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 Berrys

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, Berrys

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

Berry Petroleum Company
Investors and Media
Shawn Canaday,

1-303-999-4000
Todd Crabtree, 1-866-472-8279
www.bry.com

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