UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date of
Report: September 29, 2008
(Date of
Earliest Event Reported): (June 10, 2008)
Commission
file number
1-9735
BERRY
PETROLEUM COMPANY
(Exact
name of registrant as specified in its charter)
|
DELAWARE
|
77-0079387
|
|||
|
(State
of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
|
1999
Broadway
Denver,
Colorado 80202
(Address
of principal executive offices, including zip code)
Registrant's
telephone number, including area code: (303) 999-4400
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 (see General Instruction A.2.
below):
r Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
r Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
r Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
r Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
EXPLANATORY
NOTES:
On July
16, 2008, Berry Petroleum Company (“Berry” or “Company”) filed a Form
8-K (the “Report”) announcing that on July 15, 2008 Berry closed its
previously announced Purchase and Sale Agreements with O’Brien Resources, LLC,
SEPCO II, LLC, Liberty Energy, LLC, Crow Horizons Company, and O’Brien II, LP
(collectively referred to as “O’Brien”) to acquire their interests in natural
gas producing properties on 4,500 net acres in Limestone and Harrison Counties
of East Texas for approximately $653 million including closing adjustments. The Report is
hereby amended to include Item 9.01 Financial Statements and
Exhibits.
(a)FINANCIAL
STATEMENTS OF BUSINESSES ACQUIRED.
The
Unaudited Statements of Combined Revenues and Direct Operating Expenses for the
Oil and Gas Properties purchased by Berry from O’Brien for the three
and six months ended June 30, 2008 and 2007 and the related notes thereto, and
the Audited Statements of Combined Revenues and Direct Operating Expenses for
the Oil and Gas Properties purchased by Berry from O’Brien for the
years ended December 31, 2007 and 2006, and the related notes thereto, together
with the Report of PricewaterhouseCoopers LLP, independent registered public
accounting firm, are attached hereto as Exhibits 99.3 and 99.4.
(b)PRO
FORMA FINANCIAL INFORMATION.
Unaudited
Pro Forma Condensed Combined Statements of Income of Berry Petroleum Company,
for the six months ended June 30, 2008 and for the year ended December 31, 2007,
the Unaudited Pro Forma Condensed Combined Balance Sheet of Berry Petroleum
Company, as of June 30, 2008, and the related notes thereto, show the pro forma
effects of Berry's acquisition of the O’Brien Properties. Copies of such pro
forma financial statements are attached hereto as Exhibit 99.5.
(d) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
------------------ -------------------
|
*23.1
|
Consent
of Independent Registered Public Accounting
Firm.
|
|
**99.1
|
Purchase
and Sale Agreement Between O’Brien Resources, LLC, Sepco II, LLC, Liberty
Energy, LLC, Crow Horizons Company and O’Benco II LP collectively as
Seller and Berry Petroleum Company as Purchaser, dated June 10, 2008
(filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q
for the quarter ending June 30, 2008 File No.
1-09735).
|
|
**99.2
|
Overriding
Royalty Purchase Agreement between O’Brien Resources, LLC, as Seller and
Berry Petroleum Company, as Purchaser, dated as of June 10, 2008 (filed as
Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ending June 30, 2008 File No.
1-09735).
|
|
*99.3
|
Unaudited
Statement of Combined Revenues and Direct Operating Expenses for the Oil
and Gas Properties (the "O’Brien Properties") purchased by Berry Petroleum
Company from O’Brien, for the three and six months ended June 30, 2008 and
2007, and the related notes
thereto.
|
|
*99.4
|
Audited
Statements of Combined Revenues and Direct Operating Expenses for the Oil
and Gas Properties (the " O’Brien Properties") purchased by Berry
Petroleum Company from O’Brien, for the years ended December 31, 2007 and
2006, and the related notes thereto, together with the Report of
Pricewaterhouse Coopers, LLP, independent registered public accounting
firm, concerning the Statement and related
notes.
|
|
*99.5
|
Unaudited
Pro Forma Condensed Combined Statements of Income of Berry Petroleum
Company for the six months ended June 30, 2008 and for the year ended
December 31, 2007, the Unaudited Pro Forma Condensed Combined Balance
Sheet of Berry Petroleum Company, as of June 30, 2008, and the related
notes thereto, to show the pro forma effects of Berry's acquisition of the
O’Brien Properties.
|
----------
* filed
herewith
** previously
filed
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 hereunto
duly authorized.
BERRY
PETROLEUM COMPANY
Date:
September 29,
2008 /s/
Kenneth A. Olson
-------------------------------------------
Kenneth
A. Olson
Corporate
Secretary
EXHIBIT
23.1
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to the incorporation by reference in the Registration Statements on
Form S-3ASR (File No. 333-135055), Form S-8 (File No. 333-98379), and Form
S-8 (File No. 333-127018) of Berry Petroleum Company of our report dated
September 29, 2008 relating to the Statements of Combined Revenues and Direct
Operating Expenses of the Oil and Gas Properties Purchased by Berry Petroleum
from a Consortium of Private Sellers, which appears in this Current Report on
Form 8-K/A.
PricewaterhouseCoopers
LLP
Los
Angeles, California
September
29, 2008
EXHIBIT
99.3
OF THE
OIL AND GAS PROPERTIES PURCHASED BY BERRY PETROLEUM COMPANY
FROM A
CONSORTIUM OF PRIVATE SELLERS
(UNAUDITED)
(IN
THOUSANDS)
|
Three
months ended June 30,
|
Six
months ended June 30,
|
|||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||
|
Revenues
|
$
|
25,340
|
$
|
7,836
|
$
|
40,355
|
$
|
15,254
|
||||
|
Expenses
|
||||||||||||
|
Operating
costs – oil and gas production
|
377
|
404
|
882
|
794
|
||||||||
|
Production
taxes
|
2,011
|
583
|
3,230
|
1,108
|
||||||||
|
Direct
operating expenses
|
2,388
|
987
|
4,112
|
1,902
|
||||||||
|
Excess
of revenues over direct operating expenses
|
$ |
22,952
|
$ |
6,849
|
$
|
36,243
|
$ |
13,352
|
||||
The
accompanying notes are an integral part of these financial
statements.
A-1
NOTES TO
STATEMENT OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES
OF THE
OIL AND GAS PROPERTIES PURCHASED BY BERRY PETROLEUM COMPANY
FROM A
CONSORTIUM OF PRIVATE SELLERS
(UNAUDITED)
(1)THE
PROPERTIES
On July
16, 2008, Berry Petroleum Company (Berry) filed a Form 8-K announcing that on
July 15, 2008 Berry
closed
its previously announced Purchase and Sale Agreements with multiple parties
comprised of O’Brien Resources, LLC, O’Benco II, LP, Sepco II, LLC, Crow
Horizons and Liberty Energy, LLC, referred to collectively as O’Brien or the
Sellers, to acquire their interests in two East Texas natural gas fields
(O’Brien properties) for approximately $622 million, with an effective date of
February 1, 2008. The transaction closed July 15, 2008 for the
original purchase offer of $622 million and closing adjustments of $31 million,
for a total of $653 million, subject to normal post-closing
adjustments.
(2)BASIS
FOR PRESENTATION
The
presentation of the accompanying financial statements for the O’Brien properties
is consistent with the Securities and Exchanges Commission’s rules, regulations
and staff interpretations. The financial statements of the O’Brien
properties to satisfy the requirements of Rule 3-05 of Regulation S-X are
limited to historical statements of revenues and direct operating expenses,
together with footnote disclosures of reserve quantities and the standardized
measure pursuant to Statement of Financial Accounting Standards No. 69, Disclosures about Oil and Gas
Producing Activities (SFAS 69).
We
believe that it is sufficient to provide audited historical statements of
revenues and direct operating expenses for the O’Brien properties, along with
footnote disclosures of reserve quantities and the standardized measure pursuant
to SFAS 69, for the following reasons:
|
·
|
A
substantial majority of the value of the O’Brien properties is in working
interests in oil and gas
properties.
|
No
historical GAAP-basis financial statements exist for the O’Brien properties on a
stand-alone basis. The O’Brien properties comprise only a
portion of the oil and gas and other assets owned by the Sellers and were not
accounted for or operated as a separate division by the
Sellers. Accordingly, full separate financial statements prepared in
accordance with GAAP
do not exist and are not practical to obtain. Additionally, due to
multiple parties that comprise the Seller, it is impractical to prepare audited
financial statements that would represent the combined financial results of all
Sellers, and such an undertaking would result in undue cost and
difficulty.
|
·
|
The
portion of historical general and administrative expenses or other
indirect expenses attributable to the O’Brien properties is indeterminable
and is not necessarily indicative of the level of such expenses to be
incurred in the future under Berry’s ownership. Berry does not
intend to hire any of the employees of the Sellers, although it may
continue to use the Sellers’ contract pumpers and other
vendors.
|
|
·
|
Historical
depreciation, depletion and amortization attributable to the O’Brien
properties is irrelevant to the ongoing financial reporting for such
operations because the assets will be recorded at Berry’s acquisition cost
and depleted accordingly over future periods using the successful-efforts
method of accounting.
|
During
the periods presented, the O’Brien properties were not accounted for or operated
as a separate division by the Sellers. Certain costs, such as depreciation,
depletion and amortization, interest, accretion, general and administrative
expenses, and corporate income taxes were not allocated to the individual
properties. Accordingly, full separate financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America do not exist and are not practical to obtain in these
circumstances. As a result,, the financial statements presented are
not indicative of the results of operations of the acquired properties going
forward.
A-2
NOTES TO
STATEMENT OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES
OF THE
OIL AND GAS PROPERTIES PURCHASED BY BERRY PETROLEUM COMPANY
FROM A
CONSORTIUM OF PRIVATE SELLERS
(UNAUDITED)
Direct Operating
Expenses
Combined
revenues and direct operating expenses included in the accompanying statement
represent Berry's net working interest in the properties
acquired. Direct lease operating expenses are recognized on the
accrual basis and consist of all costs incurred in producing, marketing and
distributing gas produced by the O’Brien properties as well as production
taxes. Excluded from direct lease operating expenses are
depreciation, depletion and amortization, interest, accretion, general and
administrative expenses, and corporate income taxes.
Revenue
Recognition
Revenue
associated with sales of natural gas is recognized when title passes to the
customer, net of royalties, discounts and allowances, as
applicable. Natural gas produced and used in operations are not
included in revenues. Revenue from natural gas production from
properties in which O’Brien has an interest with other producers is recognized
on the basis of O’Brien's net working interest (entitlement
method).
In the
opinion of management, the accompanying unaudited interim Statements of Combined
Revenues and Direct Operating Expenses include all adjustments considered
necessary for a fair statement. Interim results are not necessarily
indicative of results expected for a full year.
(3)COMMITMENTS
AND CONTINGENCIES
Pursuant
to the terms of the Purchase and Sale Agreements between the Sellers and Berry,
any commitments, claims, litigation or disputes pending as of the effective date
(February 1, 2008) or any matters arising in connection with ownership of the
O’Brien properties prior to the effective date are retained by the Sellers
except for the drilling rig contracts and compressor rental agreements which
approximate $50 million. Notwithstanding this indemnification,
management of O’Brien is not aware of any legal, environmental or other
commitments or contingencies that would have a material effect on the statement
of combined revenues and direct operating expenses.
A-3
EXHIBIT
99.4
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders of Berry Petroleum Company:
We have
audited the accompanying Statements of Combined Revenues and Direct Operating
Expenses for the oil and gas properties purchased by Berry Petroleum Company
from a consortium of private sellers for each of the two years in the period
ended December 31, 2007. These statements are the responsibility of
Berry Petroleum Company's management. Our
responsibility is to express an opinion on these statements based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the Statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the Statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the Statements. We believe
that our audit provides a reasonable basis for our opinion.
The
accompanying statements were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission as described in
Note 1 and are not intended to be a complete presentation of the natural gas
fields' revenues and expenses.
In our
opinion, the Statements of Combined Revenues and Direct Operating Expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses described in Note 1 of the Freestone Consolidated and
Southeast Darco natural gas fields for each of the two years in the period ended
December 31, 2007 in conformity with accounting principles generally accepted in
the United States of America.
PricewaterhouseCoopers
LLP
Los Angeles, California
September
29, 2008
B-1
STATEMENTS
OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES
OF THE
OIL AND GAS PROPERTIES PURCHASED BY BERRY PETROLEUM COMPANY
FROM A
CONSORTIUM OF PRIVATE SELLERS,
(IN
THOUSANDS)
|
Year
ended December 31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Revenues
|
$ | 33,724 | $ | 26,960 | ||||
|
Expenses
|
||||||||
|
Operating
costs – oil and gas production
|
2,109 | 1,759 | ||||||
|
Production
taxes
|
2,609 | 1,867 | ||||||
|
Direct
operating expenses
|
4,718 | 3,626 | ||||||
|
Excess
of revenues over direct operating expenses
|
$ | 29,006 |
$
|
23,334 | ||||
The
accompanying notes are an integral part of these financial
statements.
B-2
DIRECT
OPERATING EXPENSES OF THE OIL AND GAS PROPERTIES
PURCHASED
BY BERRY PETROLEUM COMPANY
FROM A
CONSORTIUM OF PRIVATE SELLERS
(1)THE
PROPERTIES
On July
16, 2008, Berry Petroleum Company (Berry) filed a Form 8-K announcing that on
July 15, 2008 Berry closed its previously announced Purchase and Sale Agreements
with multiple parties comprised of O’Brien Resources, LLC, O’Benco II, LP, Sepco
II, LLC, Crow Horizons and Liberty Energy, LLC, referred to collectively as
O’Brien or the Sellers, to acquire their interests in two East Texas natural gas
fields (O’Brien properties) for approximately $622 million., with an effective
date of February 1, 2008. The transaction closed July 15, 2008
for the original purchase offer of $622 million and closing adjustments of $31
million, for a total of $653 million, subject to normal post-closing
adjustments.
(2)BASIS
FOR PRESENTATION
The
presentation of the accompanying financial statements for the O’Brien properties
is consistent with the Securities and Exchange Commission’s rules, regulations
and staff interpretations on the topic, including those cited
above. The financial statements of the O’Brien properties to satisfy
the requirements of Rule 3-05 of Regulation S-X are limited to audited
historical statements of revenues and direct operating expenses, together with
footnote disclosures of reserve quantities and the standardized measure pursuant
to Statement of Financial Accounting Standards No. 69, Disclosures about Oil and Gas
Producing Activities (SFAS 69).
We
believe that it is sufficient to provide audited historical statements of
revenues and direct operating expenses for the O’Brien properties, along with
footnote disclosures of reserve quantities and the standardized measure pursuant
to SFAS 69, for the following reasons:
|
·
|
A
substantial majority of the value of the O’Brien properties is in working
interests in oil and gas
properties.
|
No
historical GAAP-basis financial statements exist for the O’Brien properties on a
stand-alone basis. The O’Brien properties comprise only a
portion of the oil and gas and other assets owned by the Sellers and were not
accounted for or operated as a separate division by the
Sellers. Accordingly, full separate financial statements prepared in
accordance with GAAP do not exist and are not practicable to
obtain. Additionally, due to multiple parties that comprise the
Seller, it is not practical to prepare audited financial statements that would
represent the combined financial results of all Sellers, and such an undertaking
would result in undue cost and difficulty.
|
·
|
The
portion of historical general and administrative expenses or other
indirect expenses attributable to the O’Brien properties is indeterminable
and is not necessarily indicative of the level of such expenses to be
incurred in the future under Berry’s ownership. Berry does not
intend to hire any of the employees of the Sellers, although it may
continue to use the Sellers’ contract pumpers and other
vendors.
|
|
·
|
Historical
depreciation, depletion and amortization attributable to the O’Brien
properties is irrelevant to the ongoing financial reporting for such
operations because the assets will be recorded at Berry’s acquisition cost
and depleted accordingly over future periods using the successful-efforts
method of accounting.
|
During
the periods presented, the O’Brien properties were not accounted for or operated
as a separate division by the Sellers. Certain costs, such as depreciation,
depletion and amortization, interest, accretion, general and administrative
expenses, and corporate income taxes were not allocated to the individual
properties. Accordingly, full separate financial statements prepared
in accordance with accounting principles generally accepted in the United States
of America do not exist and are not practical to obtain in these
circumstances. As a result,, the financial statements presented are
not indicative of the results of operations of the acquired properties going
forward.
B-3
NOTES TO
STATEMENTS OF COMBINED REVENUES AND
DIRECT
OPERATING EXPENSES OF THE OIL AND GAS PROPERTIES
PURCHASED
BY BERRY PETROLEUM COMPANY
FROM A
CONSORTIUM OF PRIVATE SELLERS
Direct Operating
Expenses
Combined
revenues and direct operating expenses included in the accompanying statements
represent Berry's net working interest in the properties
acquired. Direct lease operating expenses are recognized on the
accrual basis and consist of all costs incurred in producing, marketing and
distributing gas produced by the O’Brien properties as well as production
taxes. Excluded from direct lease operating expenses are
depreciation, depletion and amortization, interest, accretion, general and
administrative expenses, and corporate income taxes.
Revenue
Recognition
Revenue
associated with sales of natural gas is recognized when title passes to the
customer, net of royalties, discounts and allowances, as
applicable. Natural gas produced and used in operations are not
included in revenues. Revenue from natural gas production from
properties in which O’Brien has an interest with other producers is recognized
on the basis of O’Brien's net working interest (entitlement
method).
(3)COMMITMENTS
AND CONTINGENCIES
Pursuant to the terms of the Purchase
and Sale Agreements between the Sellers and Berry, any commitments, claims,
litigation or disputes pending as of the effective date (February 1, 2008) or
any matters arising in connection with ownership of the O’Brien properties prior
to the effective date are retained by the Sellers except for the drilling rig
contracts and compressor rental agreements which approximate $50
million. Notwithstanding this indemnification, management of O’Brien
is not aware of any legal, environmental or other commitments or contingencies
that would have a material effect on the statement of combined revenues and
direct operating expenses.
B-4
(UNAUDITED)
The
following estimates of proved oil and gas reserves, both developed and
undeveloped, represent interests acquired by Berry in the transaction described
above, and are located solely within the United States. Proved
reserves represent estimated quantities of crude oil and natural gas which
geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and
operating conditions. Proved developed oil and gas reserves are the
quantities expected to be recovered through existing wells with existing
equipment and operating methods. Proved undeveloped oil and gas
reserves are reserves that are expected to be recovered from new wells on
undrilled acreage, or from existing wells for which relatively major
expenditures are required for completion.
Disclosures
of oil and gas reserves which follow are based on estimates as of December 31,
2006 and 2007, respectively, prepared by O’Brien's engineers and from
information provided by the Sellers, in accordance with guidelines established
by the Securities and Exchange Commission. Such estimates are subject
to numerous uncertainties inherent in the estimation of quantities of proved
reserves and in the projection of future rates of production and the timing of
development expenditures. These estimates do not include probable or
possible reserves. The information provided does not necessarily
represent Berry's estimate of expected future cash flows or value of proved oil
and gas reserves.
The
tables below detail O’Brien’s proved reserves at December 31, 2007 and 2006.
Reserve studies with respect to the O’Brien properties were conducted as of
December 31, 2007 and 2006, but not as of December 31, 2005. Based on
the age of the data and changes in well naming nomenclature, it would be
impractical to recreate a reserve study as of December 31,
2005. Therefore, the reserves for December 31, 2005 were computed
using only production and new discovery quantities and valuation, without
showing any amounts under the “revision of prior estimates”
category.
Changes
in estimated reserve quantities
The net
interest in estimated quantities of proved developed and undeveloped reserves of
crude oil and natural gas at December 31, 2007 and 2006, and changes in such
quantities during each of the years then ended were as follows (in
thousands):
|
2007
|
2006
|
|||||||||||||
|
Oil
|
Gas
|
Oil
|
Gas
|
|||||||||||
|
Mbbl
|
MMcf
|
MBOE
|
Mbbl
|
MMcf
|
MBOE
|
|||||||||
|
Proved
developed and Undeveloped reserves:
|
||||||||||||||
|
Beginning of year
|
172
|
253,025
|
42,343
|
122
|
237,967
|
39,783
|
||||||||
|
Revision of previous estimates
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||
|
Improved recovery
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||
|
Extensions and discoveries
|
227
|
75,386
|
12,791
|
56
|
20,758
|
3,516
|
||||||||
|
Property sales
|
-
|
-
|
-
|
-
|
-
|
|||||||||
|
Production
|
(14
|
)
|
(7,375
|
)
|
(1,243
|
)
|
(6
|
)
|
(5,700
|
)
|
(956
|
)
|
||
|
Purchase of reserves in place
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||
|
End of year
|
385
|
321,036
|
53,891
|
172
|
253,025
|
42,343
|
||||||||
|
Proved
developed reserves:
|
||||||||||||||
|
Beginning of year
|
87
|
69,176
|
11,616
|
31
|
50,233
|
8,403
|
||||||||
|
End of year
|
163
|
97,758
|
16,456
|
87
|
69,176
|
11,616
|
||||||||
The
standardized measure has been prepared assuming year end sales prices adjusted
for fixed and determinable contractual price changes, current costs and
statutory tax rates (adjusted for tax credits and other items), and a ten
percent annual discount rate. No deduction has been made for depletion,
depreciation or any indirect costs such as general corporate overhead or
interest expense. Cash outflows for future production and development costs
include those cash flows associated with the ultimate settlement of the asset
retirement obligation.
B-5
SUPPLEMENTAL
INFORMATION ABOUT OIL AND GAS PRODUCING PROPERTIES
(UNAUDITED)
The
following table sets forth unaudited information concerning future net cash
flows for oil and gas reserves, net of income tax expense. This
information does not purport to present the fair market value of the O’Brien
properties’ oil and gas assets, but does present a standardized disclosure
concerning possible future net cash flows that would result under the
assumptions used.
Supplemental
Information About Oil & Gas Producing Activities (Unaudited)
(Cont'd)
Standardized
measure of discounted future net cash flows from estimated production of proved
oil and gas reserves (in thousands):
|
2007
|
2006
|
|||||||
|
Future
cash inflows
|
$
|
2,279,457
|
$
|
1,404,002
|
||||
|
Future
production costs
|
(286,492
|
)
|
(173,572
|
)
|
||||
|
Future
development costs
|
(355,964
|
)
|
(355,514
|
)
|
||||
|
Future
net cash flows
|
1,637,001
|
874,916
|
||||||
|
10%
annual discount for estimated timing of cash flows
|
(936,799
|
)
|
(473,349
|
)
|
||||
|
Standardized
measure of discounted future net cash flows
|
$
|
700,202
|
$
|
401,567
|
||||
|
Average
sales prices at December 31:
|
||||||||
|
Oil ($/Bbl)
|
$
|
92.05
|
$
|
57.25
|
||||
|
Gas ($/Mcf)
|
$
|
6.99
|
$
|
5.51
|
||||
|
BOE Price
|
$
|
42.30
|
$
|
33.16
|
||||
Changes
in standardized measure of discounted future net cash flows from proved oil and
gas reserves (in thousands):
|
2007
|
2006
|
|||||||
|
Standardized
measure - beginning of year
|
$
|
401,567
|
$
|
590,061
|
||||
|
Sales
of oil and gas produced, net of production costs
|
(29,421
|
)
|
(22,818
|
)
|
||||
|
Revisions
to estimates of proved reserves:
|
||||||||
|
Net changes in sales prices and production costs
|
121,597
|
(277,311
|
)
|
|||||
|
Revisions of previous quantity estimates
|
-
|
-
|
||||||
|
Improved recovery
|
-
|
-
|
||||||
|
Extensions and discoveries
|
238,505
|
55,150
|
||||||
|
Change in estimated future development costs
|
(88,682
|
)
|
(48,545
|
)
|
||||
|
Purchases
of reserves in place
|
-
|
-
|
||||||
|
Sales
of reserves in place
|
-
|
-
|
||||||
|
Development
costs incurred during the period
|
104,180
|
33,233
|
||||||
|
Accretion
of discount
|
40,157
|
59,006
|
||||||
|
Income
taxes
|
-
|
-
|
||||||
|
Other
|
(87,701
|
)
|
12,791
|
|||||
|
Net
increase (decrease)
|
298,635
|
(188,494
|
)
|
|||||
|
Standardized
measure - end of year
|
$
|
700,202
|
$
|
401,567
|
||||
B-6
EXHIBIT
99.5
BERRY
PETROLEUM COMPANY
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The
following unaudited pro forma condensed combined financial statements and
related notes give effect to the acquisition by Berry of certain oil and gas
producing properties from O’Brien for the six months ended June 30, 2008 and for
the year ended December 31, 2007.
The
unaudited pro forma condensed combined statements of income are derived from the
individual statements of operations of Berry and the statements of combined
revenues and direct operating expenses of O’Brien, and combines the results of
operations of Berry and O’Brien for the six months ended June 30, 2008 and for
the year ended December 31, 2007 as if the acquisition occurred on January 1,
2007. The unaudited pro forma condensed combined balance sheet is
derived from the individual balance sheet of Berry and has been presented to
show the effect as if the acquisition occurred as of June 30, 2008.
Pro
forma data is based on assumptions and include adjustments as explained in the
notes to the unaudited pro forma condensed combined financial
statements. As adjustments are based on currently available
information, actual adjustments may differ from the pro forma adjustments;
therefore, the pro forma data is not necessarily indicative of the financial
results that would have been attained had the O’Brien transaction occurred on
the dates referenced above, and should not be viewed as indicative of operations
in future periods. The unaudited pro forma condensed combined
financial statements, including any notes thereto, are qualified in their
entirety to, and should be read in conjunction with the notes thereto, Berry’s
Annual Report on Form 10-K for the year ended December 31, 2007 filed with the
Securities and Exchange Commission and Form 10-Q for the quarter ended June 30,
2008 filed with the Securities and Exchange Commission, and the Statement of
Combined Revenues and Direct Operating Expenses for the Oil and Gas Properties
Purchased by Berry Petroleum Company From a Consortium of Private Sellers
included herein.
C-1
BERRY
PETROLEUM COMPANY
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE
SIX MONTHS ENDED JUNE 30, 2008
(In
thousands, except per share amounts)
|
BERRY
HISTORICAL
|
O’BRIEN
PROPERTIES
HISTORICAL
|
PRO
FORMA
ADJUSTMENTS
(SEE
NOTE 2)
|
PRO
FORMA
COMBINED
|
|||||||
|
REVENUES
AND OTHER INCOME ITEMS
|
||||||||||
|
Sales
of oil and gas
|
$
|
349,827
|
$
|
40,355
|
$
|
-
|
$
|
390,182
|
||
|
Sales
of electricity
|
32,906
|
-
|
-
|
32,906
|
||||||
|
Gas
marketing
|
14,762
|
-
|
-
|
14,762
|
||||||
|
Gain
on sale of assets
|
414
|
-
|
-
|
414
|
||||||
|
Interest
and other income, net
|
2,893
|
-
|
-
|
2,893
|
||||||
|
400,802
|
40,355
|
-
|
441,157
|
|||||||
|
EXPENSES
|
||||||||||
|
Operating
costs – oil and gas production
|
96,814
|
882
|
-
|
97,696
|
||||||
|
Operating costs -
electricity generation
|
31,914
|
-
|
-
|
31,914
|
||||||
|
Production
taxes
|
13,448
|
3,230
|
-
|
16,678
|
||||||
|
Depreciation,
depletion & amortization - oil and gas production
|
56,148
|
9,451
|
a,d
|
65,599
|
||||||
|
Depreciation,
depletion & amortization - electricity
generation
|
1,345
|
-
|
-
|
1,345
|
||||||
|
Gas
marketing
|
14,053
|
-
|
-
|
14,053
|
||||||
|
General
and administrative
|
22,543
|
-
|
2,675
|
b
|
25,218
|
|||||
|
Interest
|
7,689
|
-
|
24,455
|
c
|
32,144
|
|||||
|
Commodity
derivatives
|
767
|
-
|
-
|
767
|
||||||
|
Dry
hole, abandonment, impairment and exploration
|
7,590
|
-
|
-
|
7,590
|
||||||
|
252,311
|
4,112
|
36,581
|
293,004
|
|||||||
|
Income
before income taxes
|
148,491
|
36,243
|
(36,581
|
)
|
148,153
|
|||||
|
Provision
for income taxes
|
56,319
|
-
|
(1,162
|
)
|
55,157
|
|||||
|
Net
income
|
$
|
92,172
|
$
|
36,243
|
$
|
(35,419
|
)
|
92,996
|
||
|
Basic
net income per share
|
$
|
2.07
|
$
|
2.09
|
||||||
|
Diluted
net income per share
|
$
|
2.03
|
$
|
2.04
|
||||||
|
Dividends
per share
|
$
|
.15
|
$
|
.15
|
||||||
|
Weighted
average number of shares of capital stock outstanding used
to calculate basic net income per share
|
44,435
|
44,435
|
||||||||
|
Effect
of dilutive securities:
|
||||||||||
|
Equity
based compensation
|
924
|
924
|
||||||||
|
Director
deferred compensation
|
124
|
124
|
||||||||
|
Weighted
average number of shares of capital stock used to calculate diluted net
income per share
|
45,483
|
45,483
|
C-2
BERRY
PETROLEUM COMPANY
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE
YEAR ENDED DECEMBER 31, 2007
(In
thousands, except per share amounts)
|
BERRY
HISTORICAL
|
O’BRIEN
PROPERTIES
HISTORICAL
|
PRO
FORMA
ADJUSTMENTS
(SEE
NOTE 2)
|
PRO
FORMA
COMBINED
|
||||||
|
REVENUES
AND OTHER INCOME ITEMS
|
|||||||||
|
Sales
of oil and gas
|
$
|
467,400
|
$
|
33,724
|
$
|
-
|
$
|
501,124
|
|
|
Sales
of electricity
|
55,619
|
-
|
-
|
55,619
|
|||||
|
Gain
on sale of assets
|
54,173
|
-
|
-
|
54,173
|
|||||
|
Interest
and other income, net
|
6,265
|
-
|
-
|
6,265
|
|||||
|
583,457
|
33,724
|
-
|
617,181
|
||||||
|
EXPENSES
|
|||||||||
|
Operating
costs - oil and gas production
|
141,218
|
2,109
|
-
|
143,327
|
|||||
|
Operating
costs - electricity generation
|
45,980
|
-
|
-
|
45,980
|
|||||
|
Production
taxes
|
17,215
|
2,609
|
-
|
19,824
|
|||||
|
Depreciation,
depletion & amortization - oil and gas production
|
93,691
|
19,670
|
a,d
|
113,361
|
|||||
|
Depreciation,
depletion & amortization - electricity
generation
|
3,568
|
-
|
-
|
3,568
|
|||||
|
General
and administrative
|
40,210
|
-
|
4,027
|
b
|
44,237
|
||||
|
Interest
|
17,287
|
-
|
48,920
|
c
|
66,207
|
||||
|
Dry
hole, abandonment, impairment and exploration
|
13,657
|
-
|
-
|
13,657
|
|||||
|
372,826
|
4,718
|
72,617
|
450,161
|
||||||
|
Income
before income taxes
|
210,631
|
29,006
|
(72,617
|
)
|
167,020
|
||||
|
Provision
for income taxes
|
80,703
|
-
|
(19,685
|
)
|
61,018
|
||||
|
Net
income
|
$
|
129,928
|
$
|
29,006
|
$
|
(52,932
|
)
|
106,002
|
|
|
Basic
net income per share
|
$
|
2.95
|
$
|
2.41
|
|||||
|
Diluted
net income per share
|
$
|
2.89
|
$
|
2.36
|
|||||
|
Dividends
per share
|
$
|
.30
|
$
|
.30
|
|||||
|
Weighted
average number of shares of capital stock outstanding used
to calculate basic net income per share
|
44,075
|
44,075
|
|||||||
|
Effect
of dilutive securities:
|
|||||||||
|
Equity
based compensation
|
604
|
604
|
|||||||
|
Director
deferred compensation
|
227
|
227
|
|||||||
|
Weighted
average number of shares of capital stock used to calculate diluted net
income per share
|
44,906
|
44,906
|
|||||||
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF
JUNE 30, 2008
(In
thousands)
|
BERRY
HISTORICAL
|
FINANCING
PRO FORMA
ADJUSTMENTS
(SEE
NOTE 3)
|
ACQUISITION
PRO FORMA
ADJUSTMENTS
(SEE
NOTE 3)
|
PRO
FORMA
COMBINED
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||
|
Current
assets
|
$ | 270,871 | $ | 653,648 |
(1
|
) | $ | (653,648 | ) | (1 | ) | $ | 270,871 | |||||
|
Oil
and gas properties, buildings and equipment
|
1,405,560 | 656,354 | (2 | ) | 2,061,914 | |||||||||||||
|
Other
assets
|
73,885 | 73,885 | ||||||||||||||||
|
Total
assets
|
$ | 1,750,316 | $ | 653,648 | $ | 2,706 | $ | 2,406,670 | ||||||||||
|
LIABILITIES
& SHAREHOLDERS’ EQUITY
|
||||||||||||||||||
|
Current
liabilities
|
$ | 495,994 | $ | 1,631 | (2 | ) | $ | 497,625 | ||||||||||
|
Deferred
taxes
|
87,858 | 87,858 | ||||||||||||||||
|
Long-term
debt
|
511,000 | 653,648 | (1 | ) | 1,164,648 | |||||||||||||
|
Abandonment
obligation
|
40,051 | 1,075 | (2 | ) | 41,126 | |||||||||||||
|
Fair
value of derivatives
|
322,560 | 322,560 | ||||||||||||||||
|
Other
liabilities
|
4,858 | 4,858 | ||||||||||||||||
|
Shareholders’
equity
|
287,995 | 287,995 | ||||||||||||||||
|
Total
liabilities and shareholders’ equity
|
$ | 1,750,316 | $ | 653,648 | $ | 2,706 | $ | 2,406,670 | ||||||||||
C-4
BERRY
PETROLEUM COMPANY
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 –
BASIS OF PRESENTATION
The
unaudited pro forma statements of income for the six months ended June 30,
2008 and for the year ended December 31, 2007 are based on the unaudited
financial statements of Berry for the six months ended June 30,
2008 and the audited financial statements of Berry for the year ended December
31, 2007, the unaudited statement of combined revenues and direct
operating expenses of the O’Brien properties for the six months ended June 30,
2008 and the audited statement of combined revenues and direct operating
expenses for the O’Brien properties for the year ended December 31,
2007, and the adjustments and assumptions described below.
The
financial statements presented are not indicative of the results of operations
of the acquired properties going forward
due to
changes in the business and the need to include certain operating expenses on a
prospective basis.
NOTE 2 –
ADJUSTMENTS TO PRO FORMA STATEMENTS OF INCOME
The
unaudited pro forma statement of income gives effect to the following pro forma
adjustments necessary to reflect the acquisition and additional debt outlined in
Note 3 below:
|
a.
|
Record
incremental pro forma depreciation, depletion and amortization expense
recorded in accordance with the successful efforts method of accounting
for oil and gas activities based on the purchase price allocation to
depreciable and depletable assets.
|
|
b.
|
Record
assumed increase in general and administrative expenses as a result of the
purchase of the O’Brien properties primarily relating to an increase of 14
additional employees and other costs incurred to support increased
operating activities.
|
|
c.
|
Record
interest expense for the additional debt of approximately $654 million
incurred in conjunction with the purchase of O’Brien properties at a rate
of 7.715% per annum based on the terms of Berry’s credit
agreement. A one-tenth of one percent change in interest rate
would have an approximately $897 thousand annual impact on interest
expense.
|
|
d.
|
Record
pro forma accretion of asset retirement obligation on properties acquired
in accordance Statement of Financial Accounting Standards No. 143,
“Accounting for Asset Retirement Obligations,” computed using an inflation
rate of 2.85% and a discount rate of
8.05%.
|
|
e.
|
Record
a pro forma income tax provision on the incremental pre-tax income at a
net statutory rate approximating 39% and certain other tax
adjustments.
|
C-5
BERRY
PETROLEUM COMPANY
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 –
ADJUSTMENTS TO PRO FORMA BALANCE SHEETS
The unaudited pro forma
balance sheet has been prepared to show the effect as if the acquisition
of the O’Brien properties by Berry had occurred as of June 30,
2008. The pro forma balance sheet reflects the following adjustments
related to the O’Brien acquisition activity as if the activity occurred on June
30, 2008:
Record
the financing of acquisition funded by borrowings from the senior secured
revolving credit facility. On July 15, 2008, Berry entered into a
five-year amended and restated credit agreement (Credit Agreement) with Wells
Fargo Bank, N.A. as administrative agent and other lenders. The
secured revolving credit facility amends and restates the Company’s previous
credit agreement dated as of April 28, 2006, as amended.
The
Credit Agreement is a $1.5 billion revolving facility with an initial borrowing
base of $1 billion. The borrowing base under the previous agreement
was $650 million. Interest on amounts borrowed under this debt
is charged at either LIBOR or the prime rate with margins on the various rate
options based on the ratio of credit outstanding to the borrowing
base. Additionally, an annual commitment fee of .25% to .375% is
charged on the unused portion of the credit facility.
The full
text of the Credit Agreement was filed as an exhibit to the Company’s second
quarter 2008 Form 10-Q and provides a description of the terms, covenants,
representations and warranties.
Record
the preliminary pro forma allocation of the purchase price of the acquisition of
the O’Brien properties using the purchase method of accounting. The
following is a calculation and allocation of purchase price to the O’Brien
properties and liabilities based on their relative fair values, pending
completion of Berry’s valuation analysis:
|
Purchase
price (in thousands):
|
|||||
|
Original
purchase price
|
$ | 622,356 | |||
|
Closing
adjustments for property costs, and operating expenses in excess of
revenues between the effective date and closing date funded by borrowings
from senior secured revolving credit facility
|
31,292 | ||||
|
Total
purchase price allocation
|
$ | 653,648 | |||
|
Preliminary
allocation of purchase price (in thousands):
|
|||||
|
Gas
properties
|
$ | 639,395 |
(i)
|
||
|
Pipeline
|
16,959 | ||||
|
Total
asset acquired
|
656,354 | ||||
|
Current
liabilities
|
1,631 |
(ii)
|
|||
|
Asset
retirement obligation
|
1,075 | ||||
|
Net
assets acquired
|
$ | 653,648 | |||
|
(i)
|
Determined
by reserve analysis.
|
|
(ii)
|
Record
accrual for royalties payable and transaction costs, which are primarily
legal and accounting fees.
|
C-6
BERRY
PETROLEUM COMPANY
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 –
NET INCOME PER SHARE
Basic net
income per share is computed by dividing income available to common shareholders
(the numerator) by the weighted average number of shares of capital stock
outstanding (the denominator). The Company’s Class B stock is
included in the denominator of basic and diluted net income. The
computation of diluted net income per share is similar to the computation of
basic net income per share except that the denominator is increased to include
the dilutive effect of the additional common shares that would have been
outstanding if all convertible securities had been converted to common shares
during the period.
SUPPLEMENTAL PRO FORMA CASH
FLOW INFORMATION
On a pro
forma basis and to the extent practical, cash flows related to operating,
financing and investing activities are estimated based solely on combining
results of operations of Berry and the O’Brien properties for the six months
ended June 30, 2008 and for the year ended December 31, 2007 as if the
acquisition occurred on January 1, 2007. Accordingly, full separate
cash flow statements prepared with accounting principles generally accepted in
the United States of America do not exist and are not practical to obtain in
these circumstances. Pro forma cash flows from operations based
on the pro forma combined results are estimated to increase cash by
approximately $11 million and decrease cash by $2 million for the six months
ended June 30, 2008 and for the year ended December 31, 2007, respectively, due
primarily to net loss before depreciation, depletion and amortization
expense. However, as stated in the Statements of Combined Revenues
and Direct Operating Expenses for the Oil and Gas Properties Purchased by Berry
Petroleum Company from a Consortium of Private Sellers the portion of historical
general and administrative expenses or other indirect expenses attributable to
the O’Brien properties is indeterminable and is not necessarily indicative of
the level of such expenses to be incurred in the future under Berry’s
ownership. Pro forma cash flows related to investing activities based
on the pro forma combined results for the six months ended June 30, 2008 and for
the year ended December 31, 2007 are estimated to decrease cash by approximately
$78 million and $808 million, respectively, related to development of $78
million and $155 million activities for the six months ended June 30, 2008 and
for the year ended December 31, 2007, respectively, and related
to $653 million for cash outlays to purchase the O’Brien properties
for the year ended December 31, 2007. Pro forma cash flows from
financing activities based on the pro forma combined results for the six months
ended June 30, 2008 and for the year ended December 31, 2007 are estimated to
increase cash by $0 and $654 million, respectively, related to borrowing from
the revolving credit facility to fund the purchase of the O’Brien
properties. Overall, cash and cash equivalents are estimated to
decrease by approximately $67 million and $156 million for the six months ended
June 30, 2008 and for the year ended December 31, 2007,
respectively.
C-7
PROFORMA
SUPPLEMENTAL OIL AND GAS DISCLOSURES
(UNAUDITED)
The
following table sets forth certain unaudited combined supplemental oil and gas
disclosures concerning Berry's proved oil and gas reserves at December 31, 2007,
giving effect to the O’Brien transaction as if it had occurred on January 1,
2007. The following estimates of proved oil and gas reserves, both
developed and undeveloped, represent interests acquired by Berry in the
transaction described above, and are located solely within the United
States. Proved reserves represent estimated quantities of crude oil
and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed
oil and gas reserves are the quantities expected to be recovered through
existing wells with existing equipment and operating methods. Proved
undeveloped oil and gas reserves are reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells for which relatively
major expenditures are required for completion.
Disclosures
of oil and gas reserves which follow are based on estimates as of December 31,
2007, prepared by O’Brien’s engineers and from information provided by the
Sellers, in accordance with guidelines established by the SEC. Such
estimates are subject to numerous uncertainties inherent in the estimation of
quantities of proved reserves and in the projection of future rates of
production and the timing of development expenditures. These
estimates do not include probable or possible reserves. The
information provided does not necessarily represent Berry's estimate of expected
future cash flows or value of proved oil and gas reserves.
Changes
in estimated reserve quantities:
|
BERRY
|
O’BRIEN
PROPERTIES
|
COMBINED
|
||||||||||||||||||||||||||
|
Oil
|
Gas
|
Oil
|
Gas
|
Oil
|
Gas
|
|||||||||||||||||||||||
|
Mbbl
|
MMcf
|
MBOE
|
Mbbl
|
MMcf
|
MBOE
|
Mbbl
|
MMcf
|
MBOE
|
||||||||||||||||||||
|
Proved
developed and Undeveloped reserves:
|
||||||||||||||||||||||||||||
|
Balance, December 31, 2006
|
112,538
|
226,363
|
150,262
|
|
172
|
253,025
|
42,343
|
112,710
|
479,388
|
192,605
|
||||||||||||||||||
|
Revision of previous
estimates
|
(3,826
|
)
|
3,358
|
(3,262
|
)
|
-
|
-
|
-
|
(3,826
|
)
|
3,358
|
(3,262
|
)
|
|||||||||||||||
|
Improved recovery
|
4,500
|
-
|
4,500
|
-
|
-
|
-
|
4,500
|
-
|
4,500
|
|||||||||||||||||||
|
Extensions and discoveries
|
17,300
|
101,400
|
34,200
|
227
|
75,386
|
12,791
|
17,527
|
176,786
|
46,991
|
|||||||||||||||||||
|
Property sales
|
(6,700
|
)
|
-
|
(6,700
|
)
|
-
|
-
|
-
|
(6,700
|
)
|
-
|
(6,700
|
)
|
|||||||||||||||
|
Production
|
(7,210
|
)
|
(15,657
|
)
|
(9,819
|
)
|
(14
|
)
|
(7,375
|
)
|
(1,243
|
)
|
(7,224
|
)
|
(23,032
|
)
|
(11,062
|
)
|
||||||||||
|
Purchase of reserves in place
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||
|
Balance, December 31, 2007
|
116,602
|
315,464
|
169,179
|
385
|
321,036
|
53,891
|
116,987
|
636,500
|
223,070
|
|||||||||||||||||||
|
Proved
developed reserves:
|
||||||||||||||||||||||||||||
|
Balance,
December 31, 2006
|
84,782
|
104,934
|
102,270
|
87
|
69,176
|
11,616
|
84,869
|
174,110
|
113,886
|
|||||||||||||||||||
|
Balance,
December 31, 2007
|
78,339
|
147,346
|
102,897
|
163
|
97,758
|
16,456
|
78,502
|
245,104
|
119,353
|
|||||||||||||||||||
C-8
PROFORMA
SUPPLEMENTAL OIL AND GAS DISCLOSURES - (CONTINUED)
(UNAUDITED)
The
following table sets forth unaudited pro forma supplemental oil and gas
disclosures concerning the discounted future net cash flows from proved oil and
gas reserves of Berry as of December 31, 2007, net of income tax expense, and
giving effect to the acquisition of the O’Brien properties as if it had occurred
on January 1, 2007. Income tax expense has been computed using
assumptions relating to the future tax rates and the permanent differences and
credits under the tax laws relating to oil and gas activities at December 31,
2007. Cash flows relating to the O’Brien properties are based on O’Brien’s
evaluation of reserves and on information provided by the
Sellers. Future income tax expense on the O’Brien properties is based
on Berry's purchase price allocation. The information should be
viewed only as a form of standardized disclosure concerning possible future cash
flows that would result under the assumptions used, but should not be viewed as
indicative of fair market value. Reference is made to Berry's
financial statements for the fiscal year ended December 31, 2007, and the
Statements of Combined Revenues and Direct Operating Expenses included herein,
for a discussion of the assumptions used in preparing the information
presented.
Standardized
measure of discounted future net cash flows from estimated production of proved
oil and gas reserves (in thousands) as of December 31, 2007:
|
BERRY
|
O’BRIEN
PROPERTIES
|
PRO
FORMA
ADJUSTMENTS
(1)
|
COMBINED
|
|||||||||||
|
Future
cash inflows
|
$
|
11,211,151
|
$
|
2,279,457
|
$
|
-
|
$
|
13,490,608
|
||||||
|
Future
production costs
|
(3,275,397
|
)
|
(286,492
|
)
|
-
|
(3,561,889
|
)
|
|||||||
|
Future
development costs
|
(812,070
|
)
|
(355,964
|
)
|
-
|
(1,168,034
|
)
|
|||||||
|
Future
income tax expense
|
(2,286,296
|
)
|
-
|
(523,599
|
)
|
(2,809,895
|
)
|
|||||||
|
Future
net cash flows
|
4,837,388
|
1,637,001
|
(523,599
|
)
|
5,950,790
|
|||||||||
|
10%
annual discount for estimated timing of cash flows
|
(2,417,882
|
)
|
(936,799
|
)
|
217,570
|
(3,137,111
|
)
|
|||||||
|
Standardized
measure of discounted future net cash flows
|
$
|
2,419,506
|
$
|
700,202
|
$
|
(306,029
|
)
|
$
|
2,813,679
|
|||||
|
Average
sales prices at December 31:
|
||||||||||||||
|
Oil ($/Bbl)
|
$
|
79.19
|
$
|
92.05
|
$
|
79.23
|
||||||||
|
Gas ($/Mcf)
|
$
|
6.27
|
$
|
6.99
|
$
|
6.63
|
||||||||
|
BOE Price
|
$
|
66.27
|
$
|
42.30
|
$
|
60.48
|
||||||||
|
(1)
|
O’Brien
are limited liability companies that are taxed as partnerships or are
partnerships and therefore are not subject to income taxes. Pro forma
income tax expense reflects expense on the combined future net cash flows
based on Berry’s estimated effective tax rate, after giving effect to the
pro forma transactions.
|
C-9
BERRY
PETROLEUM COMPANY
PROFORMA
SUPPLEMENTAL OIL AND GAS DISCLOSURES - (CONTINUED)
(UNAUDITED)
Changes
in standardized measure of discounted future net cash flows from proved oil and
gas reserves (in thousands):
|
BERRY
|
O’BRIEN
PROPERTIES
|
PRO
FORMA
ADJUSTMENTS
(1)
|
COMBINED
|
|||||||||||
|
Standardized
measure - beginning of year
|
$
|
1,182,268
|
$
|
401,567
|
$
|
-
|
$
|
1,583,835
|
||||||
|
Sales
of oil and gas produced, net of production costs
|
(326,174
|
)
|
(29,421
|
)
|
-
|
(355,595
|
)
|
|||||||
|
Revisions
to estimates of proved reserves:
|
||||||||||||||
|
Net changes in sales prices and production costs
|
1,451,140
|
121,597
|
-
|
1,572,737
|
||||||||||
|
Revisions of previous quantity estimates
|
(78,758
|
)
|
-
|
-
|
(78,758
|
)
|
||||||||
|
Improved recovery
|
108,655
|
-
|
-
|
108,655
|
||||||||||
|
Extensions and discoveries
|
825,775
|
238,505
|
-
|
1,064,280
|
||||||||||
|
Change in estimated future development costs
|
(385,656
|
)
|
(88,682
|
)
|
-
|
(474,338
|
)
|
|||||||
|
Purchases
of reserves in place
|
-
|
-
|
-
|
-
|
||||||||||
|
Sales
of reserves in place
|
(98,680
|
)
|
-
|
-
|
(98,680
|
)
|
||||||||
|
Development
costs incurred during the period
|
281,702
|
104,180
|
-
|
385,882
|
||||||||||
|
Accretion
of discount
|
162,257
|
40,157
|
-
|
202,414
|
||||||||||
|
Income
taxes
|
(687,103
|
)
|
-
|
(306,029
|
)
|
(993,132
|
)
|
|||||||
|
Other
|
(15,920
|
)
|
(87,701
|
)
|
-
|
(103,621
|
)
|
|||||||
|
Net
increase
|
1,237,238
|
298,635
|
(306,029
|
)
|
1,229,844
|
|||||||||
|
Standardized
measure - end of year
|
$
|
2,419,506
|
$
|
700,202
|
$
|
(306,029
|
)$
|
2,813,679
|
||||||
|
1)
|
O’Brien
are limited liability companies that are taxed as partnerships or are
partnerships and therefore are not subject to income taxes. Pro forma
income tax expense reflects expense on the combined future net cash flows
based on Berry’s estimated effective tax rate, after giving effect to the
pro forma transactions.
|
|||||||||||||
C-10
[End]