Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
x Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2004
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.) |
5201 Truxtun Avenue, Suite 300, Bakersfield, California |
|
93309-0640 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant's telephone number, including area code |
|
(661) 616-3900 |
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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES x NO o
The number of shares of each of the registrants classes of capital stock outstanding as of March 31, 2004, was 20,925,096 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, 2004
INDEX
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Page No. |
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PART I.Financial Information |
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Item 1.Financial Statements |
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Condensed Balance Sheets at March 31, 2004 and December 31, 2003 |
4 |
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Condensed Income Statements for the Three Month Periods Ended March 31, 2004 and 2003 |
5 |
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Condensed Statements of Comprehensive Income for the Three Month Periods Ended March 31, 2004 and 2003 |
5 |
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|
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Condensed Statements of Cash Flows for the Three Month Periods Ended March 31, 2004 and 2003 |
6 |
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|
|
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Notes to Condensed Financial Statements |
7 |
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Item 2.Management's Discussion and Analysis Of Financial Condition and Results of Operations |
20 |
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Item 3. Quantitative and Qualitative Disclosure About Market Risk |
24 |
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Item 4.Controls and Procedures |
25 |
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Part II. Other Information |
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Item 6. Exhibits and Reports on Form 8-K |
26 |
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SIGNATURE |
27 |
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TABLE OF CONTENTS
Explanatory Note
This Amendment No. 1 on Form 10-Q/A of the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 includes unaudited restated financial information for the three months ended March 31, 2004 and 2003. The original Form 10-Q was filed with the Securities and Exchange Commission on May 5, 2004. The purpose of this Amendment is to (i) restate the Companys previously reported financial information for the three months ended March 31, 2004 and 2003 to account for the Companys stock option plan using variable plan accounting as more fully described in Note 3 to the
condensed financial statements included in Item 1 of this Form 10-Q/A and (ii) restate the financial information for the three months ended March 31, 2004 (as restated for variable plan accounting for stock options described in (i) above) due to the Companys adoption of the fair value method of accounting for stock options in accordance with Statement of Financial Accounting Standards ("SFAS") No. 123 effective January 1, 2004 as more fully described in Note 4 to the
condensed financial statements included in Item 1 of this Form 10-Q/A. These
condensed financial statements should be read in conjunction with the financial statements and accompanying notes included in the Companys Form 10-K/A for the fiscal year ended December 31, 2003. Restated financial information has been included in Note 3 to the
condensed financial statements for the periods ending June 30, 2003 and September 30, 2003 for informational purposes.
All information contained in this Amendment is as of the original filing date of the Form 10-Q for the quarterly period ended March 31, 2004 and does not reflect any subsequent information or events other than the restatement of financial information referred to above. Forward looking statements have not been updated for events or operations subsequent to May 5, 2004.
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets
(In Thousands, Except Share Information) |
|
|
|
March 31,
2004
(Unaudited)
(Restated) |
|
December 31,
|
|
ASSETS |
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
9,383 |
|
$ |
10,658 |
|
Short-term investments available for sale |
|
|
665 |
|
|
663 |
|
Accounts receivable |
|
|
26,722 |
|
|
23,506 |
|
Deferred income taxes |
|
|
7,733 |
|
|
6,410 |
|
Prepaid expenses and other |
|
|
2,150 |
|
|
2,049 |
|
Total current assets |
|
|
46,653 |
|
|
43,286 |
|
|
|
|
|
|
|
|
|
Oil and gas properties (successful efforts basis), buildings and equipment, net |
|
|
306,545 |
|
|
295,151 |
|
Other assets |
|
|
2,593 |
|
|
1,940 |
|
|
|
$ |
355,791 |
|
$ |
340,377 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
31,315 |
|
$ |
32,490 |
|
Accrued liabilities |
|
|
4,678 |
|
|
4,214 |
|
Accrued Compensation |
|
|
4,478 |
|
|
- |
|
Income taxes payable |
|
|
6,057 |
|
|
4,412 |
|
Fair value of derivatives |
|
|
6,088 |
|
|
5,710 |
|
Total current liabilities |
|
|
52,616 |
|
|
46,826 |
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
Deferred income taxes |
|
|
41,321 |
|
|
38,559 |
|
Accrued Compensation |
|
|
887 |
|
|
- |
|
Long-term debt |
|
|
50,000 |
|
|
50,000 |
|
Abandonment obligation |
|
|
7,369 |
|
|
7,311 |
|
Other |
|
|
- |
|
|
343 |
|
Total long-term liabilities |
|
|
99,577 |
|
|
96,213 |
|
|
|
|
|
|
|
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Shareholders' equity: |
|
|
|
|
|
|
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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; 20,925,096 shares issued and outstanding at March 31, 2004 (20,904,372at December 31, 2003) |
|
|
209 |
|
|
209 |
|
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 |
|
|
53,300 |
|
|
56,475 |
|
Deferred Stock Option Compensation |
|
|
- |
|
|
(1,108 |
) |
Accumulated other comprehensive loss |
|
|
(3,267 |
) |
|
(3,632 |
) |
Retained earnings |
|
|
153,347 |
|
|
145,385 |
|
Total shareholders' equity |
|
|
203,598 |
|
|
197,338 |
|
|
|
$ |
355,791 |
|
$ |
340,377 |
|
The accompanying notes are an integral part of these financial statements.
BERRY PETROLEUM COMPANY |
|
Part I. Financial Information |
|
Item 1. Financial Statements |
|
Condensed Income Statements |
|
Three Month Periods Ended March 31, 2004 and 2003 |
|
(In Thousands, Except Per Share Information) |
|
(Unaudited) |
|
|
|
2004
(Restated) |
|
2003
(Restated) |
|
Revenues: |
|
|
|
|
|
|
|
Sales of oil and gas |
|
$ |
45,205 |
|
$ |
34,354 |
|
Sales of electricity |
|
|
11,934 |
|
|
12,418 |
|
Interest and other income, net |
|
|
203 |
|
|
20 |
|
|
|
|
57,342 |
|
|
46,792 |
|
Expenses: |
|
|
|
|
|
|
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Operating costs - oil and gas production |
|
|
18,020 |
|
|
13,184 |
|
Operating costs - electricity generation |
|
|
11,934 |
|
|
12,418 |
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Depreciation, depletion and amortization |
|
|
7,209 |
|
|
4,454 |
|
General and administrative |
|
|
6,575 |
|
|
427 |
|
Dry hole, abandonment and impairment |
|
|
- |
|
|
2,487 |
|
Interest |
|
|
531 |
|
|
209 |
|
|
|
|
44,269 |
|
|
33,179 |
|
|
|
|
|
|
|
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Income before income taxes |
|
|
13,073 |
|
|
13,613 |
|
Provision for income taxes |
|
|
2,709 |
|
|
3,338 |
|
|
|
|
|
|
|
|
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Net income |
|
$ |
10,364 |
|
$ |
10,275 |
|
|
|
|
|
|
|
|
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Basic net income per share |
|
$ |
.48 |
|
$ |
.47 |
|
Diluted net income per share |
|
$ |
.47 |
|
$ |
.47 |
|
Cash dividends per share |
|
$ |
.11 |
|
$ |
.10 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares of capital stock outstanding used to calculate basic net income per share |
|
|
21,817 |
|
|
21,758 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
Stock options |
|
|
404 |
|
|
120 |
|
Other |
|
|
52 |
|
|
42 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares of capital stock used to calculate diluted net income per share |
|
|
22,273 |
|
|
21,920 |
|
|
|
|
|
|
|
|
|
Condensed Statements of Comprehensive Income
Three Month Periods Ended March 31, 2004 and 2003
(in Thousands)
(Unaudited) |
|
|
|
2004 |
|
2003 |
|
|
|
|
|
|
|
Net income |
|
$ |
10,364 |
|
$ |
10,275 |
|
Unrealized gains (losses) on derivatives, (net of income taxes of $243 and $(1,422), respectively) |
|
|
364 |
|
|
(2,133 |
) |
Comprehensive income |
|
$ |
10,728 |
|
$ |
8,142 |
|
The accompanying notes are an integral part of these financial statements.
BERRY PETROLEUM COMPANY |
|
Part I. Financial Information |
|
Item 1. Financial Statements |
|
Condensed Statements of Cash Flows |
|
Three Month Periods Ended March 31, 2004 and 2003 |
|
(In Thousands) |
|
(Unaudited) |
|
|
|
2004 |
|
2003 |
|
|
|
(Restated) |
|
(Restated) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
10,364 |
|
$ |
10,275 |
|
Depreciation, depletion and amortization |
|
|
7,209 |
|
|
4,454 |
|
Dry hole, abandonment and impairment |
|
|
(105 |
) |
|
2,487 |
|
Deferred income tax liability |
|
|
2,270 |
|
|
990 |
|
Deferred stock option compensation |
|
|
3,240 |
|
|
(1,888 |
) |
Other, net |
|
|
147 |
|
|
60 |
|
(Increase) in current assets other than cash, cash equivalents and short-term investments |
|
|
(4,490 |
) |
|
(4,566 |
) |
Increase(decrease)in current liabilities |
|
|
931 |
|
|
(3,453 |
) |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
19,566 |
|
|
8,359 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(18,440 |
) |
|
(2,324 |
) |
Property acquisitions |
|
|
- |
|
|
(2,547 |
) |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(18,440 |
) |
|
(4,871 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Dividends paid |
|
|
(2,401 |
) |
|
(2,175 |
) |
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(2,401 |
) |
|
(2,175 |
) |
|
|
|
|
|
|
|
|
Net (decrease)increase in cash and cash equivalents |
|
|
(1,275 |
) |
|
1,313 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
10,658 |
|
|
9,866 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
9,383 |
|
$ |
11,179 |
|
|
|
|
|
|
|
|
|
Supplemental non-cash activity: |
|
|
|
|
|
|
|
Increase(decrease) in fair value of derivatives: |
|
|
|
|
|
|
|
Current (net of income taxes of $(151) and $(1,363) in 2004 and 2003, respectively) |
|
$ |
(227 |
) |
$ |
(2,045 |
) |
Non-current (net of income taxes of $394 and$(59) in 2004 and 2003, respectively) |
|
|
591 |
|
|
(88 |
) |
|
|
|
|
|
|
|
|
Net increase (decrease) to accumulated other comprehensive income |
|
$ |
364 |
|
$ |
(2,133 |
) |
The accompanying notes are an integral part of these financial statements.
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
1. All adjustments which are, in the opinion of Management, necessary for a fair presentation of the Companys financial position at March 31, 2004 and December 31, 2003 and results of operations and cash flows for the three-month periods ended March 31, 2004 and 2003 have been included. All such adjustments are of a normal recurring nature, except as indicated in Notes 3 and 4. 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, 2003 financial statements, except as indicated in Notes 3 and 4. The December 31, 2003 Form 10-K/A 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 of America.
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options
Amendment No. 1 on Form 10-Q/A of the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 includes unaudited restated financial information for the three months ended March 31, 2004 and 2003. The original Form 10-Q was filed with the Securities and Exchange Commission on May 5, 2004. The purpose of the Amendment is to (i) restate the Companys previously reported financial information for the three months ended March 31, 2004 and 2003 to account for the Companys stock option plan using variable plan accounting and (ii) restate the financial information for the three months ended March 31, 2004 (as restated for variable plan accounting for stock options described in (i) above) due to the Companys adoption of the fair value method of accounting for stock options in accordance w
ith Statement of Financial Accounting Standards ("SFAS") No. 123 effective January 1, 2004 as more fully described in Note 4 to the financial statements.
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
The Company restated its financial position as of December 31, 2003 and 2002 and results of operations and cash flows for the years ended December 31, 2003, 2002, and 2001, to account for the Companys stock option plan using variable plan accounting, insofar as the Company had permitted option holders to exercise options by surrendering underlying unexercised options in payment of the exercise price of the options and related taxes. While the Company had accounted for options issued under the plan as fixed awards with compensation expense recorded for certain option exercises, it was determined that variable plan accounting is required under generally accepted accounting principles in the United States. The use of variable plan accounting requires a charge to compensation expense, commencing at the grant date, in an
amount by which the market price of the Companys stock covered by the grant exceeds the option price. This accounting continues and subsequent changes in the market price of the Companys stock from the date of grant to the date of exercise or forfeiture result in a change in the measure of compensation cost for the award being recognized but not resulting in an accumulated adjustment below zero. Amounts in the ensuing discussion have been adjusted for these restatements where applicable.
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
The effect of the restatement to use variable plan accounting is as follows:
Condensed Income Statements
|
|
Three Months Ended March 31, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
46,792 |
|
$ |
- |
|
$ |
46,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
25,602 |
|
|
- |
|
|
25,602 |
|
Depreciation, depletion & amortization |
|
|
4,454 |
|
|
- |
|
|
4,454 |
|
General & administrative |
|
|
2,257 |
|
|
(1,830 |
) |
|
427 |
|
Interest |
|
|
209 |
|
|
- |
|
|
209 |
|
Dry hole, abandonment and impairment |
|
|
2,487 |
|
|
- |
|
|
2,487 |
|
|
|
|
35,009 |
|
|
(1,830 |
) |
|
33,179 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
11,783 |
|
|
1,830 |
|
|
13,613 |
|
Provision for income taxes |
|
|
2,606 |
|
|
732 |
|
|
3,338 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
9,177 |
|
$ |
1,098 |
|
$ |
10,275 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.42 |
|
$ |
0.05 |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.42 |
|
$ |
0.05 |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate basic net income per share) |
|
|
21,758 |
|
|
|
|
|
21,758 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
120 |
|
|
|
|
|
120 |
|
Other |
|
|
42 |
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate diluted net income per share) |
|
|
21,920 |
|
|
|
|
|
21,920 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Income Statements
|
|
Three Months Ended June 30, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
39,593 |
|
$ |
- |
|
$ |
39,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
25,525 |
|
|
- |
|
|
25,525 |
|
Depreciation, depletion & amortization |
|
|
4,729 |
|
|
- |
|
|
4,729 |
|
General & administrative |
|
|
2,404 |
|
|
2,675 |
|
|
5,079 |
|
Interest |
|
|
268 |
|
|
- |
|
|
268 |
|
|
|
|
32,926 |
|
|
2,675 |
|
|
35,601 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
6,667 |
|
|
(2,675 |
) |
|
3,992 |
|
Provision for income taxes |
|
|
157 |
|
|
(1,070 |
) |
|
(913 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,510 |
|
$ |
(1,605 |
) |
$ |
4,905 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.30 |
|
$ |
(0.07 |
) |
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.30 |
|
$ |
(0.08 |
) |
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate basic net income per share) |
|
|
21,764 |
|
|
|
|
|
21,764 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
145 |
|
|
|
|
|
145 |
|
Other |
|
|
45 |
|
|
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate diluted net income per share) |
|
|
21,954 |
|
|
|
|
|
21,954 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Income Statements
|
|
Six Months Ended June 30, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
86,385 |
|
$ |
- |
|
$ |
86,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
51,127 |
|
|
- |
|
|
51,127 |
|
Depreciation, depletion & amortization |
|
|
9,183 |
|
|
- |
|
|
9,183 |
|
General & administrative |
|
|
4,661 |
|
|
845 |
|
|
5,506 |
|
Interest |
|
|
477 |
|
|
- |
|
|
477 |
|
Dry hole, abandonment and impairment |
|
|
2,487 |
|
|
- |
|
|
2,487 |
|
|
|
|
67,935 |
|
|
845 |
|
|
68,780 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
18,450 |
|
|
(845 |
) |
|
17,605 |
|
Provision for income taxes |
|
|
2,763 |
|
|
(338 |
) |
|
2,425 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
15,687 |
|
$ |
(507 |
) |
$ |
15,180 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.72 |
|
$ |
(0.02 |
) |
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.72 |
|
$ |
(0.03 |
) |
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate basic net income per share) |
|
|
21,761 |
|
|
|
|
|
21,761 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
130 |
|
|
|
|
|
130 |
|
Other |
|
|
43 |
|
|
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate diluted net income per share) |
|
|
21,934 |
|
|
|
|
|
21,934 |
|
|
|
|
|
|
|
|
|
|
|
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Income Statements
|
|
Three Months Ended September 30, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
44,458 |
|
$ |
- |
|
$ |
44,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
27,176 |
|
|
- |
|
|
27,176 |
|
Depreciation, depletion & amortization |
|
|
5,167 |
|
|
- |
|
|
5,167 |
|
General & administrative |
|
|
2,002 |
|
|
347 |
|
|
2,349 |
|
Interest |
|
|
368 |
|
|
- |
|
|
368 |
|
|
|
|
34,713 |
|
|
347 |
|
|
35,060 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
9,745 |
|
|
(347 |
) |
|
9,398 |
|
Provision for income taxes |
|
|
1,710 |
|
|
(139 |
) |
|
1,571 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
8,035 |
|
$ |
(208 |
) |
$ |
7,827 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.37 |
|
$ |
(0.01 |
) |
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.36 |
|
$ |
(0.01 |
) |
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate basic net income per share) |
|
|
21,776 |
|
|
|
|
|
21,776 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
242 |
|
|
|
|
|
242 |
|
Other |
|
|
47 |
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate diluted net income per share) |
|
|
22,065 |
|
|
|
|
|
22,065 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Income Statements
|
|
Nine Months Ended September 30, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
130,843 |
|
$ |
- |
|
$ |
130,843 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
78,303 |
|
|
- |
|
|
78,303 |
|
Depreciation, depletion & amortization |
|
|
14,350 |
|
|
- |
|
|
14,350 |
|
General & administrative |
|
|
6,663 |
|
|
1,192 |
|
|
7,855 |
|
Interest |
|
|
845 |
|
|
- |
|
|
845 |
|
Dry hole, abandonment and impairment |
|
|
2,487 |
|
|
- |
|
|
2,487 |
|
|
|
|
102,648 |
|
|
1,192 |
|
|
103,840 |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
28,195 |
|
|
(1,192 |
) |
|
27,003 |
|
Provision for income taxes |
|
|
4,473 |
|
|
(477 |
) |
|
3,996 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
23,722 |
|
$ |
(715 |
) |
$ |
23,007 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
1.09 |
|
$ |
(0.03 |
) |
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
1.08 |
|
$ |
(0.03 |
) |
$ |
1.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate basic net income per share) |
|
|
21,766 |
|
|
|
|
|
21,766 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
107 |
|
|
|
|
|
107 |
|
Other |
|
|
44 |
|
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of capital stock outstanding |
|
|
|
|
|
|
|
|
|
|
(used to calculate diluted net income per share) |
|
|
21,917 |
|
|
|
|
|
21,917 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Statements of Cash Flows
|
|
Three Months Ended |
|
|
|
March 31, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
9,177 |
|
$ |
1,098 |
|
$ |
10,275 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided in operating activities |
|
|
(818 |
) |
|
(1,098 |
) |
|
(1,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
8,359 |
|
|
- |
|
|
8,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(4,871 |
) |
|
- |
|
|
(4,871 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
(2,175 |
) |
|
- |
|
|
(2,175 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
1,313 |
|
|
- |
|
|
1,313 |
|
Cash and cash equivalents at beginning of year |
|
|
9,866 |
|
|
- |
|
|
9,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
11,179 |
|
$ |
- |
|
$ |
11,179 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Statements of Cash Flows
|
|
Six Months Ended |
|
|
|
June 30, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
15,687 |
|
$ |
(507 |
) |
$ |
15,180 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided in operating activities |
|
|
6,718 |
|
|
507 |
|
|
7,225 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
22,405 |
|
|
- |
|
|
22,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(19,902 |
) |
|
- |
|
|
(19,902 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
(5,441 |
) |
|
- |
|
|
(5,441 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
(2,938 |
) |
|
- |
|
|
(2,938 |
) |
Cash and cash equivalents at beginning of year |
|
|
9,866 |
|
|
- |
|
|
9,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
6,928 |
|
$ |
- |
|
$ |
6,928 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
3. Restatement of Prior Financial Information for Variable Accounting for Stock Options (Cont'd)
Condensed Statements of Cash Flows
|
|
Nine Months Ended |
|
|
|
September 30, 2003 |
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
|
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
23,722 |
|
$ |
(715 |
) |
$ |
23,007 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided in operating activities |
|
|
16,267 |
|
|
715 |
|
|
16,982 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
39,989 |
|
|
- |
|
|
39,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(70,375 |
) |
|
- |
|
|
(70,375 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
31,088 |
|
|
- |
|
|
31,088 |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
702 |
|
|
- |
|
|
702 |
|
Cash and cash equivalents at beginning of year |
|
|
9,866 |
|
|
- |
|
|
9,866 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
10,568 |
|
$ |
- |
|
$ |
10,568 |
|
4. Adoption of Fair Value Accounting for Stock Based Compensation
Effective January 1, 2004, the Company voluntarily adopted the fair value method of accounting for its stock option plan. The modified prospective method was selected as described in SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure". Under this method, the Company has restated results for the first quarter of 2004 to recognize stock compensation expense as if it had applied the fair value method to account for unvested stock options from its original effective date. Stock compensation expense is recognized from the date of grant to the vesting date. During the quarters ended March 31, 2004 and 2003, the Company recorded stock option compensation expense/(benefit) of $3.6 million and $(1.8) million, respectively, which is included in General and Administrative expense.
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
4. Adoption of Fair Value Accounting for Stock Based Compensation (Cont'd)
The Company has determined that a portion of its stock option compensation under SFAS 123, "Accounting for Stock-based Compensation," is required to be calculated under variable plan accounting; however, the majority of stock option compensation is accounted for under the fair value method. In accordance with variable plan accounting, the Company will recognize a corresponding liability determined by a mark-to-market valuation of the Companys stock at each financial reporting date. Accordingly, as of March 31, 2004, $4.5 million and $.9 million have been recorded as current and non-current liabilities, respectively.
The effect of the restatement to use variable plan accounting and the effect of the adoption of SFAS No. 123 effective January 1, 2004 are as follows:
Condensed Balance Sheet
|
|
March 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
SFAS 123 |
|
As |
|
|
|
Reported |
|
|
|
|
|
Adjustments |
|
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
$ |
4,850 |
|
$ |
4,542 |
|
$ |
9,400 |
|
$ |
(1,666 |
) |
$ |
7,733 |
|
Other assets |
|
$ |
2,174 |
|
$ |
665 |
|
$ |
2,839 |
|
$ |
(246 |
) |
$ |
2,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
352,496 |
|
$ |
5,207 |
|
$ |
357,703 |
|
$ |
(1,912 |
) |
$ |
355,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes payable |
|
$ |
6,360 |
|
$ |
(128 |
) |
$ |
6,232 |
|
$ |
(175 |
) |
$ |
6,057 |
|
Accrued compensation, current |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
4,478 |
|
$ |
4,478 |
|
Accrued compensation, non-current |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
887 |
|
$ |
887 |
|
Deferred income taxes |
|
$ |
40,797 |
|
$ |
524 |
|
$ |
41,321 |
|
$ |
- |
|
$ |
41,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
146,607 |
|
|
396 |
|
|
147,003 |
|
|
5,190 |
|
|
152,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock |
|
|
218 |
|
|
- |
|
|
218 |
|
|
- |
|
|
218 |
|
Capital in excess of par value |
|
|
49,736 |
|
|
13,668 |
|
|
63,404 |
|
|
(10,104 |
) |
|
53,300 |
|
Accumulated other comprehensive loss |
|
|
(3,267 |
) |
|
- |
|
|
(3,267 |
) |
|
- |
|
|
(3,267 |
) |
Retained earnings |
|
|
159,202 |
|
|
(8,857 |
) |
|
150,345 |
|
|
3,002 |
|
|
153,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
|
$ |
352,496 |
|
$ |
5,207 |
|
$ |
357,703 |
|
$ |
(1,912 |
) |
$ |
355,791 |
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
4. Adoption of Fair Value Accounting for Stock Based Compensation (Cont'd)
Condensed Income Statement
|
|
Three Months Ended March 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
SFAS 123 |
|
As |
|
|
|
Reported |
|
|
|
|
|
Adjustments |
|
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
57,342 |
|
$ |
- |
|
$ |
57,342 |
|
$ |
- |
|
$ |
57,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs |
|
|
29,954 |
|
|
- |
|
|
29,954 |
|
|
- |
|
|
29,954 |
|
Depreciation, depletion & amortization |
|
|
7,209 |
|
|
- |
|
|
7,209 |
|
|
- |
|
|
7,209 |
|
General & administrative |
|
|
3,301 |
|
|
7,978 |
|
|
11,279 |
|
|
(4,704 |
) |
|
6,575 |
|
Interest |
|
|
531 |
|
|
- |
|
|
531 |
|
|
- |
|
|
531 |
|
|
|
|
40,995 |
|
|
7,978 |
|
|
48,973 |
|
|
(4,704 |
) |
|
44,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
16,347 |
|
|
(7,978 |
) |
|
8,369 |
|
|
4,704 |
|
|
13,073 |
|
Provision for income taxes |
|
|
4,198 |
|
|
(3,191 |
) |
|
1,007 |
|
|
1,702 |
|
|
2,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
12,149 |
|
$ |
(4,787 |
) |
$ |
7,362 |
|
$ |
3,002 |
|
$ |
10,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
|
$ |
0.56 |
|
$ |
(0.22 |
) |
$ |
0.34 |
|
$ |
0.14 |
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.55 |
|
$ |
(0.21 |
) |
$ |
0.34 |
|
$ |
0.13 |
|
$ |
0.47 |
|
Condensed Statement of Cash Flow
|
|
Three Months Ended |
|
|
|
March 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously |
|
Adjustments |
|
Restated |
|
SFAS 123 |
|
As |
|
|
|
Reported |
|
|
|
|
|
Adjustments |
|
Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
12,149 |
|
$ |
(4,787 |
) |
$ |
7,362 |
|
$ |
3,002 |
|
$ |
10,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided in operating activities |
|
|
7,417 |
|
|
4,787 |
|
|
12,204 |
|
|
(3,002 |
) |
|
9,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
19,566 |
|
|
|
|
|
19,566 |
|
|
- |
|
|
19,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(18,440 |
) |
|
- |
|
|
(18,440 |
) |
|
- |
|
|
(18,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
(2,401 |
) |
|
- |
|
|
(2,401 |
) |
|
- |
|
|
(2,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
(1,275 |
) |
|
- |
|
|
(1,275 |
) |
|
- |
|
|
(1,275 |
) |
Cash and cash equivalents at beginning of year |
|
|
10,658 |
|
|
- |
|
|
10,658 |
|
|
- |
|
|
10,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
9,383 |
|
$ |
- |
|
$ |
9,383 |
|
$ |
- |
|
$ |
9,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BERRY PETROLEUM COMPANY |
Part I. Financial Information |
Item 1. Financial Statements |
Notes to Condensed Financial Statements |
March 31, 2004 |
(Unaudited) |
4. Adoption of Fair Value Accounting for Stock Based Compensation (Cont'd)
If the fair value method had been used to record stock option expense for the three months ended March 31, 2003, the following would have been recorded (in thousands, except per share data):
|
|
Three Months |
|
|
|
Ended |
|
|
|
March 31, 2003 |
|
|
|
(Restated) |
|
Compensation benefit, net of income taxes: |
|
|
|
|
As reported |
|
$ |
(1,078 |
) |
Pro forma |
|
|
(380 |
) |
|
|
|
|
|
Net income: |
|
|
|
|
As reported |
|
|
10,275 |
|
Pro forma |
|
|
9,577 |
|
|
|
|
|
|
Basic net income per share: |
|
|
|
|
As reported |
|
|
0.47 |
|
Pro forma |
|
|
0.44 |
|
|
|
|
|
|
Diluted net income per share: |
|
|
|
|
As reported |
|
|
0.47 |
|
Pro forma |
|
|
0.44 |
|
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 a record net income of $10.4 million, or $.47 per share (diluted), on revenues of $57.3 million in the first quarter of 2004, compared to net income of $10.3 million, or $.47 per share (diluted), in the first quarter of 2003, and up 11% from net income of $9.4 million, or $.42 per share (diluted), in the fourth quarter of 2003. Results in the first quarter of 2003 included an after-tax charge of $1.4 million, representing the cost of an unsuccessful pilot coalbed methane project and associated leasehold acquisition costs in Kansas.
The following table presents certain comparative operating data for the first quarters of 2004 and 2003 and the fourth quarter of 2003.
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
Mar 31,
2004 |
|
Mar 31,
2003 |
|
Dec 31,
2003 |
|
Oil and gas: |
|
|
|
|
|
|
|
|
|
|
Net production - BOE/day |
|
|
19,395 |
|
|
15,736 |
|
|
18,550 |
|
Per BOE: |
|
|
|
|
|
|
|
|
|
|
Average sales price, net of hedges (1) |
|
$ |
25.58 |
|
$ |
24.23 |
|
$ |
22.68 |
|
Operating costs (2) |
|
|
9.24 |
|
|
8.78 |
|
|
8.30 |
|
Production taxes |
|
|
.97 |
|
|
.53 |
|
|
.70 |
|
Total operating costs |
|
|
10.21 |
|
|
9.31 |
|
|
9.00 |
|
Depreciation, depletion and amortization (DD&A) |
|
|
4.08 |
|
|
3.15 |
|
|
3.61 |
|
General and administrative expenses(G&A)(3) |
|
|
3.73 |
|
|
.30 |
|
|
2.94 |
|
Interest expense |
|
|
.30 |
|
|
.15 |
|
|
.33 |
|
|
|
|
|
|
|
|
|
|
|
|
Electricity: |
|
|
|
|
|
|
|
|
|
|
Electric power produced - MWh/day |
|
|
2,167 |
|
|
2,137 |
|
|
2,101 |
|
Electric power sold - MWh/day |
|
|
1,956 |
|
|
1,951 |
|
|
1,964 |
|
Average sales price, net of hedges - $/MWh |
|
|
67.05 |
|
|
70.71 |
|
|
62.20 |
|
Fuel gas cost - $/MMBtu |
|
|
5.09 |
|
|
5.40 |
|
|
4.37 |
|
|
|
|
|
|
|
|
|
|
|
|
(1)Comparative average West Texas Intermediate (WTI) price |
|
$ |
35.25 |
|
$ |
33.80 |
|
$ |
31.16 |
|
(2)Includes monthly expenses in excess of monthly revenues from cogeneration operations |
|
|
1.81 |
|
|
1.72 |
|
|
1.55 |
|
(3)G&A expense related to stock options for the three months ended March 31 and December 31, 2003 are based on the variable method of accounting under APB No. 25 compared to March 31, 2004 which is presented under the fair value method under SFAS 123. See Notes
3 and 4 to the condensed financial statements. |
|
|
|
|
|
|
|
|
|
|
BOE = Barrels of Oil Equivalent
The Companys production of oil and gas (BOE/day) in the first quarter of 2004 improved to 19,395, up 23% from 15,736 in the first quarter of 2003 and up 5% from 18,550 in the fourth quarter of 2003. Increased production is due primarily to the acquisition of the Brundage Canyon property in Utah in August 2003 and the subsequent development thereof. At Brundage Canyon, the Company drilled 27 new wells during 2003 and 14 new wells during the first quarter of 2004. Production from Brundage Canyon averaged approximately 2,100 BOE per day during the fourth quarter of 2003, increasing to approximately 3,200 BOE per day during the first quarter of 2004. To date, the performance of new wells has exceeded Managements expectations with current net production from the field at approximately 3,700 BOE per day. The Compan
y plans to drill, at a minimum, an additional 30 wells at Brundage Canyon during 2004.
Production from the Companys California properties in the first quarter of 2004 remained strong and was within 1% of the record production of 16,164 BOE per day in the fourth quarter of 2003. The Company plans to drill a total of 44 wells on its California properties in 2004. With production increases projected from the Companys Brundage Canyon and California properties, Management is targeting total production in 2004 to exceed 20,500 BOE per day, up approximately 24% from 2003.
The average price received per BOE, net of hedges, for the Companys crude oil in the first quarter of 2004 was $25.58 per barrel, up 6% from $24.23 per barrel received in the first quarter of 2003 and up 13% from $22.68 per barrel received in the fourth quarter of 2003.
The Company has continued its practice of hedging a portion of its production to protect cash flows from severe revenue price declines. See "Item 3. Quantitative and Qualitative Disclosures About Market Risk" for information related to these agreements and their impact on future revenues. The Company nets its oil hedging gains or losses into its revenue from the sale of oil and gas. For the first quarter of 2004, the effect of these agreements was to reduce the net realized price of crude oil by $2.68 per barrel compared to a reduction of $2.62 per barrel in the first quarter of 2003 and $1.91 per barrel in the fourth quarter of 2003. The Company did not enter into any new hedging arrangements in the first quarter of 2004.
The Company sells approximately 85 MW of electricity from its cogeneration facilities. Approximately 65 MW is sold to utilities under Standard Offer (SO) contracts that are scheduled to terminate on December 31, 2004. In January 2004, the California Public Utilities Commission (CPUC) issued a decision that orders the utilities to continue to purchase energy and capacity from Qualified Facilities (QFs), such as Berry, under 5-year SO contracts. The CPUC recently initiated a rulemaking to determine the price that will be paid under these SO contracts. The Company is carefully reviewing this and other options for the sale of energy beginning in 2005. The rema
ining 20 MW of electricity continues to be sold to a utility under a long-term SO contract that is scheduled to terminate in March 2009.
Operating costs for the first three months of 2004 of $18.0 million were up 37% from $13.2 million in the first quarter of 2003 due primarily to the addition of a new core area in Utah. The operating costs in the first quarter of 2004 were up $2.6 million, or 17%, from $15.4 million in the fourth quarter of 2003 due primarily to increased steam costs.
Operating costs on a per BOE basis in Utah are lower than in California due primarily to steam costs incurred to produce heavy crude oil in California. Companywide, the increase on a per BOE basis from the first quarter of 2003 to the first quarter of 2004 was due primarily to higher steam costs resulting from a 10% increase in injected steam volumes. The increase on a per BOE basis from the fourth quarter of 2003 to the first quarter of 2004 was also related to higher steam costs, in this case, due to higher fuel costs. The Company anticipates operating costs to average between $9.50 and $10.50 per BOE in 2004.
DD&A for the first quarter of 2004 was $7.2 million, up 62% from $4.5 million in the first quarter of 2003 and up 17% from $6.2 million in the fourth quarter of 2003. DD&A was higher due to the acquisition of the Brundage Canyon properties in 2003 and the cumulative effect of development activities in recent years. On a per BOE basis, DD&A was $4.08 in the first quarter of 2004, up from $3.15 and $3.61 in the first quarter of 2003 and fourth quarter of 2003, respectively. The Company anticipates its average DD&A rate for 2004 will approximate $3.80 to $4.20 per BOE.
G&A for the first quarter of 2004 was $6.6 million, or $3.73 per BOE, up from $.4 million, or $.30 per BOE, in the first quarter of 2003 and $5.0 million, or $2.94 per BOE, in the fourth quarter of 2003. The increase in the first quarter of 2004 is primarily due to compensation expense of $3.6 million in the first quarter of 2004 as compared to a $(1.8) million reduction in the first quarter of 2003, due to recognizing compensation expense under the variable method of accounting. The effect of recording these transactions has no effect on the cash position of the Company (See Note 4 to the condensed financial statements related to the impact of adopting the fair value method of accounting for stock options under SFAS No. 123, effectiv
e January 1, 2004). For 2004, the Company expects G&A costs of approximately $12.0 million to $13.5 million with the primary variable being the quantity of stock option exercises. The Company estimates G&A costs to range from $1.60 to $1.80 per BOE in 2004.
The Company experienced an effective tax rate of 21% for the first quarter of 2004 compared to 25% for the same period last year. The Company continues to invest in qualifying enhanced oil recovery (EOR) projects. However, the anticipated EOR credit in 2004 relative to higher pre-tax income resulting from higher oil prices and increased production resulted in a higher effective tax rate compared to the 2003 period. Based on current oil prices, the Company anticipates an effective tax rate for 2004 between 26% and 30%.
Liquidity and Capital Resources
Working capital as of March 31, 2004 was negative $5.9 million, down from $3.5 million as of March 31, 2003 and up from a negative $3.5 million as of December 31, 2003. Net cash provided by operating activities was $19.6 million in the first quarter of 2004, up from $8.4 million in the first quarter of 2003 due to higher production levels resulting from the acquisition of Brundage Canyon, improved production on California properties and increases in oil prices, and down from $24.8 million in the fourth quarter of 2003 due primarily to a $10.2 million payment in the first quarter of 2004 for an annual price-based royalty on a Company property.
Cash was also used to fund $18.4 million in capital expenditures in the first quarter of 2004 which included drilling 35 new wells and completing 17 workovers. Of these totals, 21 new wells were drilled and 9 workovers were performed in California and 14 new wells were drilled and 8 workovers were performed on the Brundage Canyon properties.
The Company plans to spend a total of approximately $53 million in 2004 on capital projects to drill a total of 44 new wells and perform 63 workovers in California and to drill a total of 44 new wells and perform 20 workovers in Brundage Canyon, and drill an additional 7 wells and perform 2 workovers in other Rocky Mountain and Mid-Continent properties. If WTI prices remain above $30 per barrel, the Company may accelerate some drilling projects. Excess cash will be targeted to acquisitions, additional development and debt reduction.
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, but are not limited to, the timing and extent of changes in commodity prices for oil, gas and electricity, a limited marketplace for electricity sales within California, counterparty risk, competition, environmental risks, litigation uncertainties, drilling, development and operating risks, the availability of drilling rigs and other support services, legislative and/or judicial decisions and other government regulations.
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company enters into various financial contracts to hedge its exposure to commodity price risk associated with its crude oil production, electricity production and net natural gas volumes purchased for its steaming operations. These contracts related to crude oil and natural gas have historically been in the form of zero-cost collars and swaps. The Company generally attempts to hedge between 25% and 50% of its anticipated crude oil production each year and up to 30% of its anticipated net natural gas purchased each year. All of these hedges have historically been deemed to be cash flow hedges with the mark-to-market valuations of the collars provided by external sources, based on prices that are actually quoted.
Based on NYMEX futures prices as of March 31, 2004, (WTI $33.82; Henry Hub (HH) $5.68) the Company would expect to make pre-tax future cash payments over the remaining term of its crude oil and natural gas hedges in place as follows:
|
|
|
|
|
Impact of percent change in futures prices |
|
|
|
|
|
on earnings |
|
|
|
NYMEX |
|
|
|
|
|
Futures |
|
|
-20% |
|
|
-10% |
|
|
+10% |
|
|
+20% |
|
Average WTI Price |
$ |
33.82 |
|
$ |
27.05 |
|
$ |
30.44 |
|
$ |
37.20 |
|
$ |
40.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil gain/(loss) (in thousands) |
|
(8,250 |
) |
|
350 |
|
|
(5,250 |
) |
|
(11,140 |
) |
|
(14,040 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average HH Price |
$ |
5.68 |
|
$ |
4.54 |
|
$ |
5.11 |
|
$ |
6.25 |
|
$ |
6.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas gain/(loss) (in thousands) |
|
2,230 |
|
|
(2,260 |
) |
|
(10 |
) |
|
4,480 |
|
|
6,730 |
|
The Company sells 100% of its electricity production, net of electricity used in its oil and gas operations, under SO contracts to major utilities. Three of the four SO contracts representing approximately 77% of the Companys electricity for sale expired on December 31, 2003. However, as ordered by the CPUC, these contracts have been extended through December 31, 2004 and the Company is evaluating its options beyond the revised termination dates. Among other things, the CPUC issued a decision in January 2004 that ordered the California utilities to offer SO contracts to certain QFs, such as Berry, for a term of 5 years. The CPUC recently initiated a rulemaking to determine the price that will be paid under these SO contracts. The Company sells the remaining 20 MW to a utility at $53.70 per MWh plus capacity through
a long-term SO contract.
The Company attempts to minimize credit exposure to counter parties through monitoring procedures and diversification. The Companys exposure to changes in interest rates results primarily from long-term debt. Total debt outstanding at both March 31, 2004 and December 31, 2003 was $50 million. Interest on amounts borrowed is charged at LIBOR plus 1.25% to 2.0%. Based on these borrowings, a 1% change in interest rates would not have a material impact on the Companys financial statements.
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 4. Controls and Procedures
Based on an evaluation by the Companys management as of the end of the period covered by this Quarterly Report on Form 10-Q/A, subject to and except for the discussion below and elsewhere in this Form 10-Q/A concerning the restatement of the Company's financial statements, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures, as defined by regulations of the Securities Exchange Act of 1934 as amended (the "Exchange Act"), are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specifie
d in Securities and Exchange Commissions rules and forms.
The restatement of the Companys financial statements contained in this Form 10-Q/A is described in Part I, Item 2, "Managements Discussion and Analysis of Financial Condition and Results of Operations under Restatement of Financial Statements," and in Note 4 of the Notes to the
condensed financial statements included in Part 1, Item 1.
In July, 2004, the Company became aware of a material weakness relating to the Companys internal controls and procedures over its financial reporting for stock based compensation relating to its stock option plan. As a result, the Company has performed a review of the method of stock option exercises by employees and directors since the plans inception in 1994. Based on this review, the Company determined that variable plan accounting is required in order to comply with generally accepted accounting principles in the United States, which resulted in the restatement discussed in this Form 10-Q/A. In response to this matter, the Company, during the third quarter 2004, has remediated the ineffective internal controls through the implementation of enhanced controls to assure that financial reporting is in comp
liance with generally accepted accounting principles in the United States.
The Company has identified no changes in the internal control over financial
reporting that occurred during the fiscal quarter ended March 31, 2004, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting, except as described above.
BERRY PETROLEUM COMPANY
Part II. Other Information
PART II OTHER INFORMATION
Exhibit No. |
Description |
31.1 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * |
31.2 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * |
32.1 |
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * |
32.2 |
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * |
* Filed herewith
On January 13, 2004, the Company filed a Form 8-K reporting an Item9 - Regulation FD Disclosure to furnish the Securities and Exchange Commission a copy of the Company's press release announcing the board of directors approved a 2004 capital expenditure budget of approximately $50 million.
On February 18, 2004, the Company filed a Form 8-K reporting an Item 9 -Regulation FD Disclosure to furnish the Securities and Exchange Commission a copy of the Company's press release announcing financial results for the three months and fiscal year ended December 31, 2003.
On April 26, 2004, the Company filed a Form 8-K reporting an Item 9 - Regulation FD Disclosure to furnish the Securities and Exchange Commission a copy of the Company's press release announcing the retirement of Jerry V. Hoffman as president and chief executive officer, and the appointment of Robert F. Heinemann as Interim President and Interim Chief Executive Officer.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized on August 9, 2004.
BERRY PETROLEUM COMPANY
/s/ Donald A. Dale
Donald A. Dale
Controller
(Principal Accounting Officer)
Date: August 9, 2004
Unassociated Document
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert F. Heinemann, President and Chief Executive Officer of Berry Petroleum Company certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Berry Petroleum Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the
condensed financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
|
|
Date: August 9, 2004 |
|
/s/ Robert F. Heinemann |
|
|
|
Robert F. Heinemann |
|
President and |
|
Chief Executive Officer |
Unassociated Document
Exhibit 31.2
CERTIFICATION OF CHIEF
FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Ralph J. Goehring, Executive Vice President and Chief Financial Officer of Berry Petroleum Company certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Berry Petroleum Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the
condensed financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant is made known to us by others within the registrant, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
|
|
Date: August 9, 2004 |
|
/s/ Ralph J. Goehring |
|
|
|
Ralph J. Goehring |
|
Executive Vice President and |
|
Chief Financial Officer |
Unassociated Document
Exhibit 32.1
Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
The certification set forth below is being submitted in connection with the Quarterly Report of Berry Petroleum Company (the "Company") on Form 10-Q/A for the period ending March 31, 2004 (the 'Report') for the purpose of complying with Rule 13a-14(b) of the Securities Exchange Act of 1934 (the 'Exchange Act') and Section 1350 of Chapter 63 of Title 18 of the United States Code.
I, Robert F. Heinemann, President and Chief Executive Officer of Berry Petroleum Company (the "Company"), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report which this certification accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods presented in the
condensed financial statements in this report.
/s/ Robert F. Heinemann
Robert F. Heinemann
President and
Chief Executive Officer
August 9, 2004
Unassociated Document
Exhibit 32.2
Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
The certification set forth below is being submitted in connection with the Quarterly Report of Berry Petroleum Company (the "Company") on Form 10-Q/A for the period ending March 31, 2004 (the 'Report') for the purpose of complying with Rule 13a-14(b) of the Securities Exchange Act of 1934 (the 'Exchange Act') and Section 1350 of Chapter 63 of Title 18 of the United States Code.
I,
Ralph J. Goehring, Executive Vice President and Chief Financial Officer of Berry Petroleum Company (the "Company"), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report which this certification accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the periods presented in the
condensed financial statements in this report.
/s/ Ralph J. Goehring
Ralph J. Goehring
Executive Vice President and Chief Financial Officer
August 9, 2004