the next four to six weeks. Our Lake Canyon position covers almost 430 square miles and with our initial discovery we believe the Wasatch potential could cover a portion of our acreage spread.

This is a very, very large area and we also recognize that it will take a large number of wells to drill and assess both the Wasatch and the Green River Basin center play. Depending on the results as we continue drilling we could operate and drill up to 10 Wasatch wells and participate in as many as 14 non-operating Green River wells during those seven. In our Wasatch program, we have 56 75% working interests with average depths ranging from 7,000 to 9,000 feet. In the non-operated Green River program we have 25-18% working interest, down to depths of around 5,000 feet.

You may recall we released some exciting news in December indicating we entered into an exploration and development agreement with Ute Energy at the Blacktail Ridge area immediately north of and contiguous with the Lake Canyon area. This is a new AMI with Ute Energy which covers some 99,000 gross acres and is located in the Cedar Rim portion of the south west end of the prolific Altamont Bluebell field, which has produced over 197 million barrels of oil and 177 BCFE. We will be targeting the same productive Wasatch intervals found in the Cedar Rim area and which we completed in our Lake Canyon BLB wells some eight miles to the South.

The company has agreed to drill a minimum of five wells in 2007 and depending on the results, we could drill up to a total of eight Wasatch wells in our Blacktail Ridge area. Ute Energy has the option to participate for up to a 50% working interest in all wells within the prospect boundaries of Blacktail Ridge. Elsewhere in the Uinta Basin we will be moving in a rig to our Woodside area in Q2, which is a known four-way structural closure based on 2D seismic, to target Pennsylvanian aged gas zones at around 6,000 feet.

In addition, later in Q3 and Q4 2007, we plan to test our shale gas concept in the Hook area. Both Hook and Woodside lie to the south west of our West Tavaputs development program in the Uinta, which Joe talked about previously.

In our Waltman Arch program in the Wind River Basin we are currently testing the state of our pressured shale gas intervals in the Cody Niobrara section in our Cooper Deep #1 well. While drilling this zone we did have shut in and increased mud flake, due to the over pressured gas and at the same time, experienced a flow of about 100 barrels of oil for the pits. Initial pre track rates from this interval were in the 300-500 MCF per day range with two to four barrels of oil per hour. We are still in the final phase of the stimulation in this Cody Niobrara interval. We also recognize the presence of other live oil and gas shows and tests in this same zone along the Waltman Arch in older well bores.

As such, we are currently assessing the possibility of a broader shale gas play in the Cody Niobrara. We would control this play should it pan out along the Waltman arch. Before I leave the Wind River Basin, let me remind our listeners that in Cave Gulch and Bullfrog we are seeking a partner to participate in our deep drilling program, targeting the Lakota, the Muddy and the Frontier intervals. You may recall we drilled our second deep successful Bullfrog well last year.

By bringing in a partner, we will maximize our drilling efficiencies, mitigate the cost side of drilling to such deep horizons and accelerate our exposure to reserves and production in future wells. We plan on utilizing a continuous one-rig program, we drilled two wells this year beginning some time in the summer. Thereafter then we would expect to drill up to three wells per year while utilizing this same rig.

Continuing to look at slide seven, you’ll see that at Yellowjacket and the Paradox Basin, we’ve drilled eight sinks and have only recently begun completion operations on the first two vertical gothic shale tests. On average, we drill to a depth of 6,000 to 6,500 feet and we are conducting detailed core analysis on both wells. Given the amount of data we are collecting from the logs, the cores and the completion testing, it may take several months to assess the full results of these wells.

Having said that, we also plan to drill two additional shale gas tests this year in the Yellowjacket area. Let me also update you on two other exciting large-scale exploration programs that are scheduled for drilling during the upcoming months. First, our Circus project in the Overthrust belt of south west Montana. This is a play that has emerged as a major structural exploration position for our company with a 50% working interest in over 340,000 gross acres.

Like many of our projects, the utilization of 3D seismic technology is an integral part of our exploration assessment. We have nearly 155 square miles of contiguous seismic coverage and are in the final phases of depth processing. The early seismic data suggests the presence of several intriguing large scale structural features. We expect to being hydrating and picking exact locations for at least two of the identified features by May and expect to begin drilling some time early in Q3 2007.

In the Circus region again we are targeting multi-TCF type features, structural features analogous to the prolific structures found in the Canadian and Wyoming overthrust trends.

One other note on the Circus area: we plan to acquire an additional 75 square miles of 3D seismic this summer to the west of our Circus prospect in an area we refer to as Austin Six Mile[?]. This is an area where we have accumulated over 65,000 gross acres along with our partner and adds a whole new exploratory dynamic to the Circus region. Combined, our Circus and Austin Six Mile[?] areas now give a significant exploratory latitude both north and south and east and west in targeting these large scale, multiple structural features.

Lastly in our Bighorn Basin Project of north central Wyoming, we’re targeting a multi TCF basin-centered play. We are early in the recompletion phase throughout the five Mesa Verde stages in our Seller’s Draw #1. We expect to have more definable results over the next four to six weeks. We recently finished acquiring a 42 square mile 3D program in our Seller’s Draw area. We this data we identified the presence of an unusual structural feature deeper in the section, which we interpret as an ancient meteor impact feature.

Although somewhat rare, ancient impact features, also known as Astrablends[?], are historically quite productive where present in other oil and gas basins.

Because of this recently identified feature, we are reassessing the timing and the nature of our first exploratory well in the Seller’s Draw area. As I wrap up my discussion here, I would draw your attention to slide number 12.

As you recall early in our discussion today, we looked at double digit growth numbers in both reserves and production which are among the best growth numbers in the Rockies. It’s from this organic growth and the strength of our assets, which have also driven a record cash flow as well as record earnings for 2006. But we are even more excited about what this company is capable of doing over the next three to five years. Even on a standalone basis, just development and current delineation as slide number 13 shows, we have the capability of driving 25-35% growth over the next three years.

Keep in mind we can achieve this type of growth without any further success from our exploration portfolio. As Joe pointed out, we have the development arsenal for premium growth in production and reserves over the coming years. But later on, the upside from our robust exploration program, given our track record of exploration success, we are extremely hopeful of the outlook for this company and its growth in shareholder value, especially with additional takeaway capacity from the Rockies.

We continue to be bullish about the long-term natural gas fundamentals and will pursue our growth strategy accordingly. Although winter started out warmer in much of the country, the past month or so has been cold enough to have five consecutive withdrawals in excess of 175 BCFE, a historic first since they began keeping records in 1994. In fact, the second largest ever withdrawal occurred several weeks ago and it appears that will end the withdrawal season at 1.4-1.5 TCFE, a 300 BCFE improvement over last year.

We have given you a significant amount of information here about our core development and exploration programs. We look to continue the significant production and reserve growth that we’ve achieved since conception.

Before I turn it over for questions, I just wanted to say how excited we are to have Bob Howard come to be our CFO and our Treasurer. Bob is a true Rockies veteran. His financial and strategic experience will complement our strong management team as we execute our growth strategy in the Rockies. He obviously knows this company extremely well and he will hit the ground running when he starts in April.

Thank you, and I’ll turn it over to the operator for questions.

TRANSCRIPT SPONSOR

Better Than AdSense

What if there was a way to promote your company to a perfectly targeted group of potential customers, partners, acquirers and investors? What if you could tailor your pitch to them at the moment of maximum interest? And what if you could do this for a no-brainer price?

This is exactly what Seeking Alpha is offering with transcript sponsorships.

Seven types of companies are sponsoring earnings transcripts on Seeking Alpha:

1. Company sponsors its own earnings call transcript (example).

2. Company sponsors partner's transcript (example).

3. Company sponsors competitor's transcript (example).

4. Issuer-sponsored research firm sponsors client's transcript (example).

5. Investment newsletter sponsors transcripts of successful stock picks (example).

6. IR firm sponsors transcript of micro-cap company (example).

7. Consulting company sponsors company's transcript in sector of interest (example).

Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.

Questions-and-Answer Session

Operator

Operator instructions. Your first question is from David Cameron – Wachovia Securities.

Q - David Cameron – Wachovia Securities

Hi, congratulations on a great quarter. A couple of questions. First, and I don’t know – I guess – I don’t know if Bob’s on the call or not, but Fred, maybe this question goes to you. If I look at hedging, you said you’re 65% hedged. I know in the past that Joe has said you’ve used hedges to lock in economics on these wells. How high will you guys go on that assuming that there’s some fear of a Rockies basis blow out this summer?

A - Fredrick Barrett

You know, according to our bank and our current credit we’re kind of capped at the 80% level.

A – Bill Howard

70%.

A - Fredrick Barrett

I’m sorry, 70% level, I’m sorry, as Bill corrects me here. So we’re pretty much bumping up against that ceiling, currently at 65%.

Q - David Cameron – Wachovia Securities

Okay, and there’s nothing else you can do as far as other types of derivatives or exotic derivatives to kind of hedge yourself?

A – Bill Howard

This is Bill. We can do – we can buy puts and that is not included within that 70% cap and I think you know, we may look at that, but right now I think we’re pretty comfortable with 70% and what we can do.

Q - David Cameron – Wachovia Securities

Based on the strip today, if you look at your hedge program, your capital budget is safe for 2007. Is that correct?

A – Bill Howard

That is correct.

Q - David Cameron – Wachovia Securities

Okay. The new area just north of Lake Canyon that you recently got from the Utes, that you talked about at the analyst conference, Blacktail I believe is its name – is there any updates or have you done anything?

A - Fredrick Barrett

No. No, the only update there is that we are obligated to the five well program this year. We’ll begin those wells probably midsummer and we’ll be targeting the Wasatch, the same zones they produce out of kind of in the adjacent wells that we’ll be drilling next to. Those wells in there are anywhere from say 125,000 up to 250,000 barrels of oil per well. You know, it is gassy in there, but we’ll begin drilling in that area as I said by the end of the summer.

Q - David Cameron – Wachovia Securities

Okay. Then one more question. Encana has recently talked about some wells they’re drilling, they’re calling it to Niobrara shale, below the Williams fork and I think they drilled a couple out of Mamm Creek. Have you guys looked at the deeper sections in terms of your acreage and if so, what’s your take on it?

A - Fredrick Barrett

We are looking at it. We have not set up a drilling program to drill, nor have we necessarily – I mean, I think we drilled that field…

A – Joe Jaggers

We’re using our 3D to look at the Niobrara in the Gibson Gulch area and we’re trying to assess the potential of what we’ve learned from Encana, which is just due south of us at Gibson Gulch. They’re also to the west in the Grand Valley, Parachute, Rulison area.

Q - David Cameron – Wachovia Securities

Okay, so this would be an extra 3,000-4,000 below the Williams Fork?

A – Joe Jaggers

Probably 3,000 feet.

Q - David Cameron – Wachovia Securities

I’m trying to chase you on some metrics here, but an extra 3,000 feet would cost you what, an extra million to drill?

A – Joe Jaggers

It’s hard to say at this time. We’d likely try something high angle through there to increase the likelihood we’d intersect natural fracturing. We’ll wait for Kirk to get us a location and a depth and we’ll figure it out then, but incrementally I think it would be quite attractive.

Operator

Your next question comes from Brian Singer – Goldman Sachs.

Q - Brian Singer – Goldman Sachs

With regards to the Yellowjacket prospect, could you provide any more details on what you’re seeing from the core analysis and what your expectations are in terms of what rates you’d like to see and ultimate EURs?

A - Fredrick Barrett

First up, these are shallow wells, Brian, in the 5,500 to 6,500 foot range so it’s not going to take much to make these economic. You know, as far as additional incremental data we are in here with a partner. We are keeping things fairly tight in this play. We did core several of the shale gas intervals including the gothic shale. Those cores are currently being analysis. We have begun completion operations on the first well. We’re currently assessing the information associated with that completion again. We’re very early in the game there. Right now, that’s about all we can give. This is a very extensive zone that we’re looking at. We’re actually looking at a couple of zones in here and it’s a very large area and so it’s going to take multiple wells in here to assess what we’re currently trying to assess.

Q - Brian Singer – Goldman Sachs

On the Powder River Basin, have you seen a turn where production is now increasing, or is that something you expect later on in 2007?

A - Fredrick Barrett

Brian, we expect Q4 2007 to be markedly turning the corner. We’ve got that Cat Creek pilot that I mentioned that’s just come on production and it’s increased to about 500 MCF a day. Not a great rate, but if you look at the performance of a couple of the offset pilots to it, and [Anna Darko’s Mishy Line project?], Western’s Whiskey Draw project. We can correlate to those and be pretty confident about 2007 being a turning point.

Operator

Your next question comes from Raymond Deacon – BMO Capital Markets.

Q - Raymond Deacon – BMO Capital Markets

I had a question on the Ute Energy agreement. Are you going to be testing both the Wasatch and the Mesa Verde there? Will it be just in that area? Can you speak to what kind of quality oil you’re getting and what kind of price you expect to receive?

A - Fredrick Barrett

This is an area where we’re targeting primarily the Wasatch. There may be some zones up in the Green River. We are not currently targeting the Mesa Verde in this area. I believe…

A – Joe Jaggers

We sell our oil on the Chevron black wax posted price and the differential to NYMEX has been running about $13 the last few months, plus $5 transportation, so we’re looking at about an $18 deed.

Q - Raymond Deacon – BMO Capital Markets

My question as far as – you did a good job at the analyst meeting of pointing out the three projects and the low risk development inventory in the Piceance and West Tavaputs and the Powder River I guess. What do you feel, of the other projects, is the furthest along that could move into that two TCF low-risk development piece?

A - Fredrick Barrett

Like we said, I would draw your attention first to the Deep Cave Gulch, the Deep West Tavaputs which I think you may already be including that. Then also the Lake Canyon area. As far as drilling, the furthest we are along on drilling as it relates to the other exploration programs, you would have to start with the Yellowjacket. We’ll then commence drilling in the other projects, Hook and Woodside, which – Woodside will be drilled at the beginning of Q2 this year. Hook later in the year in Q3 and Q4. Within our setting, this feature in the Bighorn Basin that I talked about, again that would be more of a Q3 or Q4 event if we decide to pull the trigger then on that feature. Then the Circus program, which we should have ready to drill by early Q3 2007.

Q - Raymond Deacon – BMO Capital Markets

Is there any test plan for this Mateetsi[?] coal that you’ve come across in the Bighorn?

A - Fredrick Barrett

The Mateetsi[?] coals are in the Wind River Basin. That CBM program that we speak of. You know, you don’t hear us talk a lot about that, simply because it’s not a one well pilot shock where we’re collecting data on that well. So we’re not being real open about it at this point. We’ve not drilled it yet but there is data in the area that suggests that you know – satisfactory gas content could be a decent little CBM play in this area. We will probably drill that well in the summer of 2007 and once we do we’ll talk more about it.

Operator

Your next question comes from Vivelle Molchana[?] – Raymond James.

Q - Vivelle Molchana[?] – Raymond James

Question about potential acquisitions. Obviously CH4 bought last year, what area would you particularly focus on, whether in terms of acreage additions or actually a real M&A deal?

A - Fredrick Barrett

Let me just say that right now, given our inventory and the access that we have, this company really does not necessarily need to do an acquisition over the next several two, three, four years. We are always looking and keeping our eyes open and are amenable to opportunities that present themselves, always. We always keep our ears open and ready for any opportunity. Sort of that end, you know if something happens it does happen, but you know I think as relates to our looking at other potential M&S opportunities, we always look at things in the Rockies. If there are small working interests associated with our current assets, as always continue to build our positions as they relate to the current assets we have in our portfolio. I’ll leave it at that.

Operator

At this time, there are no further questions. Gentlemen, are there any closing remarks?

William Crawford, Manager, Investor Relations

Yes. Thank you all for participating in our Q4 and year end 2006 conference call. As I mentioned earlier, we plan to file our form 10-K with the SEC soon. I encourage you to read it for a more complete review of our 2006 results. Thank you again.

Operator

This concludes today’s conference call. You may now disconnect.

TRANSCRIPT SPONSOR

Better Than AdSense

What if there was a way to promote your company to a perfectly targeted group of potential customers, partners, acquirers and investors? What if you could tailor your pitch to them at the moment of maximum interest? And what if you could do this for a no-brainer price?

This is exactly what Seeking Alpha is offering with transcript sponsorships.

Six types of companies are sponsoring earnings transcripts on Seeking Alpha:

1. Company sponsors its own earnings call transcript (example).

2. Company sponsors partner's transcript (example).

3. Company sponsors competitor's transcript (example).

4. Issuer-sponsored research firm sponsors client's transcript (example).

5. Investment newsletter sponsors transcripts of successful stock picks (example).

6. IR firm sponsors transcript of micro-cap company (example).

7. Consulting company sponsors company's transcript in sector of interest (example).

Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Bill Barrett Q4 2006 Earnings Call Transcript
This Transcript
All Transcripts