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Executives

Jennifer Martin - Director of IR

Fredrick J. Barrett - Chairman and CEO

Robert W. Howard - CFO and Treasurer

Joseph N. Jaggers - President and COO

Analysts

David Tameron - Wachovia

Robert Lynd - Simmons & Company International

Brian Singer - Goldman Sachs

Larry Busnardo - Tri Stone Capital

Bill Barrett, Corp. (BBG) Q1 FY08 Earnings Call May 6, 2008 12:00 PM ET

Operator

Good afternoon. My name is Lindy and I will be your conference operator today. At this time, I would like to welcome everyone to the Bill Barrett Corporation First Quarter 2008 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you, Miss. Martin, you may begin your call.

Jennifer Martin - Director of Investor Relations

Thank you Lindy. Good morning or afternoon to some of you and welcome to the Bill Barrett Corporation's conference call. Today, we will review first quarter 2008 operating and financial results and provide an update on our current operating activities.

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; and Joe Jaggers, President and Chief Operating Officer will review operations and provide an update on our development, delineation and exploration programs and Fred will have some brief closing comments.

We have prepared a user-controlled slideshow that accompanies our discussions which available on the webcast or it can be printed from the homepage of our website at billbarrettcorp.com. Look along the left side of the page, under Current Events and you can click on First Quarter 2008 Earnings Call Slides. Also our first quarter 10-Q was filed this morning, also available on our website.

Before we begin, let me draw your attention to the forward-looking statements and cautionary statements disclosures on slide two of our presentation, which are also included in our press release today. Also, during our discussion, we will 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.

With that, I will turn it over to Fred Barrett to get started. Fred?

Fredrick J. Barrett - Chairman and Chief Executive Officer

Thank you Jennifer. And I welcome everyone and thank you for joining us today. I'll start with a few brief comments on our first quarter results. As you are aware from this morning's press release and also looking at slide number three, we posted a number of financial and operating metrics for the first quarter. That represents not only record levels for our company, but significant year-over-year growth rates. Specifically, in production cash flow and earnings. The foundation for this performance is continued execution at a low risk, high growth and high return development assets in the Tavaputs, Piceance and Powder River Basin areas.

Bob and Joe will provide more details on our financial and operational status, but I would like to highlight that our performance year-to-date has, number one, provided the impetus to narrow and increase the upper range of our production guidance and two, demonstrates our commitment to operational efficiency and as a result we are tightening our LOE guidance to just below our original numbers.

Next, I'll highlight some of our exploration activity which Joe will expand on later in the discussion. Year-to-date, we continue to gain traction with a one-rig program of Blacktail Ridge and Lake Canyon and are seeing encouraging results, both in our infill and extension programs.

In the Wind River Basin, our deep project in the Bullfrog area is off to an excellent start, a $9 million to $10 million a day recompletion and we're currently drilling the first of three deep tests in the area. We also recently TD'd our ultra deep at West Tavaputs and we'll be completing that well in the coming weeks. We have a lot of drilling yet to do in 2008, both delineation as well as new exploratory programs. I'll provide some forward-looking comments in my closing remarks there and before I hand it over to Bob, a few words on natural gas pricing.

We've seen very solid pricing in the Rockies year-to-date. Our average realized price was $8.02 per Mcf during the first quarter of 2008. Regional sector demand as well as local Rockies demand driven by cold weather combined with added transport capacities through REX West are among some of the factors responsible. Although we've seen the CIG Rockies Henry Hub basis widen from about $1.15 per MMBtu to $2.35 per MMBtu during the first four months of 2008. We've also seen CIG first month pricing continue to increase from $5.98 per MMBtu in January, to $8.94 in May, pricing levels really before seeing in the Rocky Mountain region.

This pricing environment combined with our production growth and operational efficiencies have generated very attractive margins, earnings, cash flow and excellent returns. I would also point out in context of these prices, plus our hedge positions, we enjoyed the best of both worlds. On the one hand, we enjoyed upside pricing on a number of hedges as high as $10 CIG pricing, but on the other hand, should prices deteriorate, say through the pre-winter shoulder months, our hedges give us the financial protection and exceptional economic exposure to continue our programs through the year.

Lastly, I'd like to emphasize our financial strength and flexibility to execute during 2008 and beyond. Coming off 44% reserve growth in 2007 has allowed us to substantially re-determine our borrowing base upward, and in parallel we closed on $172 million of additional financing during the first quarter. As a result, our balance sheet is in excellent shape with ample liquidity to move forward with our largest capital program to-date, a $575 million to $600 million budget in 2008.

With that, I'll hand it over to Bob Howard, our CFO, for more detailed financial update on Bill Barrett Corporation.

Robert W. Howard - Chief Financial Officer and Treasurer

Thank you Fred. A summary of first quarter financial metrics are provided in slide four. Financial results for the first quarter were very strong, as our significant growth in production, combined with improved Rocky mountain gas prices were record bottom-line results.

Oil and gas production was 18.2 Bcfe for the quarter, or approximately 200,000 Mcfe per day, an increase of 28% over the first quarter last year. This is strong growth that is line with our expectations. Following the production results for the quarter, we are tightening our 2008 guidance for production to 74 Bcfe to 78 Bcfe, reflecting confidence that we will sell increased volumes of gas from the Piceance Basins throughout the year. This increased production combined with an average realized gas equivalent sales price of $8.19 per Mcfe were the primary drivers to increase first quarter discretionary cash flow by 58%, compared to last year to $108 million, or $2.40 per share, which also equates to $5.95 per Mcfe of production demonstrating a significantly improved cash margin.

As higher production volumes and margins were 116% increase of net income, compared to the first quarter of 2007, or $30.7 million or $0.68 per share.

Now let's look at few other items in more detail. Oil and gas revenues were $149 million, net of settlements paid on our oil and gas hedges of $1.5 million. Realized natural gas prices were $8.02 per Mcf, including $0.02 per Mcf received from our hedges. Our gas production has a relatively high Btu content, which results in a realized gas price that is higher than the index price.

In addition, during the quarter, we sold approximately 30% of our gas on a daily basis. During the quarter the average daily gas price in the Rockies was quite a bit higher than the first month index price, which further increased our realized price compared to index prices. Realized oil prices were $69.83 per barrel, which is net of $14.35 per barrel paid for hedges for the quarter.

Also during the quarter, we recorded an unrealized derivative lose of $1.5 million for ineffectiveness in our hedge instruments due to minor differences in delivery points for timing of delivery of our gas sales arrangements, compared to index pricing of our derivative instruments. We expect that future correlation computations for hedge instruments will continue to cause a small amount of ineffectiveness pre-recorded in the income statement as we mark our derivative positions to market values.

On expense side, our production expenses consisting of lease operating expenses gathering and transportation costs and production taxes came in $1.59 per Mcfe, as lower LOE was offset by increased gathering and transportation costs and increased production taxes. These operating expenses average $0.51 per Mcfe for the quarter, which was down $0.11 from the prior year period and flat with the fourth quarter of 2007. Compared with the first quarter 2007, these improvements were primarily the result of installing water handling facilities and better production processes at the Piceance Basin and lower well servicing and location maintenance costs in the Powder River Basin.

We have slightly narrowed our LOE guidance for the year to $0.64 to $0.68 per Mcfe, which is above the actual rate incurred for the first quarter. There is a certain maintenance from one-time chargers that we will incur throughout the year. Gathering and transportation charges averaged $0.52 per Mcfe in the first quarter, which is up as expected from earlier quarters, be the higher gas processing charges and a firm transportation commitment on the Rockies Express pipeline. We expect that 2008 gathering and transportation cost will range between $0.54-$0.59 per Mcfe.

Production taxes which are assessed physical wellhead sales, prices were $0.56 per Mcfe in the quarter, up from $0.39 per Mcfe in the first quarter of 2007, primarily due to a 31% increase in wellhead prices.

General and administrative expenses were $10.6 million, or $0.58 per Mcfe, up $3.4 million, or $0.07 per Mcfe, compared to the first quarter of last year and up $0.02, compared with the previous quarter. The increased G&A improves approximately $700,000 for one time charges and reflects increased staffing related to the growth of our reserves and production. We are increasing our G&A guidance to $38 million to $40 million to manage our activity level for the year and for an increased budget to work with state and local authorities on certain regulatory and tax initiatives that directly affect the company and our industry.

Capital expenditures totaled a $109 million for the quarter, a full year capital budget is expected to be $575 million to $600 million. Joe will provide more details in the activities that drive our capital budget.

In March, we issued a $172.5 million of convertible senior notes to expand our capital availability and to diversify our sources of financing. The terms were very attractive with the 5% coupon and 50% conversion premium to a stock price at the time of the offering. These notes provide a very attractive source of capital that compliment the funding that is available from our operating cash flow and from our bank line of credit while offering our investors a reasonable coupon coupled with an opportunity to participate in the upside potential in our stock price. The borrowing base on a bank credit facility increased to $510 million based on our year end reserves, as provided in our credit agreement the borrowing base was reduced by 25% of face amount of the convertible notes, providing a current borrowing base of $467 million.

At the end of March, the outstanding balance under our credit facility is $134 million. At current borrowing levels, the interest rate under our credit facility is Libor plus 100 basis points. Combining the bank line and convertible notes our outstanding debt of March 31st was $307 million. This leaves $333 million available under our credit facility which provides funding flexibility to support our capital development program well in to 2009.

Now just a few final comments on our hedging positions. At the mid point of our production guidance, we have approximately 68% of production hedge through the remainder of the year. As detailed in the press release, our hedge has improved 52% of our production volumes under swap agreement arrangements for the rest of the year and have an average natural gas index price $6.76 per MMBtu and an average WTI price of $73.84 per barrel and 16% of these future production volumes are under collars and have an upside to an index price of $10 per MMBtu and WTI price of $81.62 per barrel. All of our gas hedges are for delivery points in the Rockies and the Mid-Continent.

We intend to continue to grow our ongoing program of layering and hedges to approximately 70% of our anticipated production for the forward 12 month period to provide certainty for our operating cash flows that will be used to fund our exploration and development activities. We are very pleased to report these record first quarter results as a very good start to 2008.

With that, I'll turn it over to Joe Jaggers to provide an update on our operating activities.

Joseph N. Jaggers - President and Chief Operating Officer

Thanks Bob. Quarter was clearly an extremely strong one, operationally and the numbers largely speak for themselves. But there is some color to add on results that in my mind make the results even more impressive and that's the difficult weather conditions during the quarter. Instead of the dry, warm winter that was forecast, we has a very wet one and colder than most recent years. Snowpack in March reached 180% of normal in large parts of our operating areas in Colorado and Utah. Good for skiers, but tough on rig moves, completion operations and construction work and to the large part the winter operations were hampered by snow in the spring here, recently mud caused some related operating problems and some degree of lost production during the quarter. The weather also raised over time costs as callouts and generally slower travel time increased over time hours.

Let me just take a moment thank our dedicated field operations work forces successfully executed our plans through these difficult winter conditions. I'll begin with the update though on slide five and run quickly through each of our development and exploration project areas. In the Uinta Basin, West Tavaputs we currently have one shallow rig operating. We're experiencing faster drilling times in the field generally. And as a result we now expect our wells drilled during the year to be at the high end of our range and expect to drill 55 wells in 2008.

We still plan to pick up our second and third rigs here in June and July timeframe and to operate these continuously, as we move into the full field, full year development phase at West Tavaputs. We've released the deep rig at TD at the ultra deep well. We drilled to 17,554 feet. We've logged and cased the well and we'll begin completion operations this month. Our original plan was to move from the ultra deep to test the west deep structure. However, where the EIS now expected in the latter parts of 2008 and much of the more attractive deep drilling subject to the EIS for access, we view it more efficient logistically to go ahead and bring a rig back to the field when we have a certainty of a continuous multi-well program at the deep levels.

So the deep program is expected to resume in 2009 after the EIS record of decision is in hand. We are currently producing 76 million cubic feet equivalent from the filed, that's approximately 100 million cubic feet per day gross and slightly above our contracted processing capacity which is 100,000 MMBtus. We expect to remain at this level until additional processing and transportation capacity is available which is forecast to be mid June. Coming to the Piceance Basin, Gibson Gulch area we're operating four rigs and plan to continue to operate four throughout the year. This is going to result in a higher well count. We expect our well count now to reach some 125 ahead of previous guidance, which was at 110 wells for the year.

This increase is late year and will principally impact 2009 production results. We're considering a fifth rig for Q4 and this rig would follow capacity increases planned on our field water system which we're currently permitting. The water system has been a tremendous positive impact on not only LOE, but also general field efficiency allowing more fracs in a day, faster flowbacks and earlier gas production. We're currently producing 88 million cubic feet equivalent net and our gross operated production is a 100 million cubic feet per day. And we will be flat at 100 million gross operate [ph] until additional compression capacity is installed in operating July 1st and we plan a second compression increase for October 1st and an additional 22 million cubic feet per day.

In the Powder River, we're operating four rigs and plan 225 to 235 wells this year. This is a reduction from earlier plans of 275. Considerations that led to the reduction include weather related operating conditions that have delayed gathering and water discharge piping installations this year and an effort on our part to match our production growth, planned increases and gathering and compression as well as export capacity from the basin.

We continue to be heavily constrained in one of our key production areas in the Powder. It's the Cat Creek area we believe we have gross production capacity of some 20 million cubic feet per day and are currently producing at 10 million cubic feet per day. We're working with our third party gathering service to increase capacity here but not... did not expect to have capacity installed until Q4, 2008.

Turning now to slide number six, we'll run through the status of our delineation and exploration projects. First, in Blacktail Ridge/Lake Canyon area, we've now drilled 11 Wasatch wells and have eight wells completed. We're planning a continuous program through the year and potentially increasing the one rig continuous program to two rigs during the latter part of the year. Current production potential is some 1,000 barrels of oil per day gross. We're receiving wellhead prices of $85 to $88 per barrel, that's based on April realizations to-date some $17 to $20 of NYMEX for quality transportation differentials. Here we're targeting per well EURs of some 220,000 barrels per day at a cost of $3.8 million per well.

Now, these parameters provide attractive rates of return at current pricing in the 45% internal rate of return range. We are working hard to reduce cost to ensure this program remains attractive throughout the price cycle.

In the Paradox Basin in Yellow Jacket project, we plan to split our first horizontal well in the quarter. This is in the vicinity of the Koskie well, our original vertical well that established production in Gothic shale. We have the completed the 3D survey working in the vicinity of the Johnson well which was our third vertical well and plan our second horizontal well in this area later in the year. We have obtained partners for both our Green Jacket and Hovenweep Shale project and then our Salt Flank projects, both of which are plan to begin drilling this summer.

In our Uinta basin, Hook project, Manning [ph] Canyon and Juana Lopez Shales, we and our partner, ConocoPhillips plan two to three wells this year in this area. At Cave Gulch project in the Wind River we're off to a great start that Fred mentioned that first side track and recompletion well 14-18 continues to produce 9.5 million a day and we plan to add an additional frontier layer to this well later this week in the first frontier. We've got two further wells within that same fault block that we will identify for recompletion to the frontier and are currently planning operations on these wells.

The new Grassroots well in the field at 31, 32, this is first since 2006. The well is drilling at 16,635 feet this morning and is expected to TD in June. This well is going to target all of the deep producing horizons Lakota, Muddy and Frontier and plan to continue to drill throughout the year depending on drill times, this will provide for two to three wells for 2008.

Our Circus project in Montana Overthrust will resume drilling this month. We and our partner Devon plan four wells in the area. These will target the Cody Shale, which established production by last year's Draco and Leviathan wells, and we'll be the first and will be vertical wells in each case. We'll core these extensively to establish, rock composition, rock properties and gas contents before completion operations begin during the third quarter.

Finally, our Big Horn Basin project this year will concentrate on the Red Point area where we've have completed acquisition and now interpreting a previous survey. Before we drill one well to test the Fort Union Lance and Mesa Verde sections. In addition, we plan test operations again on our Sellers well which was a recompletion in 2007, to establish longer term deliverability from the well.

All in all, our delineation and exploration program this year will include drilling in nine different projects and place. 2008 as a result, promises to be very active and exciting as results in these areas become available.

Now, I'll turn things back to Fred for some concluding remarks

Fredrick J. Barrett - Chairman and Chief Executive Officer

Thank you Joe. In closing, these are, I believe some of the most exciting times we've seen for oil and natural gas industry in general and we believe even more so for this company and its shareholders. As you have heard from Bob and Joe, given our recent financial operating metrics, we're off to our best start ever in 2008 as a premier Rockies EMP Company.

Looking ahead, as you also heard Joe, our activity level picks up considerably and we look forward to continued strong growth in reserves, production and cash flow during 2008 while generating attractive returns of our low risk development programs. But the focus on drilling and completion technology applications and optimizations, we also look forward to tangible additional upside value associated with our portfolio of delineation opportunities, a number of which are showing a solid encouragement.

At the same time, our excitement levels continues to build through the year, as we'll get a good look at a number of new large scale resource plays over the coming months that have the potential for a multi TCF exposure. Keep in mind, it only takes one or two of these delineation and our new exploration plays to bring this company to a new level. Again, we are in excellent financial shape to conduct our 2008 plans. Thank you for listening today and we look forward to providing you further updates at our next conference call in August. Jennifer?

Jennifer Martin - Director of Investor Relations

Thank you. I think we'll go ahead and take some questions now.

Question And Answer

Operator

[Operator Instructions]. Your first question comes from David Tameron. Your line is open.

David Tameron - Wachovia

Hi, thanks. Congrats on a nice quarter. Joe you mentioned in the Uinta Basin and the deep test, I'm sorry, the deep drilling program, you mentioned the western structure is going to be delayed, probably until you are going to postpone that until after the record of decision. What's your target for the year? Are you still, before you had been targeting 50 shallow and five deep. Is that still accurate or are you going to have any deep rigs running?

Fredrick J. Barrett - Chairman and Chief Executive Officer

No, David. We released that rig at the conclusion of the ultra deep. Originally, as I mentioned the plan was to go test that west structure and then by that time we hoped to have had the EIS and we'd come back over to the east structure and just over the drilling on that. The eastern side of that structure, but since the EIS has been delayed, we released the rig. We won't bring it back until '09 when we have clarity on the number of continuous locations, so we're not mobing and demobing that rig for just one well.

David Tameron - Wachovia

Okay... and that's why I was asking. It's just the west structure, but it's the rig altogether, I just want clarify that? In the Piceance, and you mentioned you have well count from one... I guess 110 last quarter, you're now at 125. Can you give... you mentioned the explanation which I missed. Can you recap that point, is that just faster drilling days?

Unidentified Company Representative

No, that's a combination of things, David. Initially we had planned to operate three rigs in the field. We supplemented with four as we fell behind due to some of this weather in the first quarter. Results have been spectacular out there recently. Our a well costs are down in the vicinity of $1.85 million from a target earlier of $2 million, our EURs are generally up from targets of $1 million to about $1.25 million, and of course gas prices are strong. So rather than drop that fourth rig, when we have caught back up, we decided to keep it there and that will result in more wells and... because again results are so good, we're also eagerly looking at that ways to get that fifth rig active in the field as well.

David Tameron - Wachovia

Okay. One more and I'll let somebody else jump on. But did full year production guidance, you obviously brought it up. If I look at the 20%, that's, I guess $2 million a day, kind of what you're producing today. I have accused you in the past of being conservative on production guidance. How do you feel, given the deep... I know that deep's kind of lumpy, but given that there's no contribution from that. Was that built into the forecast? And how do you feel about your production targets? Is that 20% of P50, P75 level on the down side?

Unidentified Company Representative

I'll start and Fred can chime in. I feel very comfortable with the range that we've provided right now. As you mentioned, there is a number of upsides that we haven't included in guidance. We don't include results from the 31, 32 and the next well. We don't include any of these completions we're about to make at the ultra deep at West Tavaputs and we don't include some of the drilling that's yet to be done at Blacktail Ridge and Lake Canyon. We are so far, we have been encouraged on these eight we've completed and the rest of the completions and the further drilling is not included. So, it does strike me as buy us more towards... there is more upside here than downside, but it is the forecast that we are running our financials and capital requirements and contributions on right now.

David Tameron - Wachovia

Okay. And what price are you using internally now to run your budget in your forecast?

Unidentified Company Representative

We're using the about the Rockies price of somewhere in the low 6s.

David Tameron - Wachovia

All right. Thanks. I'll let somebody else to jump on.

Operator

Your next question comes from Robert Lynd. Your line is open.

Robert Lynd - Simmons & Company International

Hi, good morning.

Unidentified Company Representative

Good morning.

Robert Lynd - Simmons & Company International

Joe, just a follow-up on David's Piceance question. You said you're seeing about, I believe you said 1.25 Bcf on your wells. I assume those were the 10 acre wells, which leads me to think that you are not seeing the 20% haircut to reserves when you infill on 10s, which was originally thought.

Joseph N. Jaggers - President and Chief Operating Officer

Well that is a mixed bag. I think that's the last 70 wells or so that 1.25 of the average comes from and there is... large proportion of those are 10 acre wells. And we continue to carry somewhat of our haircut on those 10s, not in the initial years, but mostly in the terminal years where we've accelerated decline on them and we'll take those haircuts off as we get little bit more into the production life of these things and see some results. But we we're very, very encouraged by the early 10 acre drilling out here.

Robert Lynd - Simmons & Company International

All right. Do they still at least initially... it sounds like they're still producing similarly, but the outyear impacted, I think it's haircut.

Joseph N. Jaggers - President and Chief Operating Officer

That's right Robert.

Robert Lynd - Simmons & Company International

Okay. And then just jumping over from here to Blacktail Ridge. I think you said that you're now looking at reserves per well of about 220,000 barrels. In the previous range I had in mind that was 200 to 400 range for about 2 million. So it looks like that is now more towards the low end at a higher cost?

Joseph N. Jaggers - President and Chief Operating Officer

Well I don't ever recall a $2 million capital number.

Robert Lynd - Simmons & Company International

Okay, yeah.

Joseph N. Jaggers - President and Chief Operating Officer

But I'll have to check back on... our costs have increased out there, somewhat due to the weathers and then generally our cost associated with steel and rigs in the area. But as I recall some of our earlier stuff was in the 3.3 range and now we're talking 3.8. So nothing is dramatic as 2 to 3.8. And what we'd still like to see and still expect to see some higher EUR wells. I just gave the 220 as what we're using as a planning basis and what I think we could reasonably support, given the results on these first eight wells out here.

Robert Lynd - Simmons & Company International

On the earlier wells, can you provide a say 60 day average or 120 day average production rate form?

Unidentified Company Representative

Well I could, but not right up hand.

Robert Lynd - Simmons & Company International

Okay, I could follow-up with you. And then one question for Bob sound... and touched on this in your prepared remarks, but it sounds like you're accounting for NGLs and your gas volumes and you're realized gas prices. Is there a way you can break out what the NGL impact was?

Robert W. Howard - Chief Financial Officer and Treasurer

Yes, the breakout that we have if we're looking at trying to built up to our price.

Robert Lynd - Simmons & Company International

Right.

Robert W. Howard - Chief Financial Officer and Treasurer

The CIG first of month for the quarter was right around $7. And we don't really break out all the components, but our Btu adjustments net of deducts that we get for transporting gas, typically runs about 10%. And so that'll be about 10% of $7 or $0.70. And then with the daily pricing that occurred when we were able sell gas at higher prices on daily basis of 30% that we did not have or basically, roughly 30% that we did not sell first of month that added about another $0.25 to the quarter. And then we did transport some gas to the mid continent that adds another $0.03 to $0.05 with some of the higher mid-continent prices. That reconciles from about $7 CIG first of month up to $8 price that there's some softness to those numbers, because it's not quite that exact. But that directionally is how we reconciled from the $7 to an $8 Mcf price for the quarter.

Robert Lynd - Simmons & Company International

Yes, just to clarify, you get about a 10% premium for the Btu content on average. And then you said you had about a quarter for selling on spot market or daily?

Unidentified Company Representative

A small portion of our gas that we sold on a daily basis. That also reflects some of the production increases that we can't nominate beginning of the month, but we had during the quarter and so we sell those in daily in a very daily gas markets for the first quarter.

Robert Lynd - Simmons & Company International

Thank you, that's all I had.

Unidentified Company Representative

Okay.

Operator

The next question Brian Singer. Your line is open.

Brian Singer - Goldman Sachs

Thank you, good morning.

Unidentified Company Representative

Hi Brian.

Brian Singer - Goldman Sachs

Following up on some of the earlier questions, going back to the Uinta, when you put together any weather related delays in the first quarter with some of the deferrals in deep drilling throughout the rest of the year Uinta Basin production over the next few quarters, versus the first quarter.

Unidentified Company Representative

Well, I think if you look at it as flat, Brian, until we get the new three rivers pipeline and the Stagecoach plan online which is currently scheduled for June 15th. So, certainly for the second quarter, it'll be flat and then will increase towards the end of the year significantly due to the fact that instead of operating one and two rigs we're going to be operating a second rig beginning about June 15th and a third rig beginning about July 15th and that drilling will begin at completion phase in about the fourth quarter. So, we'll be up sharply by then and beyond constraint by any other facilities.

Brian Singer - Goldman Sachs

Okay. And where do you think you'll get to at year end?

Unidentified Company Representative

In the Uinta?

Brian Singer - Goldman Sachs

In the Uinta specifically?

Unidentified Company Representative

I don't have an exit rate with me, but give me a second... I can look one up.

Brian Singer - Goldman Sachs

I'll ask one additional question maybe while you're doing that, in the Powder River Basin, are you assuming in your guidance any pick up in the fourth quarter as a result of some of the capacity constraints being relieved?

Unidentified Company Representative

Yes, at the end of the year, fourth quarter, we should see two more compressors installed in that Cat Creek area and be able to also bring on our Willow Creek area, Dobern's [ph] Ranch area and Pumpkin Creek area. Three more, other projects which are showing early signs of gas production and pressure but we just don't have the facilities in place to begin to produce.

Brian Singer - Goldman Sachs

Are you assuming in your guidance that the facilities come on and that production that comes on line?

Unidentified Company Representative

Yes, we are. But it's going to be late year and full year bcf is not going to be very many and that earlier question we're looking at an exit rate of about 115 from West Tavaputs for the year.

Brian Singer - Goldman Sachs

Great. And you mentioned that a number of specifics on some of your recent Piceance wells, what are the initial production rates that you're seeing there. I don't know if that number got in there?

Unidentified Company Representative

Lynn, production rates in that analysis side, I know it's --

Unidentified Company Representative

About 2.3 million a day.

Unidentified Company Representative

About 2.3 million a day, Brian but keep in mind we restrict these wells substantially in the early days to avoid sand production and what we think we're doing as a result is keeping the fracs open and higher conductivity and seeing a lot less decline from these wells. Hence the higher EUR zone.

Brian Singer - Goldman Sachs

Okay. And lastly the ultra deep well is... if the completion is successful, are you prepared the facilities in place to tie that into sales or would that... would there be some delay in the ability to do that?

Unidentified Company Representative

No, we have facilities there.

Brian Singer - Goldman Sachs

Okay. Thank you very much.

Operator

Your next question comes from Larry Busnardo. Your line is open.

Larry Busnardo - Tri Stone Capital

Hey good morning. I guess at Circus, other than the Cody Shale test that you have planned, are there any other plans to test the deeper structures there at any point this year or next year. Where does that kind of stack up right now?

Unidentified Company Representative

Yes in 2008, no. We need to look at... we recently finished out toss [ph] in six miles really we're working through the interpretation on that three. But, I would just reemphasize our focus on a significant sized resource player that we came across during the initial completions on Circus around Draco and Leviathan wells. So right now Larry, our focus on Cody Shale gas play, as Joe mentioned four wells, we're going to core to those wells, obtain the characteristics and analysis on those shales and move forward accordingly. The nice thing about this area is that there are a lot of structures deep, we do recognize structures, we haven't drilled, but are deep, but those are off into the future as we move forward with this resource play.

Larry Busnardo - Tri Stone Capital

Other than the four wells, I mean would you be in position this year to drill more than those four or is that just kind of it for the plans, because you'll take claim data and kind of look at the results and then and maybe expand in '09.

Unidentified Company Representative

Yes Gibson Gulch [ph] and Joe can chime in, in but the way we've designed these four vertical wells, it does get us the opportunity the well bore assemblies will allow for potential future horizontal well bores where we cut a window and drill out horizontally from these well bores. If we're seeing very encouraging and very promising results. I am a big believer in applying the right technology and we'll move forward towards potential horizontalling in this program. We have the data, gives us the impetus to do so. Joe do you have any. Does that answer your question?

Larry Busnardo - Tri Stone Capital

Yes, that's good. Can you just remind me kind of a depth, what the well cost may be and then if do you have any initial estimates of what EURs could be?

Unidentified Company Representative

Those depths are anywhere from 4,000 and 7,000 feet out there and each of these wells is kind of targeting a different area. So there is going to be variety of depths there. The well costs are going to be high when you think about a well of that depth, simply because of lot of coring and lots of logging and in some cases some microseismic associated with the completions out there and so, hesitant to give you a typical well number since they are going to vary so much and since they are such early data gathering operations out here.

Larry Busnardo - Tri Stone Capital

Okay, yeah that's fine. I guess shifting over to the ultra deep well at West Tavaputs. Can you talk about what you are seeing so far from a geologic standpoint as you were drilling down to kind of the structure as you thought you might?

Unidentified Company Representative

Yes, structures there...we were essentially on prognosis. I think we may have been a little bit, high structurally. But let me just frame where we are at right now. First off, I'll make sure everybody understands we have not completed the well yet. Secondly, we are looking at the Weber and the Mississippi and relatively speaking when you look down to wellbore you look at those reservoirs and on the large you would say, that's relatively tight. But we also recognize there is virtually no analog, productive analogs in the Uinta Basin, just like it was for the Navajo. There is no analogs for either of those zones. In fact the closest Mississippi in analog is 60 miles to the South in the Paradox Basin. As such we feel we need to get in here and complete some zones in both the Mississippi and Weber and see what've got in order to calibrate what the logs are really telling us. So we are starting to get in there and complete it. As I mentioned it looks kind of relatively tight but we need to see what we have here through completion.

Larry Busnardo - Tri Stone Capital

Thanks and then one for Bob, just on the hedging strategy. I guess going forward, just given potential delays in Rex East coming on, have you changed the strategy at all just in terms of how you're looking at the hedging. I know you talked about getting up to 70% but are anything... is there anything being done differently than you have in the past?

Robert W. Howard - Chief Financial Officer and Treasurer

No, not at this time Larry. We are still looking at the opportunities with the prices to hedge to Rocky's price. We do have some hedges that take us to eastern delivery points, a very small amount that tie about a year after Rocky's East was intended to come online. I think we will cover that but we will continue to look at hedging up to 70%, to stick with Rocky's price or the small amounts of the mid continent as we get more clarity on the timing of moving gas through Rocky's Express.

Larry Busnardo - Tri Stone Capital

Okay. All right, great. Thanks guys.

Operator

Your next question comes from David Tameron. Your line is open.

David Tameron - Wachovia

Hi, just a follow-up, Joe. You mentioned the Uinta Basin, the 115 number is that a gross or a net... 115 expected extra rate I think in response to Brian's question?

Joseph N. Jaggers - President and Chief Operating Officer

That's a gross rate, David.

David Tameron - Wachovia

Okay.

Joseph N. Jaggers - President and Chief Operating Officer

And that's just on the West Tavaput structure but included in the Blacktail Ridge, Lake Canyon and stuff.

David Tameron - Wachovia

Okay, so just... I am just trying to make sure I got my math right. I mean you have, I guess 70, what it was, mid-70s come out of Uinta, another 85 to 90 come out of the Piceanse and another 20 come out of Powder. That gets you to 103, I mean 183 I think when you add up to all the details. You are expecting over the second half that you Piceanse obviously ramp, I would think with the additional rig count, is that accurate?

Joseph N. Jaggers - President and Chief Operating Officer

Yes, Piceanse goes up. The 115 is a net rate.

David Tameron - Wachovia

It is a net?

Joseph N. Jaggers - President and Chief Operating Officer

Yeah.

David Tameron - Wachovia

Okay. So, I am just... and then obviously I'm trying to pin it down here in production but it looks like to me if you add 50 from the, I guess not 50 but 75 to 150 so it's called 40 from the Uinta, the Piceanse should be up if Powder stays flat. Is that an underlying property, is that declining for us in the Deep or some other one off...

Joseph N. Jaggers - President and Chief Operating Officer

Well, the Wind River continues to decline and we haven't added any of the new wells there. So, that could be bringing the amount down.

David Tameron - Wachovia

Okay. I'll get off that topic. Reserve bookings in the Piceance for 2007, how many wells were booked on 10 acre spacing?

Joseph N. Jaggers - President and Chief Operating Officer

I don't remember offhand but we took a very conservative approach to the bookings of the 10s and only booked in areas we'd actively done the pilot operations during 2007. Now, during this year we're going to expand the areas that are going to be drilled on 10s and it should provide us quite a bit more booking opportunity in Piceance this year.

David Tameron - Wachovia

Okay, and final question. I have to ask of the DIS timing, when you said later FY08, any idea, any more clarity on that?

Joseph N. Jaggers - President and Chief Operating Officer

Our consultant and the BLM schedule both show it playing out in '08 and we continue to meet with State and Federal and DC level, BLM folks to try to shorten up some of the final review stuff. The governor's conflict resolution period and one other consecutive review period that we're trying get under concurrently. So we're confident about '08, as confident as you can be.

David Tameron - Wachovia

Okay. And obviously '08 is fine but as far as production and forecast that you've given to the Street but it's... at what point did it start impacting 2009?

Joseph N. Jaggers - President and Chief Operating Officer

Well, we clearly got locations to move us through '08 and there are more locations and at this point we're comfortable with '08 and early '09.

David Tameron - Wachovia

All right. Thanks.

Joseph N. Jaggers - President and Chief Operating Officer

Thanks David.

Operator

[Operator Instructions]. Your next question comes from Corey Garcia [ph]. Your line is open.

Unidentified Analyst

Hi, thanks guys. Solid quarter. Lot of the questions have already been answered but I was just hoping you guys can provide a little more clarity into kind of what basis differentials are doing out there in the Rocky's, obviously Questar gave a little bit more color. I was hoping what your guys take was on that?

Robert W. Howard - Chief Financial Officer and Treasurer

This is Bob Howard. Basis differentials have widened. We saw for the month of May basis was about 235, now this as Greg mentioned that still gives us $9 raise in the Rocky's. We just haven't... the Rocky's prices haven't participated nearly as much as some of the other parts of the countries. We're still looking at a very strong prices through 2008 but we are seeing basis wide as NYMEX continues to increase. We're seeing basis little over $3 for 2009 and again good overall prices for 2009 but we are seeing basis widen between the Rocky's and the NYMEX prices.

Unidentified Analyst

Sure, okay. Thanks a lot.

Operator

[Operator Instructions]. At this time there are no more questions.

Jennifer Martin - Director of Investor Relations

Well, I know it's a busy morning for a conference call, so thank you all for taking the time to join Bill Barrett today. And as always feel free to give us a call if you have any follow-up questions.

Operator

This concludes today's conference call. You may disconnect.

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