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Berry Petroleum Earns $.60 Per Share in Third Quarter 2007

Posted on: Wednesday, 31 October 2007, 09:00 CDT

Berry Petroleum Company (NYSE:BRY) earned net income of $26.9 million, or $.60 per diluted share, for the three months ending September 30, 2007, compared to $31.4 million, or $.70 per diluted share, for the third quarter of 2006, according to Robert F. Heinemann, president and chief executive officer. Third quarter net income included a write-down of the value of certain prospective acreage and a gain on sale of assets. Excluding these items, net income for the three months ended September 30, 2007 was $29.2 million or $.65 per diluted share.

Revenues for the third quarter of 2007 increased by 3% to $134 million compared to the third quarter of 2006. Discretionary cash flow totaled $71 million in the third quarter of 2007, compared to $73 million in the comparable 2006 period and was 20% higher than the $59 million achieved in the second quarter of 2007. (Discretionary cash flow is a non-GAAP measure; see reconciliation below.)

For the third quarter of 2007, net production averaged 26,873 barrels of oil equivalent per day (BOE/D), an increase of 2% from the 26,423 BOE per day achieved in the third quarter of 2006 and a decrease of 1% compared to the second quarter 2007. Excluding the production impact of assets sold in the second quarter of 2007, production in the third quarter increased slightly. Total natural gas production in the third quarter of 2007 was up 19% over the third quarter of 2006 and 5% from the second quarter of 2007. In the third quarter of 2007 the average realized sales price net of hedging was $47.93 per BOE compared to $47.28 per BOE in the third quarter of 2006 and $45.43 per BOE in the second quarter of 2007.

Mr. Heinemann stated, "We achieved record oil production from our Poso Creek and diatomite assets in the third quarter and these steam enhanced oil properties continue to benefit from strong crude prices and low natural gas prices. Poso Creek averaged 2,100 Bbls/d in the third quarter compared to 1,800 Bbls/d in the second quarter of 2007 and averaged over 2,400 Bbls/d in September 2007. We anticipate drilling another 23 wells on this property in the fourth quarter and expect this asset to exit the year at approximately 2,600 Bbls/d.

"Oil production from our diatomite asset also increased to record levels in the third quarter, even with only two wells drilled in the third quarter. We continue to efficiently manage our steam injection and our production averaged 1,100 Bbls/d during the third quarter, compared to 900 Bbls/d in the second quarter. In the fourth quarter, we expect to drill 27 wells in the diatomite and plan to exit 2007 with production at approximately 1,250 Bbls/d.

"In the Piceance Basin we continue to improve our average drilling days for our mesa locations. Drilling for our last four Garden Gulch wells averaged 17 days and drilling for our last four North Parachute Ranch wells averaged 25 days. We are targeting drilling days at Garden Gulch to be under 17 days and under 25 days for North Parachute Ranch locations. We are confident that we can maintain this efficiency which will deliver improved economics on this project. Our third quarter daily average production in the Piceance Basin increased to 11.5 MMcf/d or a 40% increase compared to the second quarter of 2007 and we are anticipating another 30% increase, or an average production of 15 MMcf/d in the fourth quarter of 2007.

"Our natural gas production is growing, and comprised 27% of our total production in the third quarter of 2007 compared to 24% in the second quarter. The overall impact on our operating income due to lower gas prices is reduced due to our significant natural gas consumption for steaming operations in California and the natural gas hedges that we have in place. We estimate that for 2008, a $1.00 per MMBtu change in NYMEX Henry Hub natural gas prices would result in only a $3 million change in annual net income, demonstrating our relative insensitivity to natural gas prices company-wide. For 2008, we are hedged at an average $6.26 per MMBtu on Colorado Interstate Gas pricing on volume of approximately 18,300 MMBtu/d."

Nine Months Results

Net income for the nine months of 2007 was $97.7 million or $2.18 per diluted share, up 10% from $88.8 or $1.98 per diluted share in the comparable 2006 period. Excluding a net gain related to the disposition of non-core assets, net income for the nine months ended September 30, 2007 was $65.9 million or $1.47 per diluted share. This decrease is due to lower realized oil and gas prices, higher operating costs, increased depreciation, depletion & amortization (DD&A) charges related to increased development activity and increased interest expense.

Discretionary cash flow totaled $182 million for the first nine months of 2007, down from $195 million in the comparable 2006 period, a decrease of 7% over the comparable period in 2006.

For the nine months ended September 30, 2007, net production averaged 26,525 BOE/D, an increase of 7% from the 24,896 BOE/D achieved in the same period in 2006. The average realized sales price per BOE, net of hedging, for the nine months ended September 30, 2007 was $45.82 per BOE, down 5% from the $48.33 per BOE received in the 2006 period.

Operations

During the third quarter of 2007 the Company drilled 99 gross (83 net) wells with a success rate of 97 percent. For the third quarters of 2007 and 2006 the mix of average net oil and natural gas production was as follows:

Third Quarter ended September 30

2007 Production

2006 Production

Oil (Bbls)

19,481

73

%

20,194

76

%

Natural Gas (BOE)

7,392

27

%

6,229

24

%

Total BOE per day

26,873

100

%

26,423

100

%

Ralph J. Goehring, executive vice president and chief financial officer, stated, "We reduced our debt level (long-term debt and line of credit) by $35 million in the third quarter to $440 million from $475 million at June 30, 2007. Although third quarter 2007 operating costs were higher than 2006 levels, this is the second consecutive quarter that we have seen our per-unit operating costs decline. For the first, second and third quarters of 2007 our operating costs per BOE averaged $14.65, $14.44 and $13.75, respectively. The largest driver in this trend is lower natural gas costs for steaming operations in California. Our average all-in fuel cost of natural gas in California was $4.84 per MMBtu, down 25% from our comparable fuel cost in the second quarter of 2007.

"Separately, we are moving forward with our plans, as previously announced, to form a Master Limited Partnership (MLP). The MLP is expected to own certain of Berry Petroleum's long-lived oil and natural gas properties. We expect to file a registration statement with the U.S. Securities and Exchange Commission for the initial public offering of common units of the MLP during the fourth quarter of 2007."

Explanation and Reconciliation of Non-GAAP Financial Measures

Three Months Ended

Nine Months Ended

09/30/07

09/30/06

06/30/07

9/30/07

9/30/06

Net cash provided by operating activities

$ 92.5

$101.0

$ 80.4

$ 184.5

$ 185.1

Add back: Net increase (decrease) in current assets

5.7

(0.6)

(8.2)

10.8

18.0

Add back: Net decrease (increase) in current liabilities

(27.7)

(27.3)

(13.5)

(13.1)

(8.6)

Discretionary cash flow

$ 70.5

$ 73.1

$ 58.7

$ 182.2

$ 194.5

Teleconference Call

An earnings conference call will be held Wednesday, October 31, 2007 at 1:30 p.m. Eastern Time (10:30 a.m. Pacific Time). Dial 1-888-873-4896 to participate, using passcode 65745746. International callers may dial 617-213-8850. For a digital replay available through November 8, 2007 dial 1-888-286-8010 (passcode 91345141). 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 in the "Investor Center."

About Berry Petroleum Company

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, including, among other things, that the MLP will not be formed, will not complete an offering of securities and will not complete such actions on the timetable indicated. Words such as "plans,""anticipates,""will,""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 our 2006 Form 10-K filed with the Securities and Exchange Commission on February 28, 2007 and all material changes are updated in Part II, Item 1A within our Form 10-Qs filed subsequent to that date.

This announcement shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of any securities in any state or jurisdiction in which the offer, solicitation or sale of securities would be unlawful. The securities will only be offered and sold pursuant to a registration statement filed under the Securities Act of 1933, as amended.

CONDENSED STATEMENTS OF INCOME

(In thousands)

(unaudited)

Three Months

Nine Months

09/30/07

09/30/06

09/30/07

09/30/06

Revenues

Sales of oil and gas

$

118,733

$

116,168

$

333,933

$

328,742

Sales of electricity

12,241

12,592

40,704

39,476

Gain on sale of assets

1,418

-

51,816

-

Interest and other income, net

1,108

603

3,754

1,898

Total

133,500

129,363

430,207

370,116

Expenses

Operating costs -- oil & gas

33,995

30,950

103,330

83,763

Operating costs -- electricity

9,760

11,198

35,014

36,155

Production taxes

4,344

5,286

12,297

11,891

Depreciation, depletion & amortization - oil & gas

23,356

17,974

65,478

47,333

Depreciation, depletion & amortization - electricity

938

825

2,661

2,526

General and administrative

9,333

9,419

29,291

25,610

Interest

4,326

2,707

13,593

6,745

Commodity derivatives

-

-

-

(736

)

Dry hole, abandonment, impairment & exploration

5,175

527

9,342

11,070

Total

91,227

78,886

271,006

224,357

Income before income taxes

42,273

50,477

159,201

145,759

Provision for income taxes

15,418

19,103

61,534

56,930

Net income

$

26,855

$

31,374

$

97,667

$

88,829

Basic net income per share

$

.61

$

.71

$

2.22

$

2.02

Diluted net income per share

$

.60

$

.70

$

2.18

$

1.98

Cash dividends per share

$

.075

$

.095

$

.225

$

.225

Weighted average common shares:

Basic

44,112

43,907

44,020

43,982

Diluted

45,002

44,665

44,836

44,875

CONDENSED BALANCE SHEETS

(In thousands)

(unaudited)

09/30/07

12/31/06

Assets

Current assets

$

114,106

$

98,809

Properties, buildings & equipment, net

1,237,921

1,080,631

Other assets

16,574

19,557

$

1,368,601

$

1,198,997

Liabilities & Shareholders' Equity

Current liabilities

$

205,075

$

215,403

Deferred income taxes

143,320

103,515

Long-term debt

435,000

390,000

Other long-term liabilities

88,086

62,379

Shareholders' equity

497,120

427,700

$

1,368,601

$

1,198,997

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Nine Months

09/30/07

09/30/06

Cash flows from operating activities:

Net income

$

97,667

$

88,829

Depreciation, depletion & amortization (DD&A)

68,139

49,858

Dry hole, abandonment & impairment

8,065

6,396

Commodity derivatives

804

(264

)

Stock-based compensation

5,437

3,563

Deferred income taxes

53,162

44,410

Gain on sale

(51,816

)

-

Other, net

750

1,749

Net changes in operating assets and liabilities

2,331

(9,396

)

Net cash provided by operating activities

184,539

185,145

Net cash used in investing activities

(210,079

)

(419,801

)

Net cash provided by financing activities

25,315

233,018

Net decrease in cash and cash equivalents

(225

)

(1,638

)

Cash and cash equivalents at beginning of year

416

1,990

Cash and cash equivalents at end of period

$

191

$

352

COMPARATIVE OPERATING STATISTICS

(unaudited)

Three Months

Nine Months

09/30/07

09/30/06

Change

09/30/07

09/30/06

Change

Oil and gas:

Net production-BOE per day

26,873

26,423

+2%

26,525

24,896

+7%

Per BOE:

Average sales price before hedges

$49.35

$50.33

-2%

$45.98

$50.81

-10%

Average sales price after hedges

47.93

47.28

+1%

45.82

48.33

-5%

Operating costs - oil and gas

13.75

12.73

+8%

14.27

12.32

+16%

Production taxes

1.76

2.17

-19%

1.70

1.75

-3%

Total operating costs

15.51

14.90

+4%

15.97

14.07

+14%

DD&A - oil and gas

9.45

7.39

+28%

9.04

6.96

+30%

General & administrative expenses

3.78

3.87

-2%

4.05

3.77

+7%

Interest expense

$ 1.75

$ 1.11

+58%

$ 1.88

$ .99

+90%

Source: Business Wire

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