After wrapping up a couple of noncore sales, Bill Barrett Corp. (NYSE: BBG) remains on the lookout for an “attractive bid” on its plentiful Uinta Basin acreage.

The Denver company said Dec. 1 it had closed the sales of noncore properties located in the Uinta and Denver-Julesburg (D-J) basins. The company gained about $56 million of net cash proceeds from undisclosed buyers.

A sale for its remaining 120,000 net Uinta acres is expected to be completed during the first quarter of 2016, according to a December investor presentation.

The company has essentially shut off the power to the Uinta. The company has four commitment wells it will drill, but has otherwise directed capital toward the D-J. In the third quarter of 2015, Bill Barrett spent $7.2 million in the Uinta compared to $55.8 million the D-J.

The closed deals include after-tax cash proceeds of about $27 million for the Uinta acreage and $31 million in after-tax cash for assets outside of the core Northeast Wattenberg area.

Money Brawl

As with its other noncore sales, the company proceeds will be used for general corporate purposes.

The funds may end up supporting the development of its Northeast Wattenberg acreage where the company has experienced recent success with extended reach lateral (XRL) wells.

But further sales run the risk of limiting the company’s borrowing base. Driven by acquisitions and overspending, Bill Barrett had a debt balance of $821 million as of Sept. 30—about double its balance of $420 million in December 2010.

Looking toward 2016, the company has "ample liquidity to navigate the current environment," said Scot Woodall, CEO and president, in a statement. The recent divestitures did not affect the company’s balance sheet.

However, on Nov. 24, Bill Barrett’s credit rating was downgraded by Moody’s Investors Service. The firm said Dec. 4 that the company had obtained covenant relief.

The company has secured claims on substantially all of its proved reserves and other assets, “limiting alternatives for raising additional cash through asset sales without a reduction in borrowing base,” Moody’s said.

At the end of September, Bill Barrett had $113 million in cash and short-term investments and no debt under its $375 million borrowing base revolving credit facility, Moody’s said.

Combined with lower production volumes, the company's leverage metrics have “deteriorated significantly” in the past few years to about $47,000 per barrel of oil equivalent (boe) of average daily production and $20 per boe of proved developed reserves as of Sept. 30.

Grow Small

While Bill Barrett is marketing the Uinta, it’s clear the company is banking on the D-J for its future amid slumping commodity prices and hundreds of millions in debt.

In the third quarter of 2015, the Uinta made up about one-fifth of the company’s average daily production. That was after the company shut in about 1,000 boe/d of production that included volumes associated with expected asset sales, Woodall said.

"This is clearly a reflection of the performance of our Northeast Wattenberg assets," he said.

XRL drilling days in the Wattenberg have improved by 40% to about 10 days per well. The company has been consistently drilling recent wells in eight days or less, Woodall said.

Furthermore, associated cost reductions have lowered completed XRL well costs to $5.6 million, or by 32%.

"We are committed to continuous cost reduction measures as we endeavor to further improve our capital efficiency," Woodall said.

Efficiency gains are also translating into tangible reductions in operating costs across the company's assets, he added.

In the third-quarter, it had lease operating expenses of $5.67 per boe, which was 19% lower than the second quarter. The company will seek additional means to drive down costs, Woodall said.

Bill Barrett’s remaining 3,700 boe/d of Uinta production is on the block.

In its completed Uinta sale, the company sold about 17,632 net acres. The properties produced about 470 boe/d during August and had estimated proved reserves of 11 MMboe (9% proved developed) as of year-end 2014.

Overall, the company’s divestitures have mainly included legacy vertical wells.

Emily Moser can be reached at emoser@hartenergy.com, and Darren Barbee can be reached at dbarbee@hartenergy.com.