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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 9, 2004
Berry Petroleum Company
(Exact name of registrant as specified in its charter)
Delaware 1-9735 77-0079387
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.
incorporation)
5201 Truxtun Avenue, Suite 300 Bakersfield, CA 93309
(Address of principal executive offices)
Registrant's telephone number, including area code (661) 616-3900
N/A
(Former name or former address, if changed since last report)
1
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99 - News Release dated August 9, 2004 regarding the
Registrant's financial and operating results for the three months
ended June 30, 2004.
and
Item 12. Results of Operations and Financial Condition.
The information in this Form 8-K and the Exhibit attached hereto shall
not be deemed "filed" for purposes of Section 18 of the Securities Act
of 1934, nor shall it be deemed incorporated by reference in any filing
under the Securities Act of 1933, except as shall be expressly set forth
by specific reference in such filing.
On August 9, 2004, Berry Petroleum Company (Berry) announced financial
results for the three months ended June 30, 2004. A copy of the news
release announcing Berry's earnings results for three months ended
June 30, 2004 is attached hereto as Exhibit 99.
SIGNATURE
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
By /s/ Ralph J. Goehring
Name: Ralph J. Goehring
Title: Executive Vice President
and Chief Financial Officer
August 9, 2004
2
News Release
Berry Petroleum Company Phone (661) 616-3900
5201 Truxtun Avenue, Suite 300 E-mail: ir@bry.com
Bakersfield, California 93309-0640 Internet: www.bry.com
Contacts: Robert F. Heinemann, President and CEO
Ralph J. Goehring, Executive Vice President and CFO
BERRY PETROLEUM REPORTS RECORD SECOND
QUARTER 2004 NET INCOME OF $.68 PER SHARE
Bakersfield, CA - August 9, 2004 - Berry Petroleum Company (NYSE:BRY)
earned record net income for the second quarter ended June 30, 2004
of $15.3 million, or $.68 per diluted share, an increase of 212%
compared to prior-year second quarter net income of $4.9 million, or
$.22 per diluted share. This is the fifth consecutive quarter of
increased earnings and the twenty-second consecutive quarter of
positive earnings for the Company, according to Robert F. Heinemann,
president and chief executive officer.
Berry produced a record average 20,315 barrels of oil equivalent
(BOE) per day during the second quarter of 2004, a 32% increase from
an average of 15,397 BOE per day during the prior year's second
quarter. The Company produced 15,973 BOE per day from its California
assets and 4,342 BOE per day from its assets in the Rockies.
Companywide, oil production averaged 19,182 barrels per day (94% of
total) and natural gas production averaged 6,799 Mcf (thousand cubic
feet) per day (6% of total) for the second quarter of 2004.
Mr. Heinemann continued, "Berry posted another great quarter of
operating and financial results and we are on target to achieve our
planned 2004 average production of 20,500 BOE per day. We have
increased our drilling programs in Utah and California to take
advantage of the excellent crude price environment. We have been
active on the acquisition front as well and recently announced a
joint Exploration and Development Agreement with the Ute Indian Tribe
and an industry partner. The combination of the new acreage
immediately to the west of Brundage Canyon with our existing property
provides Berry with over 215,000 acres in the hydrocarbon-rich Uinta
Basin in Utah and offers the opportunity to add significant reserves
and production over the next several years. This and other future
acquisitions are important to Berry's growth strategy."
Berry realized an average sales price per BOE of $28.55 for the
second quarter, a 36% increase over the $21.07 received in the same
2003 period. West Texas Intermediate (WTI) crude oil per barrel on
the NYMEX averaged $38.28 and $28.91 in the second quarter of 2004
and 2003, respectively. Total operating costs from oil and gas
operations on a per BOE basis for the second quarter of 2004
decreased 7% to $10.38 from $11.15 in the same 2003 period, primarily
due to increased daily production in both California and Utah, and
lower operating costs on a per BOE basis in the Utah properties
acquired in August 2003.
Berry also achieved record EBITDA (earnings before interest, taxes
and depreciation, depletion and amortization) of $29.3 million during
the second quarter, up 225% from $9.0 million reported during the
prior year's second quarter, and up $8.4 million, or 41% from $20.8
million reported in the first quarter of 2004.
Six-Month Results
- ------------------
Berry earned net income of $25.6 million, or $1.15 per diluted share,
for the six months ended June 30, 2004, a Company record, and up 69%
compared to net income of $15.2 million, or $.69 per diluted share,
for the comparable six-month period in 2003. EBITDA for the six
months ended June 30, 2004 was $50.1 million, up 84% from $27.3
million in the comparable six-month period in 2003.
Berry produced an average of 19,949 BOE per day, an all-time high for
the Company, in the 2004 six-month period, up 28% from 15,566 BOE per
day in the comparable six-month period in 2003. Oil production
averaged 18,880 barrels per day (95% of total) and natural gas
production averaged 6,409 Mcf per day (5% of total) for the six
months ended June 30, 2004. The average realized sales price per BOE
was $27.00 for the six months ended June 30, 2004, up 19% from $22.66
per BOE received in 2003. Crude oil prices (WTI) remain near or above
$40.00 per barrel in the early portion of the current third quarter.
Total operating costs of $10.25 per BOE in the first six months of
2004 were comparable to $10.23 per BOE in the first six months of
2003. General and administrative (G&A) costs per BOE rose 55% in 2004
to $3.02 from $1.95 in the first six months of 2003, primarily due to
higher compensation expenses related to stock option charges and
costs associated with a change in the chief executive officer of the
Company.
2004 Capex Budget & Production Target
- -------------------------------------
The Company has funded $31.8 million in capital expenditures in the
first six months of 2004 which includes 58 new wells, of which 13
were a carryover from the 2003 capital budget, and 43 workovers.
Excluding 2004 acquisitions, the Company's 2004 revised budget is
approximately $61 million, up 15% from the original budget of
approximately $53 million. Within this budget, Berry expects to
drill approximately 100 wells and perform approximately 100
workovers. The accelerated drilling program will take advantage of
sustained attractive crude prices.
The Company intends to fund 100% of its capital program out of
internally generated cash flow and anticipates that production will
average at least 20,500 BOE per day in 2004, up 24% from 16,549 BOE
per day in 2003.
Ralph J. Goehring, executive vice president and chief financial
officer, stated "Berry's second quarter performance was tremendous.
We achieved record production (20,315 BOE per day), record income
($15.3 million), record EBITDA ($29.3 million) on record high crude
oil prices ($38.28 NYMEX WTI). Our six-month performance was equally
stellar and our momentum bodes well for attaining over $50 million in
net income for the year, well above our previous record of $37.8
million achieved in 2000. We are investing capital on quality
projects that should allow us to achieve higher production and strong
financial results in the balance of 2004 and into 2005."
The Company has entered into additional fixed price crude oil and
natural gas swaps since June 30, 2004. The Company's existing hedge
position can be viewed on its website utilizing the following link:
http://www.bry.com/index.php?page=hedging
Change in Accounting for Stock Option Expense
- ---------------------------------------------
During the review of the Company's second quarter financial
statements, the Company determined that variable plan accounting was
appropriate for its stock option plan, insofar as the Company had
permitted option holders to exercise options by surrendering shares
underlying unexercised options in payment of the exercise price of
the options and related taxes. The Company had accounted for options
issued under the plan as fixed awards with compensation expense
recorded for certain option exercises. The Company has restated its
financial statements for the prior three years under variable plan
accounting for its stock option plan and has filed an amended Form 10
- -K accordingly. 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 Company's stock covered by the grant
exceeds the option price. Subsequent changes in the market price of
the Company's stock result in a change in the measure of compensation
cost for the awards. These non-cash adjustments decreased the
Company's net income by $2.0 million, or $.09 per diluted share in
2003, $.8 million, or $.04 per diluted share, in 2002, and $1.0
million, or $.04 per diluted share in 2001.
To eliminate the volatility of Berry's future stock option expense
and to conform early with the emerging preferable stock compensation
treatment, the Company adopted SFAS 123 "Accounting for Stock-Based
Compensation," as amended, in the quarter ended June 30, 2004 with an
effective date of January 1, 2004. As part of the Company's review
of its stock option accounting, it was determined that a portion of
the stock compensation under SFAS 123 is required to be calculated
using a mark-to-market approach similar to variable plan accounting.
The Company has restated its financial information for the three
months ended March 31, 2004 under variable plan accounting for its
stock option plan and for the adoption of SFAS 123 and has filed an
amended Form 10-Q accordingly. As a result of the requirement for
mark-to-market accounting for a portion of the stock plan under SFAS
123, the adoption of SFAS 123 as of the beginning of the year will
not result in an improvement in earnings for the year. However, the
Company has revised certain stock option exercise provisions of the
plan and prospectively, variable plan accounting will no longer be
required, which will remove most of the volatility related to this
expense. The restated earnings for the quarter ended March 31, 2004
is $10.4 million, or $.47 per share, a decrease of $1.7 million, or
$.08 per share, from the $12.1 million, or $.55 per share, as
previously reported. The impact of variable plan accounting and SFAS
123 on stock compensation expense (after tax) in the second quarter
ended June 30, 2004 was a decrease of $.5 million, or $.02 per share.
The Company's stock option expense included in G&A expense was $0.9
million, $3.6 million and $2.8 million for the three-month periods
ended June 30, 2004, March 31, 2004 and June 30, 2003, respectively.
The Company's stock option expense included in G&A was $4.5 million
and $1 million for the six-month periods ended June 30, 2004 and
2003, respectively. A significant portion of the expense is related
to the mark-to-market impact of the Company's share price on the
options outstanding.
Mr. Goehring added, "The restatement of our financial statements and
information for prior periods under variable plan accounting and the
adoption of SFAS 123 involves a non-cash expense reflected through
G&A expense and does not affect previously reported revenues or
cashflows. It has no impact on the Company's operations and an
immaterial effect on shareholders' equity. The total of our
cumulative restated earnings from 2001 through March 31, 2004 and our
earnings for the three months ending June 30, 2004 is $108 million
after these adjustments, with the adjustments totaling approximately
$5.5 million during this timeframe. Under SFAS 123, the Company
estimates its stock option expense will be less than $1 million in
the final six months of 2004. The Company is estimating total G&A of
approximately $6.0 million in the third and fourth quarters of 2004
combined, which will be approximately $2.20 to $2.35 per BOE for the
year."
Non-GAAP Information
- --------------------
EBITDA is included in this press release for informational purposes.
This non-GAAP financial measure is provided to enhance the user's
overall understanding of the Company's financial performance.
Specifically, Berry believes that certain non-cash charges, as well
as the related tax effects, are not indicative of core operating
results. By including this item, non-GAAP results provide
information to both management and investors that is useful in
assessing the Company's core operation performance and in evaluating
and comparing results of operations on a consistent basis from period
to period. This non-GAAP financial measure is used by management to
evaluate financial results and to plan and forecast future periods.
The presentation of this additional information is not meant to be
considered a substitute for the corresponding financial measures
prepared in accordance with generally accepted accounting principles.
Investors are encouraged to review the reconciliations of GAAP to non
- -GAAP financial results which are included below.
RECONCILIATION OF EARNINGS BEFORE INTEREST, TAXES AND
DEPRECIATION, DEPLETION AND AMORTIZATION TO NET INCOME
(In thousands)
(unaudited)
Three Months Six Months
06/30/04 03/31/04 06/30/03 06/30/04 06/30/03
-------- -------- -------- -------- --------
Earnings before interest,
taxes and depreciation,
depletion and
amortization (EBITDA) $29,251 $20,813 $8,989 $50,065 $27,265
Depreciation, depletion
and amortization (8,504) (7,209) (4,729) (15,713) (9,183)
Interest (534) (531) (268) (1,065) (477)
Provision for income
taxes (4,935) (2,709) 913 (7,644) (2,425)
------- ------- ------- -------- --------
Net Income $15,278 $10,364 $4,905 $25,643 $15,180
======== ======== ======= ======== ========
Teleconference Call
- -------------------
An earnings conference call will be held Monday, August 9, 2004 at
11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). Dial 1-888-396-
2356 to participate, using passcode 50267860. International callers
may dial 617-847-8709. For a digital replay available through August
23, 2004 dial 1-888-286-8010 (passcode 63692006). Listen live or via
replay on the web at www.bry.com. Transcripts of this and previous
calls may be viewed at www.bry.com.
Berry Petroleum Company is a publicly traded independent oil and gas
production and exploitation company with its headquarters in
Bakersfield, California.
"Safe Harbor under the Private Securities Litigation Reform Act of
1995:" With the exception of historical information, certain matters
discussed in this news release 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 the commodity prices for oil,
natural gas and electricity, a limited marketplace for electricity
sales within California, counterparty risk, competition,
environmental and weather risks, litigation uncertainties, drilling,
development and operating risks, uncertainties about the estimates of
reserves, the availability of drilling rigs and other support
services, legislative and/or judicial decisions and other
governmental regulations.
CONDENSED INCOME STATEMENTS
(In thousands, except per share data)
(unaudited)
Three Months Six Months
06/30/04 06/30/03 06/30/04 06/30/03
Revenues:
Sales of oil and gas $ 52,755 $29,466 $ 97,960 $ 63,820
Sales of electricity 11,291 9,899 23,225 22,317
Interest and other
income, net 90 228 293 248
------ ------ ------- ------
Total 64,136 39,593 121,478 86,385
====== ====== ======= ======
Expenses:
Operating costs - oil
and gas 19,194 15,626 37,214 28,810
Operating costs -
electricity 11,291 9,899 23,225 22,317
Depreciation, depletion
& amortization 8,504 4,729 15,713 9,183
General and administrative 4,400 5,079 10,974 5,506
Dry hole, abandonment
& impairment - - - 2,487
Interest 534 268 1,065 477
------ ------ ------ ------
Total 43,923 35,601 88,191 68,780
====== ====== ====== ======
Income before income taxes 20,213 3,992 33,287 17,605
Provision for income 4,935 (913) 7,644 2,425
------ ------ ------ ------
Net income $ 15,278 $ 4,905 $ 25,643 $ 15,180
====== ====== ====== ======
Basic net income per share $.70 $.23 $1.17 $.70
Diluted net income per share $.68 $.22 $1.15 $.69
Cash dividends per share $.11 $.15 $.22 $.25
Weighted average common shares:
Basic 21,873 21,764 21,845 21,761
====== ====== ====== ======
Diluted 22,416 21,954 22,337 21,934
====== ====== ====== ======
CONDENSED BALANCE SHEETS
(In thousands)
(unaudited)
06/30/04 12/31/03
-------- --------
Assets
Current assets $ 51,373 $ 43,286
Property, buildings & equipment, net 311,595 295,151
Other assets 2,517 1,940
-------- --------
$365,485 $340,377
======== ========
Liabilities & Shareholders' Equity
Current liabilities $ 42,955 $ 46,826
Deferred taxes 45,018 38,559
Long-term debt 50,000 50,000
Other long-term liabilities 8,650 7,654
Shareholders' equity 218,862 197,338
-------- --------
$365,485 $340,377
======== ========
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months
06/30/04 06/30/03
-------- --------
Cash flows from operating activities:
Net income $25,643 $15,180
Depreciation, depletion & amortization 15,713 9,183
Dry hole, abandonment & impairment (235) 2,432
Deferred income taxes 6,142 353
Deferred stock option compensation 2,808 672
Other, net 763 277
Net changes in operating assets and
liabilities (13,201) (5,692)
-------- --------
Net cash provided by operating
activities 37,633 22,405
Net cash used in investing activities (31,838) (19,902)
Net cash used in financing activities (4,646) (5,441)
-------- --------
Net increase (decrease) in cash and
cash equivalents 1,149 (2,938)
Cash and cash equivalents at
beginning of year 10,658 9,866
-------- --------
Cash and cash equivalents at end of period $11,807 $ 6,928
======== ========
COMPARATIVE OPERATING STATISTICS
(unaudited)
Three Months Six Months
06/30/04 06/30/03 Change 06/30/04 06/30/03 Change
-------- -------- ------ -------- -------- ------
Oil and gas production:
Net total - BOE per day 20,315 15,397 +32% 19,949 15,566 +28%
Net oil - Bbl per day 19,182 15,059 +27% 18,880 15,191 +24%
Net gas - Mcf per day 6,799 2,027 +235% 6,409 2,248 +185%
Per BOE:
Avg. sales price,
net of hedges(1) $28.55 $21.07 +36% $27.00 $22.66 +19%
Operating costs(2) 9.21 10.63 -13% 9.18 9.71 -5%
Production taxes 1.17 .52 +125% 1.07 .52 +106%
----- ----- ----- ----- ----- -----
Total operating costs 10.38 11.15 -7% 10.25 10.23 -%
Depreciation & depletion 4.60 3.38 +36% 4.33 3.26 +33%
General & administrative
expenses 2.38 3.62 -34% 3.02 1.95 +55%
Interest expense .29 .19 +53% .29 .17 +71%
Electricity:
Electric power produced -
MWh hours/day 2,045 2,036 -% 2,118 2,086 +2%
Electric power sold -
MWh hours/day 1,843 1,847 -% 1,900 1,899 -%
Average sales price -
$/Mwh $67.51 $62.59 +8% $67.34 $68.11 -1%
Natural gas cost -
$/Mmbtu $ 5.44 $ 5.04 +8% $ 5.26 $ 5.21 +1%
(1) Comparative average
West Texas Intermediate
(WTI) crude price $38.28 $28.91 +32% $36.78 $31.32 17%
(2) Includes monthly
expenses in excess of
monthly revenues from
cogeneration
operations of $1.81 $2.79 -35% $1.81 $2.25 -20%
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