View:
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) October 26, 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 7.01. Regulation FD Disclosure.
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 October 26, 2004, Berry Petroleum Company (Berry) announced financial
results for the three months ended September 30, 2004. A copy of the news
release announcing Berry's earnings results for three months ended
September 30, 2004 is attached hereto as Exhibit 99.
and
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 99 - News Release dated September 30, 2004 regarding the
Registrant's financial and operating results for the three months
ended September 30, 2004.
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/ Kenneth A. Olson
Name: Kenneth A. Olson
Title: Corporate Secretary/Treasurer
October 26, 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 NET INCOME INCREASES 133%
TO A RECORD $.82 PER SHARE FOR THIRD QUARTER 2004
Bakersfield, CA - October 26, 2004 - Berry Petroleum Company
(NYSE:BRY) reported record net income for the third quarter ended
September 30, 2004 of $18.2 million, or $.82 per diluted share, an
increase of 133% compared to prior-year third quarter net income of
$7.8 million, or $.35 per diluted share. This is the fifth
consecutive quarter of increased earnings and the twenty-third
consecutive quarter of positive earnings for the Company, according
to Robert F. Heinemann, president and chief executive officer.
Berry produced a record average of 20,825 barrels of oil equivalent
(BOE) per day during the third quarter of 2004, a 26% increase from
an average of 16,482 BOE per day during the prior year's third
quarter. The Company produced 15,689 BOE per day from its California
assets and 5,136 BOE per day from its assets in the Rockies.
Companywide, oil production averaged 19,315 barrels per day (93% of
total production) and natural gas production averaged 9,065 Mcf
(thousand cubic feet) per day (7% of total production) for the third
quarter of 2004.
Mr. Heinemann continued, "We are very pleased with our results in the
third quarter of 2004 as we achieved record net income with a 19%
increase over our record second quarter 2004 net income. This was
accomplished by producing a record average of 20,825 BOE per day at a
record realized sales price of $32.28 per BOE."
"We continue to implement our growth strategy in the Uinta Basin and
are appraising the deep gas potential at Brundage Canyon. Our deep
farmout partner, Bill Barrett Corporation, plans to spud a deep test
well there during the fourth quarter of 2004, targeting natural gas
at around 14,000 feet in the Wasatch/Mesaverde trend. Berry will
retain 25% of this well after payout."
"The Company and its partner, Bill Barrett Corporation, closed on its
previously announced exploration and development agreement with the
Ute Tribe and the Ute Distribution Corporation in the Lake Canyon
Field of Utah earlier this month. Berry expects to drill at least two
shallow test wells in the first quarter of 2005, targeting oil at
around 6,000 feet in the Green River trend. These initial drill sites
will be approximately three miles west of our Brundage Canyon field
and have the potential of providing the Company with development
opportunities comparable to Brundage Canyon. Drilling of the first
deep natural gas test well in Lake Canyon is scheduled to begin in
January."
"In addition to these activities, Berry is continuing to expand our
prospective land position in the Uinta Basin. We have worked with an
industry partner to add, pending closing, another 17,000 acres (8,500
net to Berry) located southeast of our Brundage Canyon field, and
near recent gas discoveries. We will be conducting geologic
evaluations on this acreage during the first half of 2005."
He added, "In the fourth quarter and into 2005 we will continue to
focus development activities on projects that can add reserves and
production over the long-term. In California, these projects include
the thermal development of our Poso Creek field, Ethel D property and
our diatomite pilot. Additionally, we are increasing our infill
horizontal drilling at South Midway-Sunset. In Utah, we will test the
potential of 40-acre infill drilling at Brundage Canyon. We are
currently at 80-acre spacing and are hopeful that 40-acre spacing can
economically add both incremental production and reserves."
The Company is in the process of determining its 2005 capital budget,
and is targeting at least $80 million in spending, with the majority
allocated for the Rocky Mountain region. Given this activity level,
Berry believes it can increase its production from existing assets in
2005 by 10% to approximately 22,500 BOE per day. This production
target does not include any success from Company pilot projects or
exploration.
Berry realized an average sales price per BOE of $32.28 for the third
quarter, a 46% increase over the $22.07 received in the same 2003
period. West Texas Intermediate (WTI) crude oil per barrel on the
NYMEX averaged $43.89 and $30.21 in the third quarter of 2004 and
2003, respectively. Total operating costs from oil and gas
operations on a per BOE basis for the third quarter of 2004 increased
6% to $11.54 from $10.90 in the same 2003 period. Increased steam
costs, property taxes, and start-up costs related to thermally
enhanced recovery projects on the Company's California properties
were partially offset by lower operating costs on a per BOE basis on
the Utah properties, which average approximately $7.50 per BOE
compared to approximately $12.00 on the California properties.
General and administrative (G&A) costs per BOE in the third quarter
of 2004 were $2.21, up 43% from $1.55 in the third quarter of 2003
due to costs related to a change in the treatment of stock
compensation, higher accounting and legal fees related to Sarbanes-
Oxley compliance, and higher salaries and wages due to Company
growth.
Berry also achieved record EBITDA (earnings before interest, taxes
and depreciation, depletion and amortization) of $35.3 million during
the third quarter, up 137% from $14.9 million reported during the
prior year's third quarter, and up $6 million, or 20% from $29.3
million reported in the second quarter of 2004.
Nine-Month Results
- ------------------
Berry earned record net income of $43.9 million, or $1.97 per diluted
share, for the nine months ended September 30, 2004, and up 91%
compared to net income of $23 million, or $1.05 per diluted share,
for the comparable nine-month period in 2003. EBITDA for the nine
months ended September 30, 2004 was $85.3 million, up 102% from $42.2
million in the comparable nine-month period in 2003.
Berry produced an average of 20,243 BOE per day in the 2004 nine-
month period, up 28% from an average 15,874 BOE per day in the
comparable nine-month period in 2003. Oil production averaged 19,026
barrels per day (94% of total production) and natural gas production
averaged 7,305 Mcf per day (6% of total production) for the nine
months ended September 30, 2004. The average realized sales price
per BOE was $28.81 for the nine months ended September 30, 2004, up
28% from $22.45 per BOE received in 2003. WTI NYMEX crude oil per
barrel averaged $39.21 and $30.94 in the nine months of 2004 and
2003, respectively. Crude oil prices (WTI NYMEX) remain above $50.00
per barrel in the early portion of the current fourth quarter.
Total operating costs of $10.69 per BOE in the first nine months of
2004 were up slightly from $10.46 per BOE in the first nine months of
2003. The Company is targeting operating costs per BOE in 2005 of
between $11.00 and $12.00. This projected increase is due to
anticipated higher steam volumes and higher average fuel cost to
produce steam. G&A costs per BOE rose 51% in 2004 to $2.74 from $1.81
in the first nine months of 2003, primarily due to the change in the
treatment of stock options, additional staffing to accommodate
Company growth, higher accounting and legal fees associated with
Sarbanes-Oxley compliance, and costs associated with a change in the
chief executive officer of the Company. The Company is targeting
total G&A costs in 2005 of between $13 million and $14 million or a
range of $1.55 to $1.75 per BOE. This projected decrease from 2004 is
primarily related to lower stock option expenses.
2004 Capex Budget & Production Target
- -------------------------------------
The Company has funded $51.9 million in capital expenditures in the
first nine months of 2004 which includes 93 new wells and 76
workovers. Excluding 2004 acquisitions, the Company's 2004 revised
budget is approximately $70 million, up 32% from the original budget
of approximately $53 million. Berry expects to drill approximately
120 wells and perform approximately 90 workovers in 2004. 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, said "Berry's performance in the third quarter was excellent
and we continue to meet or surpass our financial targets. We reduced
our long-term debt by $17 million and maintain a very strong balance
sheet. At September 30, 2004 we had only $33 million of debt with
unused borrowing capacity of $167 million. Our nine-month performance
was also outstanding and we have the potential to achieve another
record in the fourth quarter, based on existing commodity prices.
Berry's high quality heavy oil assets in California are generating
significant cash in excess of our capital requirements, allowing us
to establish a significant acreage position in the Rockies supported
by rapidly increasing production there. We are excited about our
expanding opportunities for growth and given the price outlook for
next year, 2005 should be another excellent and transforming year for
Berry."
"The Company was pleased to increase the dividend in the third
quarter to an annual payment of $.48 per share, up 9% from $.44 per
share. Additionally, due to extremely strong cash flows, the Company
paid a $.06 per share special dividend. This is the second annual
increase in the dividend in the last two years. Finally, we were
ranked 25th in Forbes Magazine's `200 Best Small Companies' list in
mid October, and our current results reinforce our disciplined growth
strategy with the objective of increasing value for our
shareholders."
The Company has entered into additional fixed price crude oil and
natural gas swaps in the third quarter of 2004. The Company has
approximately 7,750 barrels per day hedged for calendar 2005 at
approximately WTI NYMEX $40.50 per barrel. The Company's existing
hedge position can be viewed on its website utilizing the following
link: http://www.bry.com/index.php?page=hedging
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 operating 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 Nine Months
-------------------------- -----------------
09/30/04 06/30/04 09/30/03 09/30/04 09/30/03
-------- -------- -------- -------- --------
Earnings before interest,
taxes and depreciation,
depletion and
amortization (EBITDA) $35,270 $29,251 $14,933 $85,335 $42,198
Depreciation, depletion
and amortization (8,323) (8,504) (5,167) (24,036) (14,350)
Interest ( 512) ( 534) ( 368) ( 1,577) ( 845)
Provision for income
taxes (8,206) (4,935) (1,571) (15,850) (3,996)
-------- -------- -------- -------- --------
Net Income $18,229 $15,278 $ 7,827 $43,872 $23,007
Teleconference Call
- -------------------
An earnings conference call will be held Tuesday, October 26, 2004 at
11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). Dial 1-800-322-
5044 to participate, using passcode 78745883. International callers
may dial 617-614-4927. For a digital replay available through
November 9, 2004 dial 1-888-286-8010 using passcode 15749304. 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, the 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 commodity prices for oil, gas and
electricity, drilling, development and operating risks, a limited
marketplace for electricity sales within California, counterparty
risk, competition, environmental risks, litigation uncertainties, the
availability of drilling rigs and other support services, legislative
and/or judicial decisions and other government or Tribal regulations.
CONDENSED INCOME STATEMENTS
(In thousands, except per share data)
(unaudited)
Three Months Nine Months
09/30/04 09/30/03 09/30/04 09/30/03
-------- -------- -------- --------
Revenues:
Sales of oil and gas $ 61,560 $ 33,466 $159,520 $ 97,286
Sales of electricity 11,344 10,642 34,569 32,959
Interest and other
income, net 45 350 338 598
-------- -------- -------- --------
Total 72,949 44,458 194,427 130,843
-------- -------- -------- --------
Expenses:
Operating costs
- oil and gas 22,107 16,534 59,321 45,344
Operating costs
- electricity 11,344 10,642 34,569 32,959
Depreciation, depletion
& amortization 8,323 5,167 24,036 14,350
General and
administrative 4,228 2,349 15,202 7,855
Dry hole, abandonment
& impairment - - - 2,487
Interest 512 368 1,577 845
-------- -------- -------- --------
Total 46,514 35,060 134,705 103,840
-------- -------- -------- --------
Income before income taxes 26,435 9,398 59,722 27,003
Provision for income taxes 8,206 1,571 15,850 3,996
-------- -------- -------- --------
Net income $ 18,229 $ 7,827 $ 43,872 $ 23,007
======== ======== ======== ========
Basic net income per share $.83 $.36 $2.01 $1.06
Diluted net income per share $.82 $.35 $1.97 $1.05
Cash dividends per share $.18 $.11 $.40 $.36
Weighted average common shares:
Basic 21,934 21,776 21,875 21,766
======== ======== ======== ========
Diluted 22,365 22,065 22,295 21,917
======== ======== ======== ========
CONDENSED BALANCE SHEETS
(In thousands)
(unaudited)
09/30/04 12/31/03
--------- ---------
Assets
Current assets $ 54,740 $ 43,286
Property, buildings & equipment, net 326,793 295,151
Other assets 3,871 1,940
--------- ---------
$385,404 $340,377
========= =========
Liabilities & Shareholders' Equity
Current liabilities $ 66,547 $ 46,826
Deferred taxes 46,702 38,559
Long-term debt 33,000 50,000
Other long-term liabilities 8,364 7,654
Shareholders' equity 230,791 197,338
--------- ---------
$385,404 $340,377
========= =========
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months
09/30/04 09/30/03
-------- --------
Cash flows from operating activities:
Net income $43,872 $23,007
Depreciation, depletion & amortization 24,036 14,350
Dry hole, abandonment & impairment (364) 2,517
Deferred income taxes 6,846 3,387
Deferred stock option compensation 4,520 917
Other, net 569 (290)
Net changes in operating assets and
liabilities (997) (3,899)
--------- ---------
Net cash provided by operating
activities 78,482 39,989
Net cash used in investing activities (55,172) (70,375)
Net cash (used in) provided by
financing activities (25,760) 31,088
--------- ---------
Net (decrease) increase in cash and
cash equivalents (2,450) 702
Cash and cash equivalents at
beginning of year 10,658 9,866
--------- ---------
Cash and cash equivalents at end of period $ 8,208 $10,568
========= =========
COMPARATIVE OPERATING STATISTICS
(unaudited)
Three Months Nine Months
------------------------ ------------------------
09/30/04 09/30/03 Change 09/30/04 09/30/03 Change
-------- -------- ------ -------- -------- ------
Oil and gas production:
- -----------------------
Net total - BOE per day 20,825 16,482 +26% 20,243 15,874 +28%
Net oil - Bbl per day 19,315 15,788 +22% 19,026 15,392 +24%
Net gas - Mcf per day 9,065 4,176 +117% 7,305 2,898 +152%
Per BOE:
Avg. sales price,
net of hedges(1) $32.28 $22.07 +46% $28.81 $22.45 +28%
Operating costs(2) 10.32 10.21 +1% 9.57 9.88 -3%
Production taxes 1.22 .69 +77% 1.12 .58 +93%
-------- -------- ------ -------- -------- ------
Total operating costs 11.54 10.90 +6% 10.69 10.46 +2%
Depreciation & depletion 4.34 3.41 +27% 4.33 3.31 +31%
General & administrative
expenses 2.21 1.55 +43% 2.74 1.81 +51%
Interest expense .27 .24 +13% .28 .19 +47%
Electricity:
- ------------
Electric power produced -
MWh hours/day 2,122 2,127 -% 2,112 2,100 +1%
Electric power sold -
MWh hours/day 1,916 1,937 -1% 1,905 1,912 -%
Average sales price-
$/Mwh $75.96 $60.12 +26% $70.25 $65.38 +7%
Natural gas cost-
$/Mmbtu $ 5.27 $ 4.75 +11% 5.27 $ 5.06 +4%
(1) Comparative average
West Texas Intermediate
(WTI) crude price $43.89 $30.21 +45% $39.21 $30.94 +27%
(2) Includes monthly
expenses in excess of
monthly revenues
from cogeneration
operations of $2.09 $2.34 -11% $1.91 $2.28 -16%
# # #