Berry Petroleum Enters Agreements to Purchase Wolfberry Oil Assets for $180 Million

Berry Petroleum Company (NYSE:BRY) announced that it has entered into agreements with a group of sellers to acquire their interests in properties on approximately 9,300 net acres in the Wolfberry trend in West Texas for a combined purchase price of $180 million in cash. Berry’s proved plus probable reserve estimates associated with the forty-acre development of the properties are approximately 35 million barrels of oil equivalent (MMBOE) with crude oil comprising 76% of these volumes. Upon completion of the acquisitions, the properties are expected to add approximately 2,200 barrels of oil equivalent per day (BOED) to Berry’s production during 2011.

Since entering the Permian basin in March of 2010, Berry has accumulated approximately 19,350 net acres in the Wolfberry trend. The $313 million of acquisitions in 2010 is expected to provide a five-year drilling inventory in the Wolfberry of 400 locations on forty-acre spacing with an additional 400 potential locations on twenty-acre spacing.

Robert Heinemann, president and chief executive officer, stated, "We are pleased to bring additional scalable, high margin oil assets into the portfolio which complements our base oil assets in California and Utah. We believe these acquisitions enhance our overall Permian operations with a contiguous 6,800 net acre block and strong per well recoveries of 180 MBOE. The first three years of expected production on these assets has a hedging floor of approximately $87 WTI which should allow these assets to generate operating margins of $62 per barrel. The Company’s existing Wolfberry assets, acquired earlier in 2010, are performing in line with expectations and production is 1,700 BOED today. With the acquisitions announced today, we now expect production from our Permian assets will grow to 9,000 BOED during the next four years.”

David Wolf, executive vice president and chief financial officer, stated “We expect to fund this acquisition under our credit facility and on a pro forma basis we will have liquidity of over $500 million. With this acquisition, our leverage should be in the range of 2.25 to 2.5 times EBITDA in 2011.”

The effective date of the transaction is October 1, 2010 with closing expected in December 2010 and is subject to customary closing conditions. Production from the properties to be acquired is expected to be approximately 1,200 BOED at closing. Contribution to the Company’s fourth quarter 2010 production will be minimal given the expected closing date.

2010 Capital Update

The Company expects 2010 capital spending will range from $290 million to $310 million. Additional capital requirements are attributable to the expedited development of the Company’s diatomite asset, an incremental 14 wells in the Uinta basin and increased costs in the Company’s East Texas operations.

2011 Capital Outlook

Assuming completion of the acquisitions in 2010, the Company plans to run four drilling rigs in the Permian basin during 2011 and spend approximately $130 million to drill approximately 75 wells. The Company’s capital budget for 2011, based on $75 WTI, is expected to be between $375 million and $425 million and should be fully funded from cash flow. Approximately 90% of the 2011 capital is expected to be directed towards the Company’s oil assets targeting oil production growth of at least 20%. Berry expects its total average 2011 production to be between 37,000 and 39,000 BOED. Of the expected 2011 production growth of approximately 15%, the acquired assets should contribute 6% with organic growth comprising 9%. Production volumes are expected to be 70% oil, which should drive corporate operating margins to $33 per BOE.

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 “estimate”, “expect”, "would," "will," "target," "goal," and forms of those words and others indicate forward-looking statements. These statements include but are not limited to forward-looking statements about acquisitions and the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, hedging activities, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Important factors which could affect actual results are discussed in Berry's 2009 Form 10-K filed with the Securities and Exchange Commission on February 25, 2010, as updated in the Company’s 10-Q filings subsequent to such date, under Part 1, Item A, Risk Factors and in Part II, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.

Oil and gas reserves disclaimer

The SEC requires oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, under existing economic condition, operating methods, and governmental regulations. Beginning with year-end reserves for 2009, the SEC permits the optional disclosure of probable and possible reserves. The SEC defines "probable" reserves as "those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered." Berry applies this definition in estimating probable reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered.

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