Berry Petroleum’s 2005 Earnings Climb 62% to $5.00 Per Share; Production, Reserves Also Reach Record Highs
Berry Petroleum Company (NYSE:BRY) earned $30.4 million, or $1.35 per diluted share, in the fourth quarter of 2005, which was 20% higher than the $25.3 million, or $1.11 per diluted share, the Company achieved in the fourth quarter of 2004. For 2005, the Company achieved record net income of $112.4 million, or $5.00 per diluted share, an increase of 62% compared to 2004 net income of $69.2 million, or $3.08 per diluted share, according to Robert F. Heinemann, president and chief executive officer.
Berry continued its transformation of diversifying its resource base in 2005 by adding a new core natural gas operating area and through solid execution of its active drilling program. The Company’s activities and strong commodity pricing generated powerful results with the following ten records set in 2005:
Average production: 23,015 BOE per day 12% increase over 2004 Revenues: $407 million 48% increase over 2004 Cash flow from operations: $188 million 50% increase over 2004 Net income: $112 million 62% increase over 2004 Capital expenditures: $131 million 82% increase over 2004 Acquisitions: $112 million versus $3 million 2004 Reserve additions: 24.9 million BOE 236% increase over 2004 Price realization: $41.62/BOE 37% increase over 2004 Dividend distributions: $13.2 million 16% increase over 2004 Return on capital employed: 33% versus 26% in 2004
Mr. Heinemann commented, “The story behind the revenue, cash flow and earnings records in 2005 was our ability to increase production by 12% to a record 23,015 BOE per day (or 8.4 million BOE for the year) and realization of excellent commodity prices, achieving $41.62 per BOE, up 37% from the average BOE realized price in 2004 of $30.32. Our overall 2005 performance benefited from accelerated execution of our drilling programs, and the acquisition and successful integration of our Colorado Niobrara gas assets acquired in the first quarter of 2005. In 2005, we incurred $243 million in total capital expenditures, $119 million in development and exploration, $112 million in acquisitions, and $12 million in the purchase of rigs and other assets.
“Our focus on capital efficiency generated a stellar return on capital of 33% for 2005. We added approximately 25 million BOE in reserves for a reserve replacement rate of 296%. We had an extremely active and well-coordinated year in drilling and field operations in which we drilled 188 new wells and 140 well workovers with only 6 dry holes. We accomplished this while maintaining an excellent safety record, and on February 5, 2006, we achieved over 1,000,000 man hours of operations without a lost-time incident. This major milestone was accomplished over a three-year period of time.
“In 2005, we added the eastern Colorado Niobrara assets as a new core area and expanded this acreage position by adding another 434,000 gross acres (191,000 net) in the Tri-State area (Colorado, Kansas and Nebraska) to our prospective inventory, and we added 186,000 gross acres (46,000 net) in the North Dakota Bakken light oil play. In 2005, we focused our exploration and appraisal activities on three potentially very significant areas or projects. These were:
1) Lake Canyon — Green River Formation. We drilled two exploratory wells about three miles west of our producing Brundage Canyon property into our 169,000 untested acreage block. Both wells discovered hydrocarbons, and we announced initial results in January of 2006. These wells indicate that the Green River Formation continues to be productive to the west of Brundage Canyon. We are adding a gas pipeline to the area to produce the associated gas, and are proceeding with the next four wells. We are preparing for a 30-well program if results from these four wells are satisfactory. 2) Coyote Flats. We continue to drill our obligation wells to earn our 50% WI in the 69,000 gross acres. We have drilled an offset well to the discovery well and a second Ferron well about three miles south of the discovery well. We are testing both wells and are pleased with the early results. We are adding pipeline access to achieve gas sales in mid-summer. 3) Diatomite. We are seeing encouraging results with production nearing 300 barrels per day. We expanded our initial pilot program by drilling another 25 wells (15 producers) in the fourth quarter of 2005. While this activity reduced our production from the diatomite in the fourth quarter, it sets the stage for pressure build-up and increased production in the first half of 2006. Upon satisfactory results, we are ready to proceed with another 50 well program later in 2006.”
Mr. Heinemann continued, “We will continue to actively explore and appraise our large prospective acreage positions in a decisive manner. With these early successes, we are very focused on an efficient execution of our record $190 million capital program for 2006. Our new production target for 2006 is 25,800 BOE per day, which is another 12% increase in production over 2005, and upon achievement, will be our fourth consecutive year of double-digit production growth. This target includes our announced Piceance Basin acquisition which is scheduled to close by March 1, 2006.”
Oil and Natural Gas Production & Pricing
Annual Production 2005 % 2004 % 2003 % ——- —- ——- —- ——- —- Oil and Gas Heavy Oil Production (Bbl/D) 16,063 70 15,901 77 15,477 94 Light Oil Production (Bbl/D) 3,336 14 3,345 16 489 3 ——- —- ——- —- ——- —- Total Oil Production (Bbl/D) 19,399 84 19,246 93 15,966 97 Natural Gas Production (Mcf/D) 21,696 16 7,752 7 3,499 3 ——- —- ——- —- ——- —- Total (BOE/D) 23,015 100 20,537 100 16,549 100 Percentage increase from prior year 12% 24% 15%
For the full-year of 2005, California production averaged 16,156 BOE per day (70%), while the Rockies assets contributed 5,259 BOE per day (23%), and the Mid-Continent assets contributed 1,600 BOE per day (7%) of the Company’s total 2005 production.
The average realized sales price net of hedging for the full-year 2005 was $41.62 per BOE, up 37% over the $30.32 per BOE received in the 2004 period.
Fourth Quarter Production Q4 2005 % Q4 2004 % Q4 2003 % ——- —- ——- —- ——- —- Oil and Gas Heavy Oil Production (Bbl/D) 15,997 68 16,174 76 16,088 87 Light Oil Production (Bbl/D) 3,438 14 3,722 17 1,582 9 ——- —- ——- —- ——- —- Total Oil Production (Bbl/D) 19,435 82 19,896 93 17,670 96 Natural Gas Production (Mcf/D) 25,428 18 9,084 7 5,280 4 ——- —- ——- —- ——- —- Total (BOE/D) 23,673 100 21,410 100 18,550 100 Percentage increase from prior quarter 11% 15% 21%
For the fourth quarter of 2005, California production averaged 16,080 BOE per day (68%), while the Rockies assets contributed 5,605 BOE per day (24%), and the Mid-Continent assets contributed 1,988 BOE per day (8%) of the Company’s total fourth quarter production.
The average realized sales price after hedging for the fourth quarter of 2005 was $44.90 per BOE, a 30% gain over the $34.62 per BOE received in the same 2004 period.
Ralph J. Goehring, executive vice president and chief financial officer, stated, “Net cash provided by operating activities increased to a record $65.5 million during the fourth quarter, up 42% from $46.1 million during the prior year’s fourth quarter. Net cash provided by operating activities increased to a record $188 million during the full-year 2005, up 50% from $125 million in 2004. We are well positioned to continue our growth story as we have significant financial capacity to execute value-adding acquisitions that meet our strategy and will remain disciplined in our capital expenditures and operational focus. We are off to a good start as we add another major core area, the Piceance Basin (pending closing), to our growing list of operated sizable acreage positions. We expect 2006 to be another exciting and rewarding year for Berry and our shareholders.”
Teleconference Call
An earnings conference call will be held Wednesday, February 22, 2006, at 1:30 p.m. Eastern Time (10:30 a.m. Pacific Time). Dial 1-866-825-1709 to participate, using passcode 23263458. International callers may dial 617-213-8060. For a digital replay available until March 7, 2005, dial 1-888-286-8010 (passcode 30001789). 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, and a regional office in Denver.
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 “will,”"preparing,”"appraise,”"continue,”"target,”"expect,” and others indicate forward-looking statements and important factors which could affect actual results are discussed in Part II of Berry’s 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.”
CONDENSED INCOME STATEMENTS (In thousands, except per share data) (unaudited) Three Months Twelve Months ——————— ——————— 12/31/05 12/31/04 12/31/05 12/31/04 ——— ——— ——— ——— Revenues Sales of oil and gas $ 97,055 $ 67,356 $ 349,691 $ 226,876 Sales of electricity 18,328 13,075 55,230 47,644 Interest and other income, net 674 89 1,804 426 ——— ——— ——— ——— Total 116,057 80,520 406,725 274,946 ——— ——— ——— ——— Expenses Operating costs – oil & gas 29,710 23,481 99,066 75,988 Operating costs – electricity 18,490 12,776 55,086 46,191 Production taxes 2,937 217 11,506 6,431 Exploration costs 2,114 – 3,649 – Depreciation, depletion & amortization – oil & gas 11,350 8,255 38,150 29,752 Depreciation, depletion & amortization – electricity 816 951 3,260 3,490 General and administrative 5,408 3,398 21,396 20,354 Loss on disposal of assets – 410 – 410 Dry hole, abandonment & impairment 280 745 5,705 745 Interest 1,547 490 6,048 2,067 ——— ——— ——— ——— Total 72,652 50,723 243,866 185,428 ——— ——— ——— ——— Income before income taxes 43,405 29,797 162,859 89,518 Provision for income taxes 13,033 4,481 50,503 20,331 ——— ——— ——— ——— Net income $ 30,372 $ 25,316 $ 112,356 $ 69,187 ========= ========= ========= ========= Basic net income per share $ 1.39 $ 1.15 $ 5.10 $ 3.16 Diluted net income per share $ 1.35 $ 1.11 $ 5.00 $ 3.08 Cash dividends per share $ 0.13 $ 0.12 $ .60 $ .52 Weighted average common shares: Basic 22,048 21,949 22,041 21,894 ========= ========= ========= ========= Diluted 22,496 22,670 22,490 22,470 ========= ========= ========= ========= CONDENSED BALANCE SHEETS (In thousands) (unaudited) 12/31/05 12/31/04 ————— ————– Assets Current assets $ 74,886 $ 61,001 Property, buildings & equipment, net 552,984 338,706 Other assets 7,181 12,397 ————— ————– $ 635,051 $ 412,104 =============== ============== Liabilities & Shareholders’ Equity Current liabilities $ 129,643 $ 64,841 Deferred taxes 55,804 47,963 Long-term debt 75,000 28,000 Other long-term liabilities 40,394 8,214 Shareholders’ equity 334,210 263,086 ————— ————– $ 635,051 $ 412,104 =============== ============== CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Twelve Months ——————————– 12/31/05 12/31/04 ————— ————– Cash flows from operating activities: Net income $ 112,356 $ 69,187 Depreciation, depletion & amortization (DD&A) 41,409 33,242 Dry hole, abandonment & impairment 4,324 (569) Deferred income taxes 20,847 10,815 Stock-based compensation 1,703 5,309 Other, net 278 794 Net changes in operating assets and liabilities 6,863 5,835 ————— ————– Net cash provided by operating activities 187,780 124,613 Net cash used in investing activities (242,599) (85,187) Net cash provided by (used in) financing activities 40,119 (33,394) ————— ————– Net (decrease) increase in cash and cash equivalents (14,700) 6,032 Cash and cash equivalents at beginning of year 16,690 10,658 ————— ————– Cash and cash equivalents at end of period $ 1,990 $ 16,690 =============== ============== COMPARATIVE OPERATING STATISTICS (unaudited) Three Months Twelve Months ————————– ————————– 12/31/05 12/31/04 Change 12/31/05 12/31/04 Change ——— ——— —— ——— ——— —— Oil and gas: Net production- BOE per day 23,673 21,410 +11% 23,015 20,537 +12% Per BOE: Average sales price before hedges $51.71 $39.54 +31% $47.01 $33.64 +40% Average sales price after hedges $44.90 $34.62 +30% $41.62 $30.32 +37% Operating costs 13.66 11.03 +24% 11.79 10.10 +17% Production taxes 1.35 .11 +1127% 1.37 .86 +59% ——— ——— ——— ——— Total operating costs 15.01 11.14 +35% 13.16 10.96 +20% DD&A – oil and gas 5.22 4.19 +25% 4.54 3.96 +15% General & administrative expenses 2.49 2.62 -5% 2.55 2.71 -6% Interest expense $.71 $.23 +209% $.72 $.27 +167%