Bill Barrett Corp fka BBG

[OilStockReport]

What makes BBG particularly attractive is the company’s ability to grow its proven reserve base even while aggressively increasing its production schedule.

A mix of internal exploration along with outside acquisitions has allowed the company to grow its reserve base to the point where several years worth of production are represented in underground assets.

Ramping up production along with reserves is only beneficial if costs are in line. Bill Barrett has seen its Finding and Development costs decrease over the last three years from $2.48 per Mcfe to an estimated $1.74 for 2010. Total cash costs are estimated at $1.97 per Mcfe which means the company can produce natural gas at a robust profit even with the current spot price at historical lows.

BBG has made an attractive agreement with Enterprise Products Partners L.P. with a portion of production comprised of natural gas liquids (NGL). This agreement along with hedging contracts has resulted in realized prices of $7.14 per Mcfe – roughly 60% above the current spot price for natural gas.

Bill Barrett continues to allocate capital to its exploration and drilling programs which in turn drive future growth opportunities. This year the company will spend between $475 and 485 million on its diversified portfolio of properties. But with ample cash flow, a debt to equity ratio of just 28%, and nearly $700 million available through a credit facility, the company has plenty of liquidity.

As investors warm up to the idea of owning natural gas companies again, BBG shares are starting to rise. The stock was rangebound between $29 and about $37 for nearly a full year and has begun to ramp higher.

If natural gas prices remain stable, BBG’s reserves (minus cash production costs) should represent more than $50 per share – an increase of 25%. But if pricing for natural gas has truly put in a floor and is ready to rebound, the value of these reserves could increase exponentially – and don’t forget the company’s track record of replacing reserves at twice the rate they can pull gas out of the ground!