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): November 8, 2006 (November 8,
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 November
8, 2006, Berry
Petroleum Company issued a news release announcing its financial
and operational results for the third quarter ended September 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
(d)
Exhibits
99.1
- News Release by Berry Petroleum Company dated November 8, 2006,
titled "Berry Petroleum Reports Third Quarter Earnings of $31.4 million and
Record Production" announcing the Registrant's results for the quarter
ended September 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: November
8, 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 REPORTS THIRD QUARTER EARNINGS
OF
$31.4 MILLION AND RECORD PRODUCTION
Bakersfield,
CA - November 8, 2006
- Berry
Petroleum Company (NYSE:BRY) earned $31.4 million, or $.70 per diluted
share,
for the third quarter of 2006, compared to net income of $34.2 million,
or $.76
per diluted share, in the third quarter of 2005, adjusted for the two-for-one
stock split effective May 17, 2006. Revenues were $129 million and discretionary
cash flow was $73.1 million in the third quarter of 2006. The Company’s
production averaged a record 26,423 barrels of oil equivalent per day
(BOE/D),
an increase of 12% over a year ago and up 7% from the second quarter
of 2006.
The average realized sales price of $47.28 per BOE was up 7% from the
$44.25 per
BOE achieved in the third quarter of 2005 and down 5% from $49.75 in
the second
quarter of 2006. The Company had no mark-to-market earnings impact in
the third
quarter related to its derivative positions. The Company was very active
during
the third quarter of 2006 drilling 155 gross (126.8 net) wells, realizing
a
gross success rate of 99 percent, according to Robert F. Heinemann, president
and chief executive officer.
For
the
nine months ending September 30, 2006, Berry’s net income was $88.8 million, or
$1.98 per diluted share, up 8% from net income of $82 million, or $1.82
per
diluted share, for the nine months ending September 30, 2005. Revenues
were $370
million in the first nine months of 2006, up 27% from $291 million in
the first
nine months of 2005. Berry achieved record discretionary cash flow of
$195
million in the first nine months of 2006, an increase of 48% over the
comparable
2005 period (see Explanation and Reconciliation of Non-GAAP Financial
Measures.)
Berry’s 2006 year-to-date results include, on a pre-tax basis, $7 million in
dry
hole charges and $4 million in exploration costs. The Company drilled
406 gross
(289.7 net) wells during the first nine months of 2006, realizing a gross
success rate of 99 percent.
Mr.
Heinemann stated, “We had an excellent third quarter as our production increased
as expected and our earnings were the highest for the year, excluding
the impact
of commodity derivatives on prior quarters. We achieved an increase in
quarterly
production of almost 1,700 BOE/D over the second quarter of 2006, primarily
through drilling and additional steam applied to new or emerging heavy
oil
opportunities. Our production for the nine months ended September 30,
2006
averaged 24,896 BOE/D, which was up 9% from the same period last year.
We are on
track to achieve double-digit production growth year-on-year and are
forecasting
average production of between 25,500 BOE/D and 25,800 BOE/D for
2006.
“We
are
having success with our exploration programs, and in the third quarter
we
drilled four shallow Green River wells at Lake Canyon with initial production
from these four wells averaging 140 BOE/D each, which is consistent with
the
results of our Brundage Canyon wells just to the east. We are in the
permitting
process for an additional 32 wells which are intended to continue exploratory
and development drilling on the eastern portion of our Lake Canyon acreage.
We
expect to begin drilling these wells in the second quarter of 2007. In
the
fourth quarter of 2006, Berry will participate in two Wasatch wells at Lake
Canyon which are following up on earlier success, with as much as a 25%
working interest.
“On
November 1 we announced that we are proceeding with full-scale development
of
our diatomite oil resource in California. In 2007 we intend to spend
$50 million
for the first 100-well development phase on this asset and expect to
average
1,000 BOE/D of heavy oil from the diatomite in 2007. Piceance production
is
increasing as expected, and in the third quarter of 2006, we drilled
or started
six additional wells, four on the Garden Gulch property and two on the
North
Parachute Ranch property. The Garden Gulch acreage now has 20 wells producing
and we anticipate production from the North Parachute Ranch property
late in the
fourth quarter. Our net production from the Piceance basin in the third
quarter
2006 averaged approximately 5,800 Mcf/D. We are building our Piceance
asset team
so that we can be as efficient as possible in the development of this
significant asset.
“We
are
in the process of determining our capital budget for 2007, but expect
our
program to target at least $250 million. We also believe that we can
achieve
another year of double digit production growth, which would be at least
28,000
BOE/D.”
Ralph
J.
Goehring, executive vice president and chief financial officer, said,
“Our third
quarter was another solid quarter operationally and financially for Berry.
For
the three months ended September 30, 2006, our discretionary cash flow
was $73
million, up 40% from the comparable 2005 period and up 11% from the second
quarter of 2006. With our recent acquisitions and diatomite development
plans,
Berry now has significantly more drilling opportunities available for
funding
than our annual cash generated from operations, thus, we will pace our
development. While we intend to keep our capital expenditure program
close to
our cash flow, we expect to be very active in drilling these locations
to add
production and reserves in a meaningful way. Given our significant drilling
inventory and our desire to maintain financial flexibility, we recently
completed a debt offering of $200 million of senior subordinated notes
with an
8.25% interest rate. This fixes the interest rate on a portion of our
long-term
debt and provides us with increased credit availability under our existing
credit facility.”
1
Third
Quarter Production Summary
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Average
Daily Production
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||||||||
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Three
Months Ended
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Oil
and Gas
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9/30/06
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%
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6/30/06
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%
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9/30/05
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%
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Heavy
Oil Production (Bbl/D)
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16,076
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61
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15,532
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63
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16,701
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71
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Light
Oil Production (Bbl/D)
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4,118
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16
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4,061
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16
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3,308
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14
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Total
Oil Production (Bbl/D)
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20,194
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76
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19,593
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79
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20,009
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85
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Natural
Gas Production (Mcf/D)
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37,374
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24
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31,047
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21
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21,828
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15
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Total
(BOE/D)
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26,423
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100
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24,768
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100
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23,647
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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 nine and three months ended September
30, 2006
and 2005 and the three months ended June 30, 2006 as follows (in
millions):
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Nine
Months Ended
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Three
Months Ended
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|||||||||||||||
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9/30/06
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9/30/05
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9/30/06
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6/30/06
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9/30/05
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Net
cash provided by operating activities
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$
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185.1
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$
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122.3
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$
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101.0
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$
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58.8
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$
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56.1
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Add
back: Net increase (decrease) in current assets
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18.0
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28.3
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(.6
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)
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16.7
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10.5
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Add
back: Net decrease (increase) in current liabilities
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(8.6
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)
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(19.6
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)
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(27.3
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)
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(9.6
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)
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(14.2
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)
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Discretionary
cash flow
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$
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194.5
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$
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131.0
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$
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73.1
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$
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65.9
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$
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52.4
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Teleconference
Call
A
conference call will be held Wednesday, November 8, 2006 at 1:30 p.m.
Eastern
Time (10:30 a.m. Pacific Time). Dial 1-866-277-1182 to participate,
using
passcode 10864327. International callers may dial 617-597-5359. For
a digital
replay available until November 22, 2006, dial 1-888-286-8010 using
passcode
95126315. 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,” “intend,” “continue,” “anticipate,” “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 September 30, 2006 Form 10-Q filed on November 8, 2006.
2
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CONDENSED INCOME
STATEMENTS
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|||||||||||||
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(unaudited)
(In thousands, except per share data)
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Three
Months
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Nine
Months
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|||||||||||
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9/30/06
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9/30/05
(1)
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9/30/06
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9/30/05(1)
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Revenues
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|||||||||||||
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Sales
of oil and gas
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$
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116,168
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$
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96,439
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$
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328,742
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$
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252,635
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Sales
of electricity
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12,592
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12,933
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39,476
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36,903
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Interest
and other income, net
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603
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612
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1,898
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1,130
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Total
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129,363
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109,984
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370,116
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290,668
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|||||||||
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Expenses
|
|||||||||||||
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Operating
costs - oil &
gas production
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30,950
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24,270
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83,763
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69,356
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Operating
costs - electricity
generation
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11,198
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12,316
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36,155
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36,596
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|||||||||
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Production
taxes
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5,286
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3,874
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11,891
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8,569
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Exploration
costs
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344
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749
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4,105
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1,535
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Depreciation,
depletion & amortization - oil & gas
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17,974
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8,602
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47,333
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26,417
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Depreciation,
depletion & amortization - electricity
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825
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1,042
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2,526
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2,826
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|||||||||
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General
and
administrative
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9,419
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5,965
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25,610
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15,988
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|||||||||
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Interest
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2,707
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1,598
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6,745
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4,502
|
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Commodity
derivatives
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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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183
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2,803
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6,965
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5,425
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Total
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78,886
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61,219
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224,357
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171,214
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|||||||||
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Income
before income
taxes
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50,477
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48,765
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145,759
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119,454
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|||||||||
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Provision
for income
taxes
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19,103
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14,546
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56,930
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37,470
|
|||||||||
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Net
income
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$
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31,374
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$
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34,219
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$
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88,829
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$
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81,984
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|||||
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|
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Basic
net income per
share
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$
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.71
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$
|
.78
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$
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2.02
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$
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1.86
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Diluted
net income per
share
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$
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.70
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$
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.76
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$
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1.98
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$
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1.82
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Dividends
per
share
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$
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.095
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$
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.115
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$
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.225
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$
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.235
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Weighted
average common shares:
|
|||||||||||||
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Basic
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43,907
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44,136
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43,982
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44,078
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Diluted
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44,665
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45,058
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44,875
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44,978
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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)
|
|||||||
|
9/30/06
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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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91,657
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$
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74,886
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Properties,
buildings & equipment, net
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1,033,222
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552,984
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|||||
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Other
long-term assets
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15,397
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7,181
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$
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1,140,276
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$
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635,051
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Liabilities
& Shareholders’ Equity
|
|||||||
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Current
liabilities
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$
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266,608
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$
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129,643
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Deferred
income taxes
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91,915
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55,804
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|||||
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Long-term
debt
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309,000
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75,000
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|||||
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Other
long-term liabilities
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69,475
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40,394
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|||||
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Shareholders’
equity
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403,278
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334,210
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$
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1,140,276
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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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(unaudited)
(In thousands)
|
|||||||
|
|
Nine
Months
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||||||
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9/30/06
|
9/30/05
|
|||||
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Cash
flows from operating activities:
|
|||||||
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Net
income
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$
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88,829
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$
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81,984
|
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Depreciation,
depletion & amortization (DD&A)
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49,858
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29,243
|
|||||
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Dry
hole, abandonment & impairment
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7,864
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2,298
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|||||
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Commodity
derivatives
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(264
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)
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-
|
||||
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Stock-based
compensation expense
|
3,563
|
404
|
|||||
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Deferred
income taxes, net
|
44,410
|
16,939
|
|||||
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Other,
net
|
281
|
106
|
|||||
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Net
increase in current assets
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(17,996
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)
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(28,310
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)
|
|||
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Net
(decrease) increase in current liabilities
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8,600
|
19,623
|
|||||
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Net
cash provided by operating activities
|
185,145
|
122,287
|
|||||
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Net
cash used in investing activities
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(419,801
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)
|
(196,891
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)
|
|||
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Net
cash provided by financing activities
|
233,018
|
66,341
|
|||||
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Net
(decrease) increase in cash and cash equivalents
|
(1,638
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)
|
(8,263
|
)
|
|||
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Cash
and cash equivalents at beginning of year
|
1,990
|
16,690
|
|||||
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Cash
and cash equivalents at end of period
|
$
|
352
|
$
|
8,427
|
|||
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COMPARATIVE
OPERATING STATISTICS
|
|||||||||||||||||||
|
|
Three
Months
|
Nine
Months
|
|||||||||||||||||
|
|
9/30/06
|
9/30/05
|
Change
|
9/30/06
|
9/30/05
|
Change
|
|||||||||||||
|
Oil
and gas:
|
|||||||||||||||||||
|
Net production-BOE
per day
|
26,423
|
23,647
|
+12
|
%
|
24,896
|
22,793
|
+9
|
%
|
|||||||||||
|
Per
BOE:
|
|||||||||||||||||||
|
Average
sales price before hedges
|
$
|
50.33
|
$
|
51.34
|
-2
|
%
|
$
|
50.81
|
$
|
45.38
|
+12
|
%
|
|||||||
|
Average
sales price after hedges
|
47.28
|
44.25
|
+7
|
%
|
48.33
|
40.48
|
+19
|
%
|
|||||||||||
|
Operating
costs
|
12.73
|
11.16
|
+14
|
%
|
12.32
|
11.14
|
+9
|
%
|
|||||||||||
|
Production
taxes
|
2.17
|
1.78
|
+22
|
%
|
1.75
|
1.38
|
+27
|
%
|
|||||||||||
|
Total
operating costs
|
14.90
|
12.94
|
+15
|
%
|
14.07
|
12.52
|
+12
|
%
|
|||||||||||
|
DD&A -
oil and
gas
|
7.39
|
3.95
|
+87
|
%
|
6.96
|
4.25
|
+64
|
%
|
|||||||||||
|
General
& administrative expenses
|
3.87
|
2.74
|
+41
|
%
|
3.77
|
2.57
|
+47
|
%
|
|||||||||||
|
|
|||||||||||||||||||
|
Interest
expense
|
$
|
1.11
|
$
|
.73
|
+52
|
%
|
$
|
.99
|
$
|
.72
|
+38
|
%
|
|||||||
#
# #