UNITED
STATES
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, 2006 (August 9, 2006)
BERRY
PETROLEUM COMPANY
(Exact
Name of Registrant as Specified in its Charter)
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DELAWARE
(State
or Other Jurisdiction of
Incorporation
or Organization)
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1-9735
(Commission
File Number)
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77-0079387
(IRS
Employer
Identification
Number)
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5201
TRUXTUN AVE., STE. 300, BAKERSFIELD, CA
(Address
of Principal Executive Offices)
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93309
(Zip
Code)
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Registrant’s
telephone number, including area code: (661)
616-3900
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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1
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Item 2.02 Results
of Operations and Financial Condition
On August
9, 2006, Berry
Petroleum Company issued a news release announcing its financial
and operational results for the second quarter ended June 30, 2006. The
information contained in the news release is incorporated herein by reference
and furnished as Exhibit 99.1
The
information in this Current Report on Form 8-K and Exhibit 99.1 is being
furnished and shall not be deemed "filed" for the purposes of Section
18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to
the
liabilities of that Section.
Item
9.01 Financial Statements and Exhibits
(c)
Exhibits
99.1
- News Release by Berry Petroleum Company dated August 9, 2006, titled
"Berry Petroleum 's Second Quarter Earnings Rise 35%" announcing the
Registrant's results for the quarter ended June 30,
2006.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereto
duly authorized.
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BERRY
PETROLEUM COMPANY
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By:
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/s/
Kenneth A. Olson
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Kenneth
A. Olson
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Corporate
Secretary
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Date: August
9, 2006
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2
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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
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Contacts:
Robert F. Heinemann, President and CEO - - Ralph J. Goehring, Executive
Vice President and CFO
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BERRY
PETROLEUM’S SECOND QUARTER EARNINGS RISE 35%
Bakersfield,
CA - August 9, 2006
- Berry
Petroleum Company (NYSE:BRY) earned $34.2 million, or $.76 per diluted
share,
for the second quarter of 2006, up 35% from net income of $25.3 million,
or $.56
per diluted share, in the second quarter of 2005, adjusted for the two-for-one
stock split effective May 17, 2006. Revenues were $123 million and discretionary
cash flow was $65.9 million in the second quarter of 2006. The Company’s
production averaged 24,768 barrels of oil equivalent per day (BOE/D),
an
increase of 9% over a year ago and up 6% from the first quarter of 2006.
The
average realized sales price of $49.75 per BOE was up 27% from the $39.32
per
BOE achieved in the second quarter of 2005. Berry recorded, on a pre-tax
basis,
$1.6 million in dry hole charges and a $5.6 million non-cash gain related
to the
Company’s natural gas derivative position in the second quarter of 2006. The
Company drilled 155 gross (97.6 net) wells during the second quarter
of 2006,
realizing a gross success rate of 99 percent, according to Robert F.
Heinemann,
president and chief executive officer.
For
the
six months ending June 30, 2006, Berry’s net income was $57.5 million, or $1.28
per diluted share, up 20% from net income of $47.8 million, or $1.06
per diluted
share, for the six months ending June 30, 2005. Revenues were $241 million
in
the first six months of 2006, up 33% from $181 million in the first six
months
of 2005. Berry’s 2006 year-to-date results include, on a pre-tax basis,
$6.8 million in dry hole charges and $.7 million in non-cash gains related
to
the Company’s natural gas derivative position. The Company drilled 251 gross
(162.9 net) wells during the first six months of 2006, realizing a gross
success
rate of 98 percent.
Mr.
Heinemann stated, “In the first half of 2006 we have established a very
significant position in the Piceance Basin that will enable Berry to
grow its
production at a double digit rate for several years. We completed our
second
Piceance transaction for 2006 in the second quarter wherein we will have
a 95%
working interest and be the operator in 4,300 gross acres in North Parachute
Ranch. We estimate we now hold approximately 850 billion cubic feet of
proved
plus probable gas reserves in this basin with acquisition costs of approximately
$300 million. We will begin to execute an efficient and timely development
plan
of our acreage and should average three drilling rigs on this project
in the
third quarter (targeting 7 net wells) and four rigs in the fourth quarter
(targeting 12 net wells).
“We
are
on track to achieve another very strong year financially for Berry while
we
continue to change the asset base of the Company. While we averaged 24,118
BOE/D
in the first six months of 2006, a Company record, our rate of production
increase has lagged behind our targets. We are currently increasing our
production and expect to average over 26,500 BOE/D in the second half
of the
year.
“Our
focus for the second half of the year is the drilling of our Piceance
acreage to
add production and reserves, determining the commerciality and performance
of
our emerging diatomite project, expanding the appraisal of our very significant
Lake Canyon acreage and developing its necessary infrastructure, and
accelerating three new steamfloods to increase our California production.
We
have begun a 50-well expansion of the diatomite project and expect our
steam to
oil ratio to continue its decline which will improve the economics of
the
project. We have permitted several wells at Lake Canyon and will begin
drilling
the next six wells in the third quarter, and our Piceance rate of development
continues to ramp up. We are very active in all areas of our business
and
believe that our efforts will add significant value to Berry as we complete
our
development plans.”
Ralph
J.
Goehring, executive vice president and chief financial officer, said,
“Our
discretionary cash flow in the second quarter of 2006 was a record $65.9
million, an increase of 19% compared to $55.5 million in the first quarter
of
2006. For the first six months of 2006, our discretionary cash flow was
also a
record $121.4 million, an increase of 54% over the comparable 2005 period
(see
Explanation and Reconciliation of Non-GAAP Financial Measures.) Our strong
financial position, earnings and cash flow are allowing us to invest
nearly $500
million in our business (through acquisitions and capital expenditures)
in 2006
to significantly expand and develop our resource base. Clearly, our level
of
activity is increasing as we grow, and our future looks very bright with
our
multiple areas of growth.”
1
Second
Quarter Production Summary
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Average
Daily Production
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Three
Months Ended
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Oil
and Gas
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6/30/06
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%
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3/31/06
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%
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6/30/05
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%
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Heavy
Oil Production (Bbl/D)
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15,532
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63
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15,407
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66
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15,733
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69
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Light
Oil Production (Bbl/D)
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4,061
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16
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3,303
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14
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3,253
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14
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Total
Oil Production (Bbl/D)
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19,593
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79
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18,710
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80
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18,986
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83
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Natural
Gas Production (Mcf/D)
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31,047
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21
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28,507
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20
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22,090
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17
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Total
(BOE/D)
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24,768
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100
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23,461
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100
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22,668
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100
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Explanation
and Reconciliation of Non-GAAP Financial Measures:
Discretionary
cash flow is net cash provided by operating activities before the net
increase
or decrease in current assets and current liabilities. This number is
presented
because of its acceptance as an indicator of an oil and gas exploration
and
production company's ability to internally fund development, exploration
and
exploitation activities and to service or incur additional debt. This
measure
should not be considered as an alternative to net cash provided by operating
activities as defined by generally accepted accounting principles. A
reconciliation of discretionary cash flow to net cash provided by operating
activities is shown below for the six and three months ended June 30,
2006 and
2005 and the three months ended March 31, 2006 as follows (in
millions):
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Six
Months Ended
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Three
Months Ended
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6/30/06
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6/30/05
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6/30/06
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3/31/06
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6/30/05
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Net
cash provided by operating activities
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$
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84.1
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$
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66.2
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$
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58.8
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$
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25.3
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$
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46.9
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Add
back: Net increase in current assets
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18.6
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17.8
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16.7
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1.9
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7.3
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Add
back: Net decrease (increase) in current liabilities
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18.7
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(5.4
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(9.6
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28.3
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(12.7
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)
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Discretionary
cash flow
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$
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121.4
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$
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78.6
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$
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65.9
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$
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55.5
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$
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41.5
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Teleconference
Call
A
conference call will be held Wednesday, August 9, 2006 at 1:30 p.m. Eastern
Time
(10:30 a.m. Pacific Time). Dial 1-866-825-3354 to participate, using
passcode
14675043. International callers may dial 617-213-8063. For a digital
replay
available until August 23, 2006, dial 1-888-286-8010 (passcode 81527857).
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/tele.htm.
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”
Any
statements in this news release that are not historical facts are
forward-looking statements that involve risks and uncertainties. Words
such as
“should,” “will,” “achieve,” “appraisal,” “continue,” “target,” “expect,” and
forms of those words and others indicate forward-looking statements.
Important
factors which could affect actual results are discussed in PART
1, Item 1A. Risk Factors
of
Berry’s 2005 Form 10-K filed with the Securities and Exchange Commission, under
the heading “Other Factors Affecting the Company's Business and Financial
Results” in the section titled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” as updated in PART
II, Item 1A. Risk Factors
of
Berry’s June 30, 2006 Form 10-Q filed on August 9, 2006.
2
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CONDENSED INCOME
STATEMENTS
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(unaudited)
(In thousands, except per share data)
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Three
Months
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Six
Months
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||||||||||||
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6/30/06
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6/30/05
(1)
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6/30/06
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6/30/05
(1)
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Revenues
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Sales
of oil and gas
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$
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110,641
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$
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80,825
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$
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212,575
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$
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156,196
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Sales
of electricity
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11,715
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11,514
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26,884
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23,970
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Interest
and other income, net
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803
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350
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1,296
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518
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Total
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123,159
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92,689
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240,755
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180,684
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Expenses
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Operating
costs - oil &
gas production
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27,074
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24,194
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52,813
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45,086
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Operating
costs - electricity
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10,626
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10,923
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24,958
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24,281
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Production
taxes
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3,373
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2,180
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6,606
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4,695
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Exploration
costs
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1,472
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225
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3,761
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786
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Depreciation,
depletion & amortization - oil & gas
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16,263
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9,461
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29,359
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17,988
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Depreciation,
depletion & amortization - electricity
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807
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839
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1,701
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1,611
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General
and
administrative
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7,877
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5,204
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16,192
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10,023
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Interest
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2,460
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1,740
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4,038
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2,902
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Commodity
derivatives
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(5,563
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)
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-
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(736
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)
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-
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Dry
hole, abandonment & impairment
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1,573
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601
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6,782
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2,622
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Total
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65,962
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55,367
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145,474
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109,994
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Income
before income
taxes
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57,197
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37,322
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95,281
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70,690
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|||||||||
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Provision
for income
taxes
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22,994
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12,062
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37,827
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22,925
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Net
income
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$
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34,203
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$
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25,260
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$
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57,454
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$
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47,765
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Basic
net income per
share
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$
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.78
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$
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.57
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$
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1.31
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$
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1.08
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Diluted
net income per
share
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$
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.76
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$
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.56
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$
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1.28
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$
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1.06
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Dividends
per
share
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$
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.065
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$
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.060
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$
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.13
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$
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.12
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Weighted
average common shares:
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Basic
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44,053
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44,134
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44,020
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44,048
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Diluted
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44,939
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44,902
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44,955
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44,928
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(1)
The
2005 earnings per share amounts have been restated to give retroactive
effect to
the two-for-one stock split that became effective on May 17, 2006.
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CONDENSED
BALANCE SHEETS
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(unaudited)
(In thousands)
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|||||||
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6/30/06
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12/31/05
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Assets
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Current
assets
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$
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100,845
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$
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74,886
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Properties,
buildings & equipment, net
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784,216
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552,984
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Other
long-term assets
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14,934
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7,181
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$
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899,995
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$
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635,051
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Liabilities
& Shareholders’ Equity
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|||||||
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Current
liabilities
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$
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162,040
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$
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129,643
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Deferred
income taxes
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59,456
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55,804
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Long-term
debt
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249,000
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75,000
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Other
long-term liabilities
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93,577
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40,394
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Shareholders’
equity
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335,922
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334,210
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$
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899,995
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$
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635,051
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3
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CONDENSED
STATEMENTS OF CASH FLOWS
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|||||||
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(unaudited)
(In thousands)
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Six
Months
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|||||||
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6/30/06
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6/30/05
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Cash
flows from operating activities:
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Net
income
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$
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57,454
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$
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47,765
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Depreciation,
depletion & amortization (DD&A)
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31,060
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19,599
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Dry
hole, abandonment & impairment
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6,375
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15
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Commodity
derivatives
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(674
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)
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-
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Stock-based
compensation expense
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2,199
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969
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Deferred
income taxes, net
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25,068
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10,064
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|||||
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Other,
net
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(64
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)
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179
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Net
increase in current assets
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(18,596
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)
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(17,840
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)
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Net
(decrease) increase in current liabilities
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(18,726
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)
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5,440
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Net
cash provided by operating activities
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84,096
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66,191
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|||||
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Net
cash used in investing activities
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(271,431
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)
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(164,221
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)
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Net
cash provided by financing activities
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185,971
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90,901
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Net
(decrease) increase in cash and cash equivalents
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(1,364
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)
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(7,129
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)
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Cash
and cash equivalents at beginning of year
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1,990
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16,690
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|||||
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Cash
and cash equivalents at end of period
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$
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626
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$
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9,561
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COMPARATIVE
OPERATING STATISTICS
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Three
Months
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Six
Months
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||||||||||||||||||
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6/30/06
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6/30/05
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Change
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6/30/06
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6/30/05
|
Change
|
|||||||||||||
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Oil
and gas:
|
|||||||||||||||||||
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Net production-BOE
per day
|
24,768
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22,668
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+9
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%
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24,118
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22,359
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+8
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%
|
|||||||||||
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Per
BOE:
|
|||||||||||||||||||
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Average
sales price before hedges
|
$
|
52.46
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$
|
43.67
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+20
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%
|
$
|
51.08
|
$
|
42.34
|
+21
|
%
|
|||||||
|
Average
sales price after hedges
|
49.75
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39.32
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+27
|
%
|
48.92
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38.62
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+27
|
%
|
|||||||||||
|
Operating
costs
|
12.01
|
11.73
|
+2
|
%
|
12.10
|
11.14
|
+9
|
%
|
|||||||||||
|
Production
taxes
|
1.50
|
1.06
|
+42
|
%
|
1.51
|
1.16
|
+30
|
%
|
|||||||||||
|
Total
operating costs
|
13.51
|
12.79
|
+6
|
%
|
13.61
|
12.30
|
+11
|
%
|
|||||||||||
|
DD&A -
oil and
gas
|
7.22
|
4.50
|
+60
|
%
|
6.73
|
4.40
|
+53
|
%
|
|||||||||||
|
General
& administrative expenses
|
3.49
|
2.52
|
+38
|
%
|
3.71
|
2.48
|
+50
|
%
|
|||||||||||
|
|
|||||||||||||||||||
|
Interest
expense
|
$
|
1.09
|
$
|
.84
|
+30
|
%
|
$
|
.92
|
$
|
.72
|
+28
|
%
|
|||||||
#
# #