Bill Barrett Corporation reported full-year 2009 operating results highlighted by:
Chairman and Chief Executive Officer Fred Barrett commented, "Our Company continues to deliver solid growth, maintaining its outstanding multi-year track record. In 2009, we realized record discretionary cash flow of $460 million, substantial production growth of 16%, positive reserve replacement of 264%, and we reduced finding and development costs to $1.68 per thousand cubic feet ('Mcfe') for the year. 2009 results underscore our Company's position as a low cost operator and confirm the quality and long-term visibility of our asset base.
"We are off to a great start in 2010. Projected production growth of 8% to 12%, combined with hedge positions already in place on approximately 60% of production, is expected to deliver another year of solid cash flow. In addition, we have a very strong balance sheet with current available borrowing capacity of $593 million that positions the Company to take advantage of growth opportunities. Our 2010 capital program is focused on development properties yet will be flexible to additional activity if we choose to pursue accelerated growth either through acquisition, exploration success, or if regulatory approvals are received at West Tavaputs."
Natural gas and oil production totaled 89.7 billion cubic feet equivalent ("Bcfe") in 2009 compared with 77.6 Bcfe in 2008. Including the effects of the Company's hedging activities, the average realized sales price was $7.10 per Mcfe in 2009 compared with $7.81 per Mcfe in 2008. The Company's 2009 hedging program increased its natural gas and oil revenues by $271.8 million, or $3.03 per Mcfe of production. For the fourth quarter 2009, production totaled 22.8 Bcfe, up 11% compared with 20.6 Bcfe in the fourth quarter of 2008, and the average realized price was $7.02 per Mcfe, up from $6.96 per Mcfe in the fourth quarter of 2008.
Proved reserves at year-end 2009 were 964.8 Bcfe, up 18% from 818.3 Bcfe at year-end 2008. Capital expenditures for 2009 totaled $406.4 million, down significantly from $601.1 million in 2008 as the Company aligned 2009 capital expenditures with discretionary cash flow.
Discretionary cash flow was $459.6 million in 2009, or $10.21 per diluted common share, up $30.5 million compared with $429.1 million, or $9.53 per diluted common share, in 2008. The increase in 2009 is due to: a 16% increase in production; lower general and administrative expenses; lower cash operating costs, which included lower lease operating expense and lower production taxes; partially offset by a lower average realized price. For the fourth quarter of 2009, discretionary cash flow was $114.4 million, or $2.53 per diluted common share, up from $101.8 million, or $2.28 per diluted common share, in the fourth quarter of 2008. Fourth quarter 2009 results benefited from higher production, higher oil prices and certain lower per unit costs.
Net income was $50.2 million in 2009, or $1.12 per diluted common share, compared with $105.3 million, or $2.34 per diluted common share, in 2008. The decline in net income is driven by higher non-cash charges, primarily $43.7 million of unrealized losses on commodity derivatives. Net income for 2009 also includes: an impairment expense of $19.7 million related to sub-economic performing wells at the Company's Yellow Jacket prospect in the Paradox Basin and to properties in the North Hill Creek field in the Uinta Basin; one-time benefits to production tax expenses of $5.0 million as a result of amended severance tax returns for 2004 through 2008; and, a gain on the sale of properties of $1.4 million. Adjusting for these items, tax effected, adjusted net income was $82.7 million. Total dry hole expense for 2009 was $30.7 million, or $17.5 million after tax, and included interests in 14 wells in five exploration areas. Net income for the fourth quarter of 2009 was $12.5 million compared with $6.1 million in the fourth quarter of 2008. Adjusted net income was $20.3 million in the fourth quarter of 2009, nearly flat with $19.9 million in the fourth quarter of 2008.
DEBT AND LIQUIDITY
As of December 31, 2009, the Company had $5.0 million in outstanding borrowings on its revolving credit facility, which were entirely repaid in February 2010. The revolving credit facility has a borrowing base of $630.0 million and bank commitments totaling $592.8 million. Also at December 31, 2009, the Company had outstanding 5% Convertible Senior Notes in the principal amount of $172.5 million and 9.875% Senior Notes due 2016 in the principal amount of $250.0 million. The Company has significant liquidity available from cash flows from operations and the credit facility to fund its planned capital programs.
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