BRY Berry Corporation

Berry Petroleum Company (NYSE:BRY) reported net income of $89 million, or $1.64 per diluted share, for the second quarter of 2010. Oil and gas revenues were $152 million during the quarter. Discretionary cash flow for the quarter totaled $142 million made up of $81 million from operations and a $61 million recovery from our claim in the Flying J bankruptcy.

Items that affected net income for the quarter included the recovery of the Flying J bankruptcy claim, a non-cash gain on hedges, non-cash items related to the Company’s Permian acquisition and dry hole costs. In total, for the second quarter of 2010, these items increased net income by approximately $66 million, or $1.22 per diluted share for an adjusted second quarter net income of $22.9 million, or $0.42 per diluted share.

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

       

Second Quarter EndedJune 30

         

First Quarter EndedMarch 31

2010 Production           2010 Production Oil (Bbls) 21,869           67 %           20,506           70 % Natural Gas (BOE) 10,985 33 % 8,885 30 %

Total BOE per day

32,854 100 % 29,391 100 %  

Robert F. Heinemann, president and chief executive officer said, “Performance from Berry’s portfolio of assets was strong in the second quarter. Production for the second quarter of 2010 was 32,854 BOE/D, 67% of which was oil production. While diatomite production declined during the quarter as we awaited new permits and optimized field production, we were able to increase companywide production by 12% during the quarter with meaningful contributions from each of our other operating areas. We are working closely with regulators and expect to resume drilling in the diatomite in the last half of 2010. We are also accelerating our Permian development program based on successful drilling results on our acquired properties and plan to operate a three rig program in the Permian for the last half of 2010. Solid operational performance and a continued focus on managing our operating costs during the second quarter allowed us to generate a corporate margin of approximately $32 per BOE, or $5.33 per Mcfe. We are maintaining our full-year 2010 production guidance of between 32,250 and 33,000 BOE/D. In addition, we settled our claim in the Flying J bankruptcy during the second quarter and received proceeds of $60.5 million on July 23, 2010 which we have used to pay down debt.”

Operational Update

Michael Duginski, executive vice president and chief operating officer, stated, “In the diatomite, average production declined from 3,570 BOED in the first quarter of 2010 to 2,730 BOED in the second quarter of 2010 as we optimized our production facilities and added infrastructure in preparation for the initiation of our 2010 drilling program. Our work in the diatomite during the second quarter should allow us to run multiple rigs and accelerate our diatomite development when new permits are issued. Outside the diatomite, performance from our other California assets was strong with average production increasing 565 BOED, a 4% increase over the first quarter of 2010. Our California assets generated operating margins of over $45 per barrel during the quarter. We executed a one rig program in the Permian during the second quarter and production from the Permian assets averaged 1,033 BOED with well productivity and development costs in line with our expectations. We began drilling with a second rig in the Permian in July 2010 and expect a third rig to commence drilling in August. In the Uinta, we drilled 26 wells during the quarter and production increased 950 BOED from the first quarter of 2010. We have completed a total of four horizontal Haynesville wells during 2010 with per well 30-day initial production rates from our second and third wells of between 9 MMcf/D and 10 MMcf/D.”

2010 Guidance

For 2010 the Company is issuing the following guidance:

      Anticipated Range per BOE in the last half of 2010 ($/BOE) $60 WTI/$4 HH             $60 WTI/$5 HH               $75 WTI/$6 HH Operating costs-oil and gas production $16.00 - $17.00 $17.00 - $18.00 $18.00 - $19.00 Production taxes 1.75 - 2.25 1.75 - 2.25 $2.00 - $2.50 DD&A 14.00 - 16.00 G&A 4.00 - 4.50 Interest expense 5.00 - 6.50 Total $41.75 - $47.25  

Explanation and Reconciliation of Non-GAAP Financial Measures

Discretionary Cash Flow

      Three Months Ended   06/30/10               3/31/10   Net cash provided by operating activities $ 71.4 $ 63.5 Add back: Net increase (decrease) in current assets 19.0 14.2 Add back: Net decrease (increase) in current liabilities including book overdraft 12.8 (7.3 ) Add back: Recovery of Flying J bad debt   38.5   -   Discretionary cash flow $ 141.7 $ 70.4  

Reconciliation of Second Quarter Net Income

          Three Months Ended   06/30/10   Adjusted net income $ 22.9 After tax adjustments: Flying J bankruptcy recovery 37.4 Non-cash hedge gains 30.0 Dry hole costs (0.1 ) Acquisition related items   (1.2 ) Net income, as reported $ 89.0  

Teleconference Call

An earnings conference call will be held Wednesday, July 28, 2010 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time). Dial 1-866-770-7125 to participate, using passcode 95298529. International callers may dial 617-213-8066. For a digital replay available until August 4, 2010 dial 1-888-286-8010 (passcode 10400913). 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   06/30/10         03/31/10 Revenues Sales of oil and gas $ 151,525 $ 147,807 Sales of electricity 7,928 9,933 Gas marketing 5,004 8,272 Gain on derivatives 56,057 1,603 Settlement of Flying J bankruptcy claim 21,992 - Interest and other, net   1,796     164 Total   244,302     167,779 Expenses Operating costs – oil & gas 46,452 47,036 Operating costs – electricity 7,839 9,670 Production taxes 5,064 5,204 Depreciation, depletion & amortization - oil & gas 43,703 35,907 Depreciation, depletion & amortization - electricity 793 795 Gas marketing 4,357 7,786 General and administrative 12,155 13,835 Interest 16,340 17,447 Transaction costs on acquisitions, net of gain 1,908 727 Dry hole, abandonment, impairment & exploration 266 1,369 Bad debt recovery   (38,508 )   - Total   100,369     139,776   Income before income taxes 143,933 28,003 Income tax provision (benefit)   54,910     10,334 Income (loss) from continuing operations 89,023 17,669   Net income (loss) $ 89,023   $ 17,669   Basic net income (loss) per share $ 1.65   $ 0.34   Diluted net income (loss) per share $ 1.64   $ 0.34   Cash dividends per share $ 0.075 $ 0.075   CONDENSED BALANCE SHEETS (In thousands) (unaudited)         06/30/10         12/31/09   Assets Current assets $ 164,440 $ 103,476 Property, buildings & equipment, net 2,343,568 2,106,385 Fair value of derivatives 6,676 735 Other assets   26,398     29,539   $ 2,541,082   $ 2,240,135   Liabilities & Shareholders’ Equity Current liabilities $ 153,536 $ 152,137 Deferred taxes 302,065 237,161 Long-term debt 947,716 1,008,544 Other long-term liabilities 68,022 63,198 Fair value of derivatives 29,646 75,836 Shareholders’ equity   1,040,097     703,259   $ 2,541,082   $ 2,240,135     CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Three Months   06/30/10     03/31/10   Cash flows from operating activities: Net income $ 89,023 $ 17,669 Depreciation, depletion & amortization (DD&A) 44,495 36,702 Amortization of debt issuance costs and net discount 2,120 2,098 Gain on purchase of oil and natural gas properties 1,358 (1,358 ) Dry hole & impairment 221 1,207 Commodity derivatives (48,586 ) 2,476 Stock based compensation 1,976 3,031 Deferred income taxes 52,594 8,548 Cash paid for abandonment (1,512 ) (22 ) Bad debt recovery (38,508 ) - Net changes in assets and liabilities including book overdraft   (31,827 )   (6,836 )   Net cash provided by operating activities 71,354 63,515   Net cash used in investing activities (111,826 ) (186,940 ) Net cash provided by financing activities   40,654     118,171     Net increase (decrease) in cash and cash equivalents 182 (5,254 )   Cash and cash equivalents at beginning of year   57     5,311     Cash and cash equivalents at end of period $ 239   $ 57     COMPARATIVE OPERATING STATISTICS (unaudited)       Three Months   06/30/10           03/31/10         Change Oil and gas: Heavy Oil Production (Bbl/D) 17,492 17,752 Light Oil Production (Bbl/D) 4,377 2,754 Total Oil Production (Bbl/D) 21,869 20,506 Natural Gas Production (Mcf/D)   65,909     53,309   Net production-BOE per day 32,854 29,391 12 % Per BOE: Average realized sales price $ 50.81 $ 55.99 -9 % Average sales price including cash derivative $ 53.11 $ 57.09 -7 %   Oil, per Bbl: Average WTI price $ 78.05 $ 78.88 -1 % Price sensitive royalties (2.90 ) (3.04 ) Gravity differential and other (9.71 ) (8.12 ) Crude oil derivatives non cash amortization   (2.42 )   (1.72 ) Oil revenue $ 63.02 $ 66.00 -5 % Add: Crude oil derivatives non cash amortization 2.42 1.72 Crude Oil derivative cash settlements   0.01     (0.22 ) Average realized oil price $ 65.45 $ 67.50 -3 %   Natural gas price: Average Henry Hub price per MMBtu $ 4.09 $ 5.30 -23 % Conversion to Mcf 0.20 0.27 Natural gas derivatives non cash amortization 0.12 0.07 Location, quality differentials, other   0.02     (0.15 ) Natural gas revenue per Mcf $ 4.43 $ 5.49 -19 % Less: Natural gas derivatives non cash amortization (0.12 ) (0.07 ) Natural gas derivative cash settlements   0.46     0.11   Average realized natural gas price per Mcf $ 4.77 $ 5.53 -14 %   Operating costs $ 15.54 $ 17.78 -13 % Production taxes   1.69     1.97   -14 % Total operating costs $ 17.23 $ 19.75 -13 %   DD&A - oil and gas $ 14.62 $ 13.57 8 % General & administrative expenses $ 4.07 $ 5.23 -22 %   Interest expense $ 5.47 $ 6.60 -17 %