Bill Barrett Corp, Fifth Creek to form major DJ Basin producer

By Luke Geiver | December 11, 2017

The combination of Denver-based exploration and production firm Bill Barrett Corp. with Fifth Creek Energy could create a major, pure-play DJ Basin producer. In a deal valued at $649 million, BBC has agreed to acquire the producing assets and undeveloped leaseholds owned and operated by Fifth Creek. If the deal is approved by shareholders, BBC would increase its acreage position in the DJ Basin by 112 percent and its number of undeveloped locations by 70 percent. At $35 oil, the company will breakeven. At current strip prices, BBC could achieve 65 percent initial rates of return, according to Scot Woodall, CEO and president of BBC.

“This presents us with a unique opportunity to add a large, undeveloped acreage position at an attractive cost with the potential for decades of high-return drilling locations located in a rural area that is highly complementary to our legacy position,” Woodall said.

The acreage acquired in the deal is largely undeveloped and derisked through HBP drilling. Much of the acreage is in proximity to an EOG Resources field and also includes 3D seismic and core data. Nearly 1,200 of the undeveloped gross drilling locations would target the Niobrara or Codell formations.

According to Woodall, there is enough infrastructure in the area to handle oil and gas takeaway. Of the seven wells that Fifth Creek drill and completed in 2017, the IP rate average was 1,052 barrels of oil equivalent per day with an 84 percent oil cut.

Part of the acreage acquired in the deal is in close proximity to the Jake well—the first horizontal discovery test well drilled in 2009 that Woodall said helped to start the activity in the DJ Basin.

In the Niobrara B formation, BBC estimates it has a target zone of 100 to 120 feet in thickness and in the Codell, the thickness for the horizontal zone is roughly 17 to 23 feet, some of the thickest in the Codell.

Next year, BBC will run three drilling rigs and spend roughly $500 to $600 million. Future multi-well pads could include 16 wells per pad with 10 wells targeting the Niobrara and 6 targeting the Codell. The goal moving forward is to drill all extended reach laterals that meet or exceed distance ranges starting at 9,500 feet. To complete the wells next year, BBC will use 1,500 to 2,000 pounds of sand per lateral foot with 80 to 90 stages per lateral. The company will also use enhanced flowback techniques.

Under terms of the deal, BBC and Fifth Creek will become subsidiaries of a newly formed holding company which will be the publicly listed entity representing each. Bill Barrett stockholders will exchange their current common stocks in a 1-to-1 swap. Fifth Creek’s current sole owner will receive 100 million shares of the new company’s stock. BBC is currently trading at $4.80 on the New York Stock Exchange.