Berry Petroleum Earns $1.08 Per Share in Second Quarter 2008; Averages Record 29,000 BOE/D Production and Generates Discretionary Cash Flow of $108 Million
2008-07-25 07:03:00
Berry Petroleum Earns $1.08 Per Share in Second Quarter 2008; Averages Record 29,000 BOE/D Production and Generates Discretionary Cash Flow of $108 Million
Achieves Second Quarter Production Exit Rate of 30,000 BOE/D
DENVER–(EMWNews)–Berry Petroleum Company (NYSE:BRY)
earned net income of $49 million, or $1.08 per diluted share, for the
three months ended June 30, 2008, up 128% from net income of $21.4
million, or $.48 per diluted share excluding the net gain on sale of
assets of $30.6 million in the second quarter of 2007, according to
Robert F. Heinemann, president and chief executive officer.
Discretionary cash flow totaled a record $108 million in the quarter, up
82% from $59.4 million in the second quarter of 2007. (Discretionary
cash flow is a non-GAAP measure; see reconciliation below.)
For the second quarter ended June 30, 2008 net production averaged a
record 29,000 barrels of oil equivalent per day (BOE/D), an increase of
7% from the 27,195 BOE/D achieved in the same 2007 period. The average
realized sales price, net of hedging, for the 2008 second quarter was
$69.77 per BOE, up 54% over the $45.43 per BOE received in the 2007
period. Oil and gas revenues rose 63% to $185 million in 2008 compared
to $113 million in 2007. The Company drilled 120 gross (112 net) wells
in the second quarter of 2008.
For 2008 and 2007, net production in BOE per day was as follows:
Second Quarter Ended June 30 |
|||||
2008 Production |
|
2007 Production |
|||
Oil (Bbls) |
20,611 |
71% |
20,163 |
74% |
|
Natural Gas (BOE) |
8,389 |
29% |
7,032 |
26% |
|
Total BOE per day |
29,000 |
100% |
27,195 |
100% |
Mr. Heinemann said, “Execution of our
development plans to reach a mid-year production goal of 30,000 BOE/D
has been a focus for each of our asset teams this year and I am pleased
to announce that through growth in both our oil and gas assets we
reached this production milestone and exited the second quarter of 2008
at 30,000 BOE/D from our base assets.
“Our oil development projects in California
continue to deliver exceptional results. Diatomite production is up 24%
over first quarter 2008 levels to approximately 1,700 BOE/D. We continue
to bring on new wells, expand infrastructure and appraise the productive
limits of the field. We expect to exit 2008 in the diatomite with
production of 3,000 BOE/D. Production from Poso Creek is up 19% from the
first quarter of 2008 to 3,200 BOE/D. Our infill horizontal program,
along with our development at Ethel D, has been successful in keeping
our South Midway production decline in the 5% range as expected.
“Our natural gas assets also performed well
with Piceance production in June up 24% over the first quarter of 2008,
with average daily production of 20.8 MMcf/D. We completed 12 wells in
the Piceance during the quarter and we expect to bring an additional 19
wells on production during the third quarter. Production in the DJ basin
was steady at 19.6 MMcf/D and we also completed the interpretation of an
additional 75 square miles of recently acquired seismic data in the DJ
and expect to replenish our low-risk drilling inventory.
Six Months Results
Net income for the first six months of 2008 was $92.2 million or $2.03
per diluted share, up 30% from $70.8 million or $1.58 per diluted share
in the comparable 2007 period. Excluding an asset sale and impairment of
an asset held for sale for a combined net after-tax gain of $28.8
million, net income for the six months ended June 30, 2007 was $42.0
million or $.94 per diluted share.
Revenues for the six months of 2008 were $400.8 million, up 35% from
$296.7 million (including a $50.4 million gain on sale of assets) in the
same 2007 period. Discretionary cash flow totaled $210 million for the
first six months of 2008, up from $108 million in the comparable 2007
period.
For the six months ended June 30, 2008, net production averaged 28,530
BOE/D, an increase of 8% from the 26,330 BOE/D achieved in the same
period in 2007. The average realized sales price per BOE, net of
hedging, for the six months ended June 30, 2008 was $67.23 per BOE, up
50% from the $44.72 per BOE received in the 2007 period.
East Texas Acquisition Closed
On July 15, 2008 Berry closed on the previously announced East Texas
natural gas asset acquisition for a price of $653 million, including
closing adjustments that reflect revenue and capital from the February
1, 2008 effective date. Proved reserves are estimated to be 335 billion
cubic feet equivalent with an all-in finding and development cost of
$2.77/Mcfe. The acquisition adds approximately 32 MMcfe/D to Berry’s
production from 100 producing wells.
Development plans include over 100 drilling locations targeting stacked
pays in various productive zones including the Pettit, Travis Peak,
Cotton Valley, and Bossier sands, and the Bossier and Haynesville
shales. We increased our 2008 capital budget by $75 million to a total
of $370 million to fund the development of this asset. We have also
conducted three 30-day vertical Haynesville tests which averaged 1.2
MMcf/D per well and are encouraged by the potential for the horizontal
development of this resource and the realization of the upside potential
of this acquisition.
With the contribution of these assets, Berry’s
production today tops 35,000 BOE/D and we expect to deliver a 20% to 25%
increase in production over 2007 and a 40% to 45% increase in net proved
reserves in 2008 at a finding and development cost between $10 and $13
per BOE. Berry expects to end the year with between 235 million and 250
million BOE of proved reserves and average production for the year of
between 32,500 and 33,500 BOE/D. For the third quarter of 2008 Berry
expects to average approximately 35,000 BOE/D and to achieve a December
2008 exit rate between 39,000 and 40,000 BOE/D.”
Financial Performance
Shawn M. Canaday, vice president, controller and interim chief financial
officer, stated, “Our financial performance
during the quarter was strong with a record $108 million in
discretionary cash flow. At $100/Bbl West Texas Intermediate pricing, we
would expect to generate approximately $450 million in cash flow for the
year which should fully fund our $370 million capital program and allow
us to accelerate our high return oil projects and repay debt.
In conjunction with our East Texas acquisition we entered into a new
five year $1 billion secured credit facility and a short-term $100
million line of credit which should provide us with the liquidity to
execute our 2008 development plans. Our operating costs increased $13.6
million during the second quarter when compared to the first quarter.
Approximately $10 million of this change is due to our increased volume
of conventional steam generation at Poso Creek and the diatomite coupled
with a $2/MMBtu increase in the price of California natural gas during
the quarter.”
Explanation and Reconciliation of Non-GAAP Financial Measures
Three Months Ended |
|
Six Months Ended |
|||||||||||||
|
06/30/08 |
|
|
|
06/30/07 |
|
|
06/30/08 |
|
|
|
06/30/07 |
|||
Net cash provided by operating activities |
$ |
106.6 |
$ |
81.1 |
$ |
193.8 |
$ |
88.0 |
|||||||
Add back: Net increase (decrease) in current assets |
29.2 |
(8.2 |
) |
29.3 |
5.1 |
||||||||||
Add back: Net decrease (increase) in current liabilities |
|
(27.3 |
) |
|
(13.5 |
) |
|
(13.0 |
) |
|
14.6 |
||||
Discretionary cash flow |
$ |
108.5 |
$ |
59.4 |
$ |
210.1 |
$ |
107.7 |
Teleconference Call
An earnings conference call will be held Friday, July 25, 2008 at 10:30
a.m. Eastern Time (7:30 a.m. Pacific Time). Dial 1-866-356-4123 to
participate, using passcode 39819015. International callers may dial
617-597-5393. For a digital replay available until August 8, 2008 dial
1-888-286-8010 (passcode 28441625). Listen live or via replay on the web
at http://www.bry.com. Transcripts of
this and previous calls may be viewed at www.bry.com
in the “Investor Center.”
About Berry Petroleum Company
Berry Petroleum Company is a publicly traded independent oil and gas
production and exploitation company with operations in California, Utah,
Colorado and Texas.
Safe harbor under the “Private Securities
Litigation Reform Act of 1995”
Any statements in this news release that are not historical facts are
forward-looking statements that involve risks and uncertainties. Words
such as “plans,” “will,”
“expect,” “target,”
“goal,” and forms
of those words and others indicate forward-looking statements. Important
factors which could affect actual results are discussed in PART 1, Item
1A. Risk Factors of Berry’s 2007 Form 10-K filed with the Securities and
Exchange Commission on February 26, 2008 under the heading “Other
Factors Affecting the Company’s Business and Financial Results”
in the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations
and all material changes are updated in Part II, Item 1A within our Form
10-Qs filed subsequent to that date.”
CONDENSED STATEMENTS OF INCOME |
|||||||
(In thousands) |
|||||||
(unaudited) |
|||||||
|
|
|
|||||
Three Months |
Six Months |
||||||
06/30/08 |
06/30/07 |
06/30/08 |
06/30/07 |
||||
Revenues |
|||||||
Sales of oil and gas |
$185,332 |
$113,426 |
$349,827 |
$215,200 |
|||
Sales of electricity |
16,979 |
13,867 |
32,906 |
28,463 |
|||
Gas marketing |
11,531 |
– |
14,762 |
– |
|||
Gain on sale of assets |
– |
50,400 |
414 |
50,398 |
|||
Interest and other, net |
1,564 |
1,536 |
2,893 |
2,647 |
|||
Total |
215,406 |
179,229 |
400,802 |
296,708 |
|||
Expenses |
|||||||
Operating costs – oil & gas |
55,185 |
35,725 |
96,814 |
69,335 |
|||
Operating costs – electricity |
15,515 |
11,083 |
31,914 |
25,254 |
|||
Production taxes |
7,481 |
4,139 |
13,448 |
7,954 |
|||
Depreciation, depletion & amortization – oil & gas |
29,073 |
23,397 |
56,148 |
42,122 |
|||
Depreciation, depletion & amortization – electricity |
652 |
961 |
1,345 |
1,723 |
|||
Gas marketing |
11,071 |
– |
14,053 |
– |
|||
General and administrative |
11,160 |
9,651 |
22,543 |
19,958 |
|||
Interest |
3,951 |
4,976 |
7,689 |
9,267 |
|||
Commodity derivatives |
59 |
– |
767 |
– |
|||
Dry hole, abandonment, impairment & exploration |
3,464 |
3,519 |
7,590 |
4,168 |
|||
Total |
137,611 |
93,451 |
252,311 |
179,781 |
|||
|
|||||||
Income before income taxes |
77,795 |
85,778 |
148,491 |
116,927 |
|||
Provision for income taxes |
28,654 |
33,821 |
56,319 |
46,115 |
|||
|
|||||||
Net income |
$ 49,141 |
$ 51,957 |
$ 92,172 |
$ 70,812 |
|||
|
|||||||
Basic net income per share |
$1.10 |
$1.18 |
$2.07 |
$1.61 |
|||
Diluted net income per share |
$1.08 |
$1.16 |
$2.03 |
$1.58 |
|||
Cash dividends per share |
$0.075 |
$0.075 |
$0.15 |
$0.15 |
|||
|
|||||||
Weighted average common shares: |
|||||||
Basic |
44,478 |
44,029 |
44,435 |
43,973 |
|||
Diluted |
45,608 |
44,895 |
45,483 |
44,754 |
CONDENSED BALANCE SHEETS |
||||
(In thousands) |
||||
(unaudited) |
||||
|
06/30/08 |
|
12/31/07 |
|
Assets |
||||
Current assets |
$ 270,871 |
$ 161,019 |
||
Property, buildings & equipment, net |
1,405,560 |
1,275,091 |
||
Other assets |
73,885 |
15,996 |
||
$1,750,316 |
$1,452,106 |
|||
Liabilities & Shareholders’ Equity |
||||
Current liabilities |
$ 495,994 |
$ 271,369 |
||
Deferred taxes |
87,858 |
128,824 |
||
Long-term debt |
511,000 |
445,000 |
||
Other long-term liabilities |
367,469 |
146,939 |
||
Shareholders’ equity |
287,995 |
459,974 |
||
$ 1,750,316 |
$ 1,452,106 |
CONDENSED STATEMENTS OF CASH FLOWS |
||||||
(In thousands) |
||||||
(unaudited) |
||||||
|
Six Months |
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