On the one hand, Bill Barrett Corporation's fourth-quarter report was surprisingly good. The oil stock posted an adjusted profit of $1.1 million, or $0.01 per share, which was $0.05 per share ahead of expectations. A 37% year-over-year increase in oil and gas production along with an 11% decrease in lease operating expenses helped fuel the stronger-than-expected showing.
Further, the company noted that it made progress on its strategic initiatives. Not only did it close the sale of its Uinta Basin assets for $102 million, but it sealed a deal to combine with Fifth Creek Energy. That transaction will significantly strengthen the company's balance sheet as well as expand its footprint in the DJ Basin when it closes next month.
With that deal closing soon, Bill Barrett only provided its outlook for the first quarter. The company said that it expects to spend $80 million to $90 million in the quarter to run two drilling rigs. However, the company said that production would be about even with the fourth quarter because of some problems with third-party processing plants. That no-growth outlook and the uncertainty about its forecast beyond the current quarter seem to be what's weighing on Bill Barrett's stock today.
While Bill Barrett's first-quarter guidance is a disappointment, it's not due to any drilling issues and appears to be a temporary problem. Meanwhile, with the needle-moving Fifth Creek merger upcoming, Bill Barrett is about to become a much stronger company. That makes today's sell-off look more like a buying opportunity for investors willing to take a risk on a smaller oil stock like Bill Barrett.