UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2000 Commission file number 1-9735 BERRY PETROLEUM COMPANY (Exact name of registrant as specified in its charter) DELAWARE 77-0079387 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 28700 Hovey Hills Road, P.O. Bin X, Taft, California 93268 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (661) 769-8811 Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) The number of shares of each of the registrant's classes of capital stock outstanding as of March 31, 2000, was 21,130,303 shares of Class A Common Stock ($.01 par value) and 898,892 shares of Class B Stock ($.01 par value). All of the Class B Stock is held by a shareholder who owns in excess of 5% of the outstanding stock of the registrant.
BERRY PETROLEUM COMPANY MARCH 31, 2000 INDEX PART I. Financial Information Page No. Item 1. Financial Statements Condensed Balance Sheets at March 31, 2000 and December 31, 1999 . . . . . . . . . . . . . . 3 Condensed Income Statements for the Three Month Periods Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . 4 Condensed Statements of Cash Flows for the Three Month Periods Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . 5 Notes to Condensed Financial Statements . . . . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations . . . . . . . . 7 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2 BERRY PETROLEUM COMPANY Part I. Financial Information Item 1. Financial Statements Condensed Balance Sheets (In Thousands, Except Share Information) March 31, December 31, 2000 1999 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 1,383 $ 980 Short-term investments available for sale 597 596 Accounts receivable 17,910 15,303 Prepaid expenses and other 1,885 2,080 ________ ________ Total current assets 21,775 18,959 Oil and gas properties (successful efforts basis), buildings and equipment, net 190,426 186,519 Other assets 2,076 2,171 ________ ________ $214,277 $207,649 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 10,976 $ 7,203 Accrued Liabilities 2,815 1,999 Federal and state income taxes payable 3,204 1,322 ________ ________ Total current liabilities 16,995 10,524 Long-term debt 44,000 52,000 Deferred income taxes 30,300 28,912 Shareholders' equity: Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares outstanding - - Capital stock, $.01 par value: Class A Common Stock, 50,000,000 shares Authorized; 21,130,303 shares issued and outstanding at March 31, 2000 (21,112,334 at December 31, 1999) 211 211 Class B Stock, 1,500,000 shares authorized; 898,892 shares issued and outstanding (liquidation preference of $899) 9 9 Capital in excess of par value 53,599 53,487 Retained earnings 69,163 62,506 ________ ________ Total shareholders' equity 122,982 116,213 ________ ________ $214,277 $207,649 ======== ======== The accompanying notes are an integral part of these financial statements. 3 BERRY PETROLEUM COMPANY Part I. Financial Information Item 1. Financial Statements Condensed Income Statements Three Month Periods Ended March 31, 2000 and 1999 (In Thousands, Except Per Share Information) (Unaudited) 2000 1999 Revenues: Sales of oil and gas $ 26,026 $ 9,225 Interest and other income, net 111 432 ________ ________ 26,137 9,657 Expenses: Operating costs 6,705 4,462 Depreciation, depletion and amortization 3,312 2,843 General and administrative 2,710 1,112 Interest 935 927 ________ ________ 13,662 9,344 ________ ________ Income before income taxes 12,475 313 Provision (benefit) for income taxes 3,616 (231) ________ ________ Net income $ 8,859 $ 544 ======== ======== Basic net income per share $ .40 $ .02 ======== ======== Diluted net income per share $ .40 $ .02 ======== ======== Cash dividends per share $ .10 $ .10 ======== ======== Weighted average number of shares of capital stock outstanding (used to calculate basic net income per share) 22,018 22,009 Effect of dilutive securities: Stock options 160 6 Other 20 4 ________ ________ Weighted average number of shares of capital stock used to calculate diluted net income per share 22,198 22,019 ======== ======== The accompanying notes are an integral part of these financial statements. 4 BERRY PETROLEUM COMPANY Part I. Financial Information Item 1. Financial Statements Condensed Statements of Cash Flows Three Month Periods Ended March 31, 2000 and 1999 (In Thousands) (Unaudited) 2000 1999 Cash flows from operating activities: Net income $ 8,859 $ 544 Depreciation, depletion and amortization 3,312 2,843 Deferred income tax liability 1,388 - Other, net (70) (98) ________ ________ Net working capital provided by operating activities 13,489 3,289 Increase in accounts receivable, prepaid expenses and other (2,412) (2,800) Increase (decrease) in current liabilities 6,471 (1,002) ________ ________ Net cash provided by (used in) operating activities 17,548 (513) Cash flows from investing activities: Capital expenditures (4,053) (2,590) Property acquisitions (3,034) (34,667) Other, net 12 (5) ________ ________ Net cash used in investing activities (7,075) (37,262) Cash flows from financing activities: Payment of long-term debt (8,000) - Proceeds from issuance of long-term debt - 34,585 Dividends paid (2,203) (2,201) Other 133 17 ________ ________ Net cash (used in) provided by financing activities (10,070) 32,401 Net increase (decrease) in cash and cash equivalents 403 (5,374) Cash and cash equivalents at beginning of year 980 7,058 ________ ________ Cash and cash equivalents at end of period $ 1,383 $ 1,684 ======== ======== The accompanying notes are an integral part of these financial statements. 5 BERRY PETROLEUM COMPANY Part I. Financial Information Item 1. Financial Statements Notes to Condensed Financial Statements March 31, 2000 (Unaudited) 1. All adjustments which are, in the opinion of management, necessary for a fair presentation of the Company's financial position at March 31, 2000 and December 31, 1999 and results of operations and cash flows for the three month periods ended March 31, 2000 and 1999 have been included. All such adjustments are of a normal recurring nature. The results of operations and cash flows are not necessarily indicative of the results for a full year. 2. The accompanying unaudited financial statements have been prepared on a basis consistent with the accounting principles and policies reflected in the December 31, 1999 financial statements. The December 31, 1999 Form 10-K should be read in conjunction herewith. The year-end condensed balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. 6 BERRY PETROLEUM COMPANY Part I. Financial Information Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company earned net income of $8.9 million, or $.40 per share, in the first quarter of 2000, on revenues of $26.1 million. This was up 1,680% from $.5 million, or $.02 per share, earned in the first quarter of 1999 and 10% higher than $8.1 million, or $.37 per share, earned in the fourth quarter of 1999. The following table presents certain comparative operating data for the three month periods: Three Months Ended -------------------------- Mar 31, Mar 31, Dec 31, 2000 1999 1999 Net Production - BOE per day 14,297 12,778 14,736 Per BOE: Average sales price $19.99 $ 8.01 $17.54 Operating costs 4.70 3.21 4.40 Production taxes .45 .67 .46 ----- ----- ----- Total operating costs 5.15 3.88 4.86 Depreciation & depletion (DD&A) 2.48 2.47 2.45 General and administrative expenses (G&A) 2.08 .97 1.91 Interest expense .72 .81 .72 Operating income was $16.1 million in the first quarter of 2000, up 705% from $2.0 million in the first quarter of 1999 and up 15% from $14.0 million in the fourth quarter of 1999. These operating results were the best ever achieved by the Company. The increase in operating income in the first quarter of 2000 compared to the first quarter of 1999 was due to higher oil prices and higher production. The average price of crude oil in the first quarter of 2000 was $19.99/BOE, a 150% increase from $8.01 in the first quarter of 1999. The first quarter of 1999 was hampered by some of the lowest inflation adjusted prices ever encountered in the industry. The other major factor in the increase in operating income from the first quarter of 1999 was higher production. Oil and gas production (BOE/day) in the first three months of 2000 averaged 14,297, 12% higher than 12,778 in the first quarter of 1999, but down 3% from 14,736 in the fourth quarter of 1999. Production increased from the first quarter of 1999 due to the acquisition of the Placerita properties in February 1999 and the effects of the 1999 drilling and workover activity. Production declined from the fourth quarter of 1999 due to lower steam availability to the Placerita properties and the temporary disruption of the South Midway-Sunset properties caused by the 3-D seismic survey in the first quarter of 2000. 7 The Company has already completed 13 of the 87 new wells included in the 2000 capital budget. The addition of all of these wells, several of which are horizontal wells, along with the probability of additional steam availability at Placerita during the summer months should increase production later in the year. Operating costs in the first quarter were $6.7 million, or $5.15/BOE, up 49% from $4.5 million, or $3.88/BOE, in the first quarter of 1999 and 2% higher than $6.6 million, or $4.86/BOE, in the fourth quarter of 1999. The largest factor in the increase from the first quarter of 1999 was a 6 square mile 3-D seismic survey performed on the South Midway-Sunset properties in the first quarter of 2000 at a cost of approximately $.7 million, or $.54/BOE. The results of this program will provide additional geologic information about the South Midway-Sunset properties and will be used to further exploit other potential accumulations and horizons. In addition, payroll and related expenses increased in the first quarter of 2000 compared to the first three months of 1999 due to an increase in employees related to the 1999 property acquisition. The Company also increased its well work activities to take advantage of the higher oil prices and performed repairs and maintenance to the Placerita and South Midway-Sunset water disposal and water treating facilities and several of the tank farms to handle increased water volumes. DD&A expense for the first quarter ($/BOE) was $2.48 comparable to $2.47 in the first quarter of 1999 and $2.45 in the fourth quarter of 1999. G&A expenses were $2.7 million in the first quarter of 2000, up $1.6 million and $.1 million from $1.1 million and $2.6 million in the first and fourth quarters of 1999, respectively. The increase from the first quarter of 1999 was primarily due to litigation expenses related to the Company's defense in a lawsuit in Los Angeles County Superior Court, which was settled in March 2000. The terms of the settlement included the payment of $3.0 million by the Company for the purchase of the Castruccio lease, adjacent to the Company's core Placerita properties, the assumption of certain abandonment obligations and the issuance of certain surface occupancy rights to the plaintiff in the case. Management estimates that the Castruccio lease will add at least 2.5 million barrels to the Company's proved reserves. The Company experienced an effective tax rate of 29% for the three-month period ending March 31, 2000 compared to an effective tax benefit of 74% for the same period last year. This significantly higher effective tax rate is due to the 150% increase in average oil prices in 2000 versus 1999's first quarter. Due to the Company's significant investment in numerous enhanced oil recovery projects in 2000, the Company's effective tax rate is anticipated to be well below the combined federal and state statutory rate. Liquidity and Capital Resources Working capital at March 31, 2000 was $4.8 million, down from $8.4 million at December 31, 1999. Net cash provided by operations was $17.5 million in the first three months of 2000, up dramatically from $.5 million used in operation for the same period of 1999. Higher oil prices and production combined to achieve robust cash flow for the quarter. Cash was used to retire $8.0 million long-term debt, fund capital expenditures of $4.1 million, make an acquisition of $3.0 million and pay dividends of $2.2 million. Long-term debt at March 31, 2000 was $44 million. 8 The Company is currently engaged in a very aggressive capital budget. The capital budget in 2000 is $22.2 million, a 144% increase from $9.1 million spent in 1999. The program includes 87 new wells, of which 20 are horizontal wells, 92 workovers and $5.2 million for facilities and other projects. It is the Company's goal to accelerate production and reach untapped reserves in the existing asset base. With success in implementation of the 2000 capital program, coupled with a modest budget in 2001, the Company expects to average over 17,000 BOE/day in 2001. Management anticipates that this ambitious capital program will be fully funded by internally generated funds. Future Developments The Company has sold its principal product, California heavy crude oil, by competitive bid to various pipeline entities for many years. The process usually resulted in four to eight customers receiving substantially all available Company operated crude oil production. However, as of April 1, 2000 the Company entered into a long-term arrangement with a major West Coast crude oil purchaser, whereby they will purchase the bulk of the Company's crude oil production for a period of 3 years. This arrangement includes terms which result in pricing in excess of the published postings by the major buyers of crude oil in California. Management believes that this sales arrangement will enhance the price realized by the Company for its crude oil production during the term of the contract. Forward Looking Statements "Safe harbor under the Private Securities Litigation Reform Act of 1995": With the exception of historical information, the matters discussed in this Form 10-Q are forward-looking statements that involve risks and uncertainties. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in commodity prices for oil, gas and electricity, environmental risks, drilling and operating risks, uncertainties about the estimates of reserves, Y2k non-compliance by the vendors, customers, the Company, etc. and government regulation. 9 BERRY PETROLEUM COMPANY Part II. Other Information Item 6. Exhibits and Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BERRY PETROLEUM COMPANY /s/ Jerry V. Hoffman Jerry V. Hoffman Chairman, President and Chief Executive Officer /s/ Ralph J. Goehring Ralph J. Goehring Senior Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Donald A. Dale Donald A. Dale Controller (Principal Accounting Officer) Date: May 8, 2000 10
5 0000778438 BERRY PETROLEUM COMPANY 1,000 3-MOS DEC-31-2000 MAR-31-2000 1,383 597 17,910 0 0 21,775 286,531 96,105 214,277 16,995 0 0 0 220 122,762 214,277 26,026 26,137 0 10,017 2,710 0 935 12,475 3,616 8,859 0 0 0 8,859 .40 .40