Bill Barrett Corporation reported full-year 2007 operating results highlighted by production growth up 17% to 61.2 Bcfe; proved reserve growth; up 30% to 558 Bcfe; up 44% adjusting for property sales; reserve replacement ratio 382%; proved, probable and possible resources of 2 Tcfe; discretionary cash flow of $248.5 million, or $5.56 per diluted share; net income of $26.8 million, or $0.60 per diluted share; and finding and development costs of $1.83 per Mcfe.
Chairman and Chief Executive Officer, Fred Barrett, commented, "We are very pleased with 2007 results, which reflect a continuation of our strong development programs. Our team delivered record growth in reserves along with very strong production and record cash flows, despite a challenging natural gas price environment. We are now realizing substantial reserve growth at a very competitive cost at our West Tavaputs and Gibson Gulch assets.
"We are well positioned in 2008 for sustained success with 80% of our $550 to $600 million capital expenditure budget devoted to development. In addition, the Company plans to earmark 20% of its budget for a robust exploration program, including four new resource plays and delineation drilling based on encouraging 2007 results at Blacktail Ridge/Lake Canyon, Yellow Jacket and Circus. In addition, the new year brings a stronger and more stable natural gas price environment to Rocky Mountain producers. We expect double digit growth again in 2008."
As previously announced, natural gas and oil production totaled 61.2 billion cubic feet equivalent (Bcfe) for 2007 compared with 52.1 Bcfe in 2006. Including the effect of the Company's hedging activities, the average sales price realized was $6.13 per million cubic feet equivalent (Mcfe) in 2007 compared with $6.60 per Mcfe in 2006. The Company's 2007 hedging program increased its natural gas and oil revenues by $86.9 million or $1.42 per Mcfe on average. For the fourth quarter 2007, production totaled 17.2 Bcfe, up 21% compared with 14.2 Bcfe in the fourth quarter 2006, and the average realized price was $6.19 per Mcfe, down slightly from $6.21 per Mcfe in the fourth quarter 2006.
Proved reserves at year-end 2007 were 558 Bcfe, up 30% from year-end 2006 and up 44% as adjusted for 2007 property sales. Capital expenditures for 2007 totaled $443.7 million. This amount is a slight increase from estimated capital expenditures of $438.0 million provided in the Company's release from January 17, 2008.
Discretionary cash flow (a non-GAAP measure, see page 10) was $248.5 million in 2007 or $5.56 per diluted share, up $10.0 million compared with $238.5 or $5.39 per diluted share in 2006. The year-over-year increase was primarily a result of higher cash operating income generated by a 17% increase in production partially offset by a 7% decline in the average realized price. For the fourth quarter 2007, discretionary cash flow was $70.1 million, or $1.56 per diluted share, compared with $61.6 million, or $1.39 per diluted share, in the prior year period. Fourth quarter 2007 results benefited from the higher year-over-year production volumes.
Net income was $26.8 million or $0.60 per diluted common share in 2007 compared with $62.0 million or $1.40 per diluted common share in 2006. The $35.2 million decline in net income was primarily a result of $10.0 million of higher discretionary cash from operations described above, more than offset by certain higher non-cash expenses. For the fourth quarter 2007, net income was $2.5 million or $0.06 per diluted common share, compared with $11.0 million or $0.25 per diluted common share in the prior year period. Fourth quarter 2007 results were affected by higher depreciation, depletion and amortization expense as well as higher dry hole costs of $13.6 million, which included proportionate expenses for drilling and testing the lower zones of the Draco and Leviathan wells located in the Montana Overthrust, the second Yellow Jacket exploration well located in the Paradox Basin, the most recent West Tavaputs deep well located in the Uinta basin and a non-operated well in the Wind River Basin.
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