BRY Berry Corporation

Berry Petroleum Company (NYSE:BRY) reported net income of $17.7 million, or $0.34 per diluted share, for the first quarter of 2010. Oil and gas revenues were $148 million during the quarter and discretionary cash flow totaled $70 million.

Items that affected net income for the quarter included a non-cash loss on hedges, transaction costs and non-cash items related to the Company’s Permian acquisition and dry hole costs. In total, for the first quarter of 2010, these items decreased net income by approximately $2.1 million, or $0.04 per diluted share for an adjusted first quarter net income of $19.8 million, or $0.38 per diluted share.

For the first quarter of 2010 and fourth quarter of 2009, average net production in BOE per day was as follows:

First Quarter Ended

March 31

  Fourth Quarter Ended

December 31

2010 Production   2009 Production Oil (Bbls) 20,506 70%   19,999 69% Natural Gas (BOE)

8,885

30%

9,150

31%

Total BOE per day 29,391 100% 29,149 100%

Robert F. Heinemann, president and chief executive officer said, “In addition to our solid financial results, Berry’s first quarter of 2010 was notable due to closing our Permian acquisition, the confirmation of the productivity of our Haynesville wells and an important bolt-on acquisition which will expand our diatomite development. Production for the first quarter of 2010 was 29,391 BOE/D, supported by a 500 BOE/D increase in crude oil volumes. We expect total average production for 2010 to be between 32,250 BOE/D and 33,000 BOE/D with increases throughout the balance of the year coming from our capital program and from the integration of our Permian basin assets. Our teams have continued to focus on executing development activities that will generate strong margins, and in the first quarter, we generated a competitive corporate EBITDA margin of approximately $31 per BOE, with cash operating margins from our California and Permian oil assets over $45 per barrel.”

Acquisitions

In April 2010, the Company entered into an agreement with Chevron U.S.A. Inc. to lease 90 acres directly adjacent to its N. Midway-Sunset diatomite development in California. These leases were acquired in exchange for a royalty on future production from the property. This acquisition increases Berry’s diatomite acreage by 20% and should raise the total oil in place under development to approximately 350 MMBOE to 370 MMBOE. Mr. Heinemann stated “We are excited to bring additional California assets into the portfolio that can add meaningful value to Berry in the long-term. The fundamentals for heavy oil remain strong supported by a long term oil to gas price ratio of greater than 14 to 1 and we continue to pursue additional acquisition opportunities in California.”

Operational Update

Michael Duginski, executive vice president and chief operating officer, stated, “We are pleased with the overall execution of our 2010 capital program. We benefited in the first quarter from our focus on the development of our oil assets where production increased by 2% over last quarter. Our consumption of natural gas to generate steam increased from approximately 34,000 MMBtu/D in the fourth quarter of 2009 to approximately 37,000 MMBtu/D in the first quarter of 2010 as we continued the development of our heavy oil assets and initiated several steam flood pilots. We closed on our first Permian basin acquisition on March 5, 2010 and our fully staffed Permian asset team took over operations at closing. Subsequently, we closed on our previously announced 3,200 acre Permian acquisition on April 6th. We are currently running a one rig program in the Permian and plan to increase production over the course of the year. We have drilled three horizontal Haynesville wells to date and have completed the first well with an initial production rate of approximately 10.3 MMcf/D and 30-day average production of 9.0 MMcf/D.”

2010 Guidance

For 2010 the Company is issuing the following guidance:

  Anticipated Range per BOE in 2010 ($/BOE) $60 WTI/$4 HH   $60 WTI/$5 HH   $75 WTI/$6 HH Operating costs-oil and gas production $17.00 - $18.00 $18.00 - $19.00 $19.00 - $20.00 Production taxes 1.75 - 2.25 1.75 - 2.25 $2.00 - $2.50 DD&A 12.00 - 14.00 G&A 4.00 - 4.50 Interest expense 5.00 - 6.50 Total $40.75 - $46.25

Explanation and Reconciliation of Non-GAAP Financial Measures

Discretionary Cash Flow

  Three Months Ended 3/31/10   3/31/09 Net cash provided by operating activities $ 63.5 $ 8.1 Add back: Net increase (decrease) in current assets 14.2 12.9 Add back: Net decrease (increase) in current liabilities including book overdraft   (7.3 )   60.3 Discretionary cash flow $ 70.4 $ 81.3

Reconciliation of First Quarter Net Income

Three Months Ended 3/31/10 Adjusted net income $ 19.8 After tax adjustments: Non-cash hedge losses (0.9 ) Dry hole costs (0.8 ) Acquisition related items   (0.4 ) Net income, as reported $ 17.7

Teleconference Call

An earnings conference call will be held Wednesday, April 28, 2010 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time). Dial 1-800-295-3991 to participate, using passcode 45990326. International callers may dial 617-614-3924. For a digital replay available until May 5, 2010 dial 1-888-286-8010 (passcode 98276042). Listen live or via replay on the web at www.bry.com.

About Berry Petroleum Company

Berry Petroleum Company is a publicly traded independent oil and gas production and exploitation company with operations in California, Colorado, Texas and Utah. The Company uses its web site as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible at http://www.bry.com/index.php?page=investor.

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 “expect,” "would," "will," "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 2009 Form 10-K filed with the Securities and Exchange Commission on February 25, 2010 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.”

CONDENSED INCOME STATEMENTS (In thousands, except per share data) (unaudited)   Three Months

03/31/10

 

12/31/09

Revenues Sales of oil and gas $ 147,807 $ 132,574 Sales of electricity 9,933 10,033 Gas marketing 8,272 5,160 Gain (loss) on derivatives 1,603 (51 ) Gain (loss) on sale of assets - (2 ) Interest and other, net   164   435   Total   167,779   148,149   Expenses Operating costs – oil & gas 47,036 45,295 Operating costs – electricity 9,670 9,329 Production taxes 5,204 3,733 Depreciation, depletion & amortization - oil & gas 35,907 35,648 Depreciation, depletion & amortization - electricity 795 743 Gas Marketing 7,786 5,082 General and administrative 13,835 12,094 Interest 17,447 14,722 Transaction costs on acquisitions, net of gain 727 - Dry hole, abandonment, impairment & exploration 1,369 5,216 Bad debt expense   -   -   Total   139,776   131,862     Income (loss) before income taxes 28,003 16,287 Income tax provision (benefit)   10,334   3,668   Income (loss) from continuing operations 17,669 12,619 Income (loss) from discontinued operations, net of tax - 385   Net income (loss) $ 17,669 $ 13,004     Basic net income (loss) from continuing operations per share $ 0.34 $ 0.27 Basic net income (loss) from discontinued operations per share   -   0.01   Basic net income (loss) per share $ 0.34 $ 0.28     Diluted net income (loss) from continuing operations per share $ 0.34 $ 0.27 Diluted net income (loss) from discontinued operations per share   -   0.01   Diluted net income (loss) per share $ 0.34 $ 0.28     Cash dividends per share $ 0.075 $ 0.075   Weighted average common shares: Basic   51,076   44,679   Diluted   51,440   45,042   CONDENSED BALANCE SHEETS (In thousands) (unaudited)

3/31/10

 

12/31/09

Assets Current assets $ 112,202 $ 103,476 Property, buildings & equipment, net 2,269,848 2,106,385 Fair value of derivatives 2,369 735 Other assets   27,973   29,539 $ 2,412,392 $ 2,240,135 Liabilities & Shareholders’ Equity Current liabilities $ 180,899 $ 152,137 Deferred taxes 251,913 237,161 Long-term debt 907,124 1,008,544 Other long-term liabilities 67,069 63,198 Fair value of derivatives 57,773 75,836 Shareholders’ equity   947,614   703,259 $ 2,412,392 $ 2,240,135 CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Three Months

03/31/10

 

12/31/09

Cash flows from operating activities: Net income $ 17,669 $ 13,004 Depreciation, depletion & amortization (DD&A) 36,702 36,390 Amortization of debt issuance costs and net discount 2,098 1,935 Gain on purchase of oil and natural gas properties (1,358 ) - Dry hole & impairment 1,207 5,216 Commodity derivatives 2,476 (4,549 ) Stock based compensation 3,031 1,572 Deferred income taxes 8,548 6,452 Other, net - 1,240 Cash paid for abandonment (22 ) (737 ) Allowance for bad debt - - Net changes in assets and liabilities including book overdraft   (6,836 )   3,674     Net cash provided by operating activities 63,515 64,197   Net cash used in investing activities (186,940 ) (50,865 ) Net cash provided by financing activities   118,171     (8,996 )   Net increase (decrease) in cash and cash equivalents (5,254 ) 4,336   Cash and cash equivalents at beginning of year   5,311     975     Cash and cash equivalents at end of period $ 57   $ 5,311   COMPARATIVE OPERATING STATISTICS (unaudited)   Three Months

03/31/10

 

12/31/09

 

Change

Oil and gas: Heavy Oil Production (Bbl/D) 17,752 17,280 Light Oil Production (Bbl/D) 2,754 2,719 Total Oil Production (Bbl/D) 20,506 19,999 Natural Gas Production (Mcf/D)   53,309     54,899   Net production-BOE per day 29,391 29,149 1 % Per BOE: Average sales price before hedges $ 57.06 $ 50.76 12 % Average sales price after hedges $ 55.99 $ 48.77 15 %   Oil, per Bbl: Average WTI price $ 78.88 $ 76.13 4 % Price sensitive royalties (3.04 ) (2.64 ) Gravity differential and other (8.12 ) (9.63 ) Crude oil hedges (1.72 ) (3.96 ) Correction to royalties payable   -     (1.78 ) Average oil sales price after hedging $ 66.00 $ 58.12 14 %   Natural gas price: Average Henry Hub price per MMBtu $ 5.30 $ 4.17 27 % Conversion to Mcf 0.27 0.21 Natural gas hedges 0.07 0.40 Location, quality differentials, other   (0.15 )   (0.13 ) Avg. gas sales price after hedging $ 5.49 $ 4.65 18 %   Operating costs $ 17.78 $ 16.89 5 % Production taxes   1.97     1.39   42 % Total operating costs $ 19.75 $ 18.28 8 %   DD&A - oil and gas $ 13.57 $ 13.29 2 % General & administrative expenses $ 5.23 $ 4.51 16 %   Interest expense $ 6.60 $ 5.49 20 %