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Berry Petroleum Reports 2007 Earnings of $2.89 Per Share and Record Production of 26,900 BOE/D

Posted on: Thursday, 14 February 2008, 09:00 CST

Berry Petroleum Company (NYSE:BRY) earned net income of $130 million, or $2.89 per diluted share, for the twelve months ended December 31, 2007, up 20% from 2006 net income of $108 million, or $2.41 per diluted share, according to Robert F. Heinemann, president and chief executive officer. The Company recorded pre-tax gains on the sale of non-core assets of $54.2 million and incurred dry hole, abandonment, impairment and exploration charges of $13.7 million in 2007. On an after-tax basis these items resulted in $25 million of net income, included above, or $.56 per diluted share. For the fourth quarter of 2007, Berry earned $32.3 million, or $.71 per diluted share, compared to net income of $19.1 million, or $.43 per diluted share, in the fourth quarter of 2006.

For 2007, net production averaged a record 26,902 barrels of oil equivalent per day (BOE/D), an increase of 6% from the 25,398 BOE per day achieved in 2006. The average realized sales price, net of hedging, for the full-year 2007 was $47.50 per BOE, up 2% over the $46.67 per BOE received in the 2006 period. Oil and gas revenues rose 9% to $467 million in 2007 from $430 million in 2006.

For 2007 and 2006, net production in BOE per day was as follows:

2007 Production

2006 Production

Oil (Bbls)

19,753

73

%

19,679

77

%

Natural Gas (BOE)

7,149

27

%

5,719

23

%

Total BOE per day

26,902

100

%

25,398

100

%

Discretionary cash flow totaled a record $260 million in 2007, up 6% from $246 million in 2006. (Discretionary cash flow is a non-GAAP measure; see reconciliation below.) The Company drilled 442 gross (339 net) wells in 2007, with a success rate of 98%.

Mr. Heinemann stated, "Berry is a growing company focused on execution, and as a result we had a year of significantly improved performance from several key assets. Our diatomite and Poso Creek heavy oil assets had strong increases in average 2007 production to 990 BOE/D and 1,950 BOE/D, up 215% and 108%, respectively. We are targeting these assets to achieve average 2008 production of 2,200 BOE/D and 3,270 BOE/D, respectively. Average 2007 production from our Piceance and DJ basin gas assets also had significant growth, up 138% and 17% to 10,290 Mcf/D and 18,740 Mcf/D, respectively.

"We are anticipating our 2008 Piceance average production to increase to 21,600 Mcf/d, another 110% increase over 2007. Our target is to drill 60 gross wells (35 net) on this asset in 2008. We achieved one of our key Piceance targets in 2007, which was to drill Garden Gulch mesa wells in fewer than 18 days. We expect to continue to improve our Piceance drilling program going forward. Our Uinta assets continued to perform well upon our entering into a new crude oil sales contract early in 2007. Our S. Midway asset in California is mature and our goal in 2008 is to reduce the natural decline to between 5% and 8% through additional drilling on the flanks of the reservoir, utilizing horizontal wells and improved steaming techniques.

"Our 2008 capital budget is $295 million, including $15 million earmarked for exploration. We are targeting over a 10% increase in both production and net reserves to end 2008 with between 180 million and 190 million BOE of proved reserves and average production of between 29,500 and 30,500 BOE/D. Our primary means to accomplish these targets is to move quickly on our drill-ready oil projects where we have significant rates of returns at the current commodity price mix which favors steam-enhanced oil recovery and to continue to drill up our probable reserves in the Piceance."

2007 Reserves

Estimated proved oil and gas reserves increased by 13% to 169 million BOE as of December 31, 2007. In 2007, Berry added 35.4 million BOE at a finding and development cost of $10.07 per BOE (see supporting cost schedule below) and replaced 293% of the 9.8 million BOE (26,902 BOE/D) it produced in 2007. Berry's three-year finding and development cost is an average $12.23 per BOE and its three-year reserve replacement rate is 316%. At year-end 2007, the Company's reserve mix includes 117 million barrels of crude oil, condensate and natural gas liquids, and 316 billion cubic feet of natural gas, or 69% oil and 31% natural gas. Geographically, 60% of proved reserves are in California and 40% are in the Rocky Mountain region. The Company's year-end reserves-to-production ratio increased slightly to 16.5 years, based on annualized fourth quarter 2007 average daily production. Proved developed reserves represent 61% of total proved reserves.

Fourth Quarter 2007

For the fourth quarter of 2007, oil and gas revenues were $133 million and discretionary cash flow was $77 million. The Company drilled 96 gross (80 net) wells in the fourth quarter of 2007, with a success rate of 100 percent. The Company recognized a $2.9 million pre-tax gain on the sale of stock and had a pre-tax impairment charge of $3.3 million associated with its Coyote Flats, Utah, asset.

Production averaged a record 28,023 BOE/D, an increase of 4% over fourth quarter 2006 (26,889 BOE/D) and up 4% from the third quarter of 2007. The average realized sales price after hedging was $52.32 per BOE, up 25% from $42.00 per BOE achieved in the fourth quarter of 2006 and up 9% from $47.93 in the third quarter of 2007.

Ralph J. Goehring, executive vice president and chief financial officer, stated, "Our capital expenditures for 2007 totaled $341 million consisting of $285 million in development and $56 million in acquisitions. We also capitalized $18 million of interest. We funded these items from $260 million of discretionary cash flow, asset sales of $72 million and the balance from additional borrowings. This compares to our total capital expenditures in 2006 of $544 million, which consisted of $258 million of acquisitions and $286 million in development and other assets. In 2006, we capitalized $9 million of interest. Based on $75 per barrel West Texas Intermediate pricing for oil and $7.50 per Mcf Henry Hub pricing for natural gas, we expect our 2008 cash provided by operating activities to be between $315 million and $335 million, which will fund our entire 2008 development and exploration program. We expect our year-end 2007 debt of $459 million to be relatively unchanged at year-end 2008, based on these commodity prices and our production expectations.

"In 2007, we achieved a 29% return on average shareholders' equity, and a 16% return on average capital employed. This is our sixth consecutive year of having achieved greater than 15% return for each of these measures.

"Our previously announced plan to form a master limited partnership for certain of our assets is currently on hold due to unfavorable capital market conditions. We will continue to monitor the economic conditions relevant to a successful offering."

Finding and Development Cost Supporting Schedule

All expenditure amounts below are estimates (unaudited)

(Amounts in millions)

One Year

Three Year

Acquisition Costs

$

56.25

$

436.01

Exploration Costs

0.70

21.46

Development Costs

281.70

671.56

Other Costs

18.10

27.40

Net Expenditures

$

356.75

$

1,156.43

Total reserves added, excluding production (MMBOE)

35.44

94.57

Estimated finding & development cost per BOE

$

10.07

$

12.23

Explanation and Reconciliation of Non-GAAP Financial Measures

(unaudited)

Three Months Ended

Twelve Months Ended

12/31/07

9/30/07

12/31/06

12/31/07

12/31/06

Net cash provided by operating activities

$

63.7

$

92.5

$

58.1

$

248.3

$

243.2

Add back: Net increase (decrease) in current assets

37.1

5.7

(1.6

)

47.9

16.3

Add back: Net increase in current liabilities

(23.5

)

(27.7

)

(4.7

)

(36.6

)

(13.3

)

Discretionary cash flow

$

77.3

$

70.5

$

51.8

$

259.6

$

246.2

Teleconference Call

An earnings conference call will be held Thursday, February 14, 2008 at 1:30 p.m. Eastern Time (10:30 a.m. Pacific Time). Dial 1-866-770-7120 to participate, using passcode 81132745. International callers may dial 617-213-8065. For a digital replay available until February 28, 2008 dial 1-888-286-8010 (passcode 14739821). 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 any timetable. Words such as "plans,""will,""expect,""target,""goal," 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 2006 Form 10-K filed with the Securities and Exchange Commission on February 28, 2007 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," 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. Such securities will only be offered and sold pursuant to a registration statement filed under the Securities Act of 1933, as amended.

CONDENSED INCOME STATEMENTS

(In thousands, except per share data)

(unaudited)

Three Months

Twelve Months

12/31/07

12/31/06

12/31/07

12/31/06

Revenues

Sales of oil and gas

$

133,467

$

101,755

$

467,400

$

430,497

Sales of electricity

14,915

13,456

55,619

52,932

Gain on sale of assets

2,356

97

54,173

97

Interest and other, net

2,511

915

6,265

2,812

Total

153,249

116,223

583,457

486,338

Expenses

Operating costs -- oil & gas

37,889

33,804

141,218

117,624

Operating costs -- electricity

10,966

12,126

45,980

48,281

Production taxes

4,918

2,840

17,215

14,674

Depreciation, depletion & amortization -- oil & gas

28,212

20,335

93,691

67,668

Depreciation, depletion & amortization -- electricity

907

817

3,568

3,343

General and administrative

10,918

11,231

40,210

36,841

Interest

3,693

3,503

17,287

10,247

Commodity derivatives

-

-

-

(736

)

Dry hole, abandonment, impairment & exploration

4,315

939

13,657

12,009

Total

101,818

85,595

372,826

309,951

Income before income taxes

51,431

30,628

210,631

176,387

Provision for income taxes

19,170

11,514

80,703

68,444

Net income

$

32,261

$

19,114

$

129,928

$

107,943

Basic net income per share

$

0.73

$

0.44

$

2.95

$

2.46

Diluted net income per share

$

0.71

$

0.43

$

2.89

$

2.41

Cash dividends per share

$

0.075

$

0.075

$

.30

$

.30

Weighted average common shares:

Basic

44,238

43,848

44,075

43,948

Diluted

45,238

44,592

44,906

44,774

CONDENSED BALANCE SHEETS

(In thousands)

(unaudited)

12/31/07

12/31/06

Assets

Current assets

$

161,019

$

98,809

Property, buildings & equipment, net

1,275,091

1,080,631

Other assets

15,996

19,557

$

1,452,106

$

1,198,997

Liabilities & Shareholders' Equity

Current liabilities

$

271,369

$

215,403

Deferred taxes

128,824

103,515

Long-term debt

445,000

390,000

Other long-term liabilities

146,939

62,379

Shareholders' equity

459,974

427,700

$

1,452,106

$

1,198,997

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Twelve Months

12/31/07

12/31/06

Cash flows from operating activities:

Net income

$

129,928

$

107,943

Depreciation, depletion & amortization (DD&A)

97,258

71,011

Dry hole & impairment

12,951

8,253

Deferred income taxes

64,826

51,666

Commodity derivatives

574

(109

)

Stock-based compensation

8,200

6,436

Gain on sale of asset

(54,173

)

(97

)

Abandonment

(1,188

)

606

Other, net

1,201

544

Net changes in operating assets and liabilities

(11,298

)

(3,024

)

Net cash provided by operating activities

248,279

243,229

Net cash used in investing activities

(287,213

)

(548,783

)

Net cash provided by financing activities

38,834

303,980

Net decrease in cash and cash equivalents

(100

)

(1,574

)

Cash and cash equivalents at beginning of year

416

1,990

Cash and cash equivalents at end of period

$

316

$

416

COMPARATIVE OPERATING STATISTICS

(unaudited)

Three Months

Twelve Months

12/31/07

12/31/06

Change

12/31/07

12/31/06

Change

Oil and gas:

Net production-BOE per day

28,023

26,889

4

%

26,902

25,398

6

%

Per BOE:

Average sales price before hedges

$

60.38

$

41.53

45

%

$

49.72

$

48.38

3

%

Average sales price after hedges

$

52.32

$

42.00

25

%

$

47.50

$

46.67

2

%

Operating costs

$

14.70

$

13.69

7

%

$

14.38

$

12.69

13

%

Production taxes

1.91

1.15

66

%

1.75

1.58

11

%

Total operating costs

16.61

14.84

12

%

16.13

14.27

13

%

DD&A -- oil and gas

10.94

8.24

33

%

9.54

7.30

31

%

General & administrative expenses

4.24

4.55

-7

%

4.09

3.98

3

%

Interest expense

$

1.43

$

1.27

13

%

$

1.76

$

1.05

68

%

Source: Business Wire

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