Berry Petroleum Reports 2012 Results

Berry Petroleum Reports 2012 Results

DENVER--(BUSINESS WIRE)-- Berry Petroleum Company (NYS: BRY) reported net earnings of $172 million, or $3.09 per diluted share, for 2012. After considering certain items, adjusted net earnings were $168 million, or $3.02 per diluted share. Oil and gas revenues were $937 million and discretionary cash flow for the year totaled $502 million, with net cash provided by operating activities of $501 million.

Berry's 2012 production averaged 36,402 BOE/D, and fourth quarter production averaged 39,500 BOE/D. The Company's oil production averaged 27,393 BOE/D in 2012, up 11% from 2011. Berry's oil mix increased from 70% of production in 2011 to 75% of production in 2012. The continued shift toward oil growth, combined with sales of the Company's California heavy oil at a $9 average premium to WTI, raised corporate operating margins from $45 per BOE in 2011 to $49 per BOE in 2012.


For 2012 and 2011, Berry's average net production in BOE per day was as follows:

2012 Production

2011 Production

Oil (BOE/D)

27,393

75

%

24,771

70

%

Natural gas (BOE/D)

9,009

25

%

10,916

30

%

Total (BOE/D)

36,402

100

%

35,687

100

%

Total Proved Reserves of 275 MMBOE; 38 MMBOE of oil additions

Proved oil and gas reserves were estimated at 275 million BOE at December 31, 2012. The company added a total of 38 million BOE of proved reserves at its oil properties in 2012 and removed 24 million BOE of reserves at its gas properties. Proved oil reserves were up 10% to 204 million barrels with oil reserves increasing to 74% of total reserves, compared to 68% of total reserves in 2011. Proved developed reserves increased to 55% of total reserves from 53% in 2011. Reserve growth in 2012 was driven by activity in Berry's three oil basins, which comprise 82.5% of proved reserves, with 46% in California, 23% in the Permian basin and 13% in the Uinta. The Company's natural gas reserves declined 24 million BOE in 2012, or 33% from 2011 levels, due to low natural gas prices and the SEC's 5-year rule.

Fourth Quarter 2012

Third Quarter 2012

Oil (BOE/D)

30,649

78

%

27,493

76

%

Natural gas (BOE/D)

8,851

22

%

8,793

24

%

Total (BOE/D)

39,500

100

%

36,286

100

%

Fourth Quarter 2012: Production of 39,500 BOE/D, Adjusted Earnings of $0.69 Per Share, and Discretionary Cash Flow of $126 million

For the fourth quarter of 2012, the Company reported net earnings of $38 million, or $0.69 per diluted share. After considering certain items, adjusted net earnings were $38 million, or $0.69 per diluted share. Oil and natural gas sales were $249 million during the quarter. Discretionary cash flow for the quarter totaled $126 million, and net cash provided by operating activities totaled $110 million. Operating margin was approximately $47 per BOE, supported by sales of our California oil at a $10 average premium to WTI.

Production in the fourth quarter of 2012 was 39,500 BOE/D, up 9% from the third quarter of 2012. The Company's oil production in the fourth quarter was 30,649 BOE/D, up 11% from the third quarter of 2012.

In the fourth quarter, production from the Company's Uinta properties averaged 7,500 BOE/D, 26% higher than the third quarter. The commingled Green River / Wasatch vertical wells continued targeting higher oil potential areas and saw improving results, especially from some locations in the acreage acquired during the third quarter of 2012.

Fourth quarter Permian production averaged 7,965 BOE/D, approximately 16% higher than the third quarter. The Company drilled a number of strong wells in northeastern Ector County, and also saw temporary production increase from operational improvements made in the field.

In the fourth quarter, production from the Diatomite asset averaged 3,855 BOE/D, up 10% from the third quarter of 2012. Fourth quarter production from the New Steam Floods projects averaged 2,130 BOE/D, up 11% from the third quarter. The legacy South Midway properties produced an average of 13,070 BOE/D in the fourth quarter, up 3% from third quarter levels, as positive steam flood response translated to increased production.

In the fourth quarter, the Company's natural gas assets in the Piceance and East Texas declined 7% sequentially with no capital investment.

Teleconference Call

Berry will not host the conference call previously announced for Thursday, February 28, 2013 at 10:00 a.m. MST (12:00 p.m. EST). However, Berry expects to file its Annual Report on Form 10-K with the Securities and Exchange Commission within the week.

Reserve Quantities

2012

Oil
MBOE

Natural Gas
MMcf

MBOE

Total proved reserves:

Beginning of year

185,880

534,279

274,926

Revision of previous estimates

12,145

(205,845

)

(22,162

)

Extensions and discoveries

8,459

100,129

25,148

Property sales

(556

)

(556

)

Production

(10,024

)

(19,784

)

(13,321

)

Purchase of reserves in place

8,304

16,740

11,094

End of year

204,208

425,519

275,129

Proved developed reserves

118,937

187,668

150,216

Proved undeveloped reserves

85,271

237,851

124,913

Total proved reserves

204,208

425,519

275,129

Reserve Quantities by Property (MMBOE)

Name, State

Proved
Reserves

Proved
Developed
Reserves

Proved
Undeveloped
Reserves

S. Midway, CA

56.5

50.3

6.2

N. Midway—Diatomite, CA

55.3

32.6

22.7

N. Midway—New Steam Floods, CA

15.4

6.9

8.5

Permian, TX

63.0

21.5

41.5

Uinta, UT

36.8

16.2

20.6

E. Texas

13.4

13.4

Piceance, CO

34.7

9.3

25.4

Totals

275.1

150.2

124.9

Non-GAAP Financial Measures

This press release includes discussion of "discretionary cash flow," "adjusted net earnings," "operating margin per BOE," and "Pre-tax PV10," each of which are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934, as amended. Discretionary cash flow consists of cash provided by operating activities before changes in working capital items. The Company uses discretionary cash flow as a measure of liquidity and believes it provides useful information to investors because it assesses cash flow from operations for each period before changes in working capital, which fluctuates due to the timing of collections of receivables and the settlements of liabilities. Adjusted net earnings consists of net earnings before non-cash derivatives gains (losses), oil and natural gas property impairments and charges related to the extinguishment of debt. The Company believes that adjusted net earnings is useful for evaluating the Company's operational performance from oil and natural gas properties. Operating margin per BOE consists of oil and natural gas revenues less oil and natural gas operating expenses and production taxes divided by the total BOEs produced during the period. The Company uses operating margin per barrel as a measure of profitability and believes it provides useful information to investors because it relates the Company's oil and natural gas revenue and oil and natural gas operating expenses to its total units of production providing a gross margin per unit of production, allowing investors to evaluate how the Company's profitability varies on a per unit basis each period. Pre-tax PV10 is defined as standardized measure before the present value of the Company's future net revenues before income taxes discounted at 10%. The Company believes that pre-tax PV10 is helpful to investors because it is a widely used industry standard and is helpful when comparing the Company's asset base and performance to other comparable oil and natural gas exploration and production companies. These measures should not be considered in isolation or as a substitute for their most directly comparable GAAP measures. Other companies calculate non-GAAP measures differently and, therefore, the non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies.

Reconciliation of Non-GAAP Financial Measures

Discretionary Cash Flow ($ millions)

Three Months
Ended

Twelve Months
Ended

12/31/2012

12/31/2012

Net cash provided by operating activities

$

109.8

$

501.4

Net increase (decrease) in current assets

10.8

13.0

Net decrease (increase) in current liabilities including book overdraft

5.6

(32.7

)

Cash premiums for repurchases of notes

34.7

Cash settlements from early termination of natural gas derivatives

(14.7

)

Discretionary cash flow

$

126.2

$

501.7

Adjusted Net Earnings ($ millions)

Three Months
Ended

Twelve Months
Ended

12/31/2012

12/31/2012

Adjusted net earnings

$

38.2

$

167.7

After tax adjustments:

Non-cash derivative loss

1.0

22.9

Legal Matter

(0.1

)

(1.8

)

Dry hole expense

(8.6

)

(9.3

)

Extinguishment of debt and other

0.8

(25.6

)

Research and development credit

7.2

7.2

Gain on sale of assets

1.1

Cash settlements from early termination of natural gas derivatives

$

$

9.3

Net earnings, as reported

$

38.5

$

171.5

Operating Margin Per BOE

Three Months
Ended

Twelve Months
Ended

12/31/2012

12/31/2012

Average sales price including cash derivative settlements

$

72.47

$

72.18

Operating cost—oil and natural gas production

23.35

20.43

Production taxes

2.57

2.96

Operating margin

$

46.55

$

48.79

About Berry Petroleum Company

Berry Petroleum Company is a publicly traded independent oil and natural gas production and exploitation company with operations in California, Texas, Utah, and Colorado. The Company uses its web site as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible at http://www.bry.com.

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 "estimate," "expect," "would," "will," "target," "goal," "potential," and forms of those words and others indicate forward-looking statements. These statements include but are not limited to forward-looking statements about the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Important factors which could affect actual results are discussed in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

Three Months Ended

Twelve Months Ended

12/31/2012

9/30/2012

12/31/2012

12/31/2011

REVENUES

Oil and natural gas sales

$

248,911

$

232,916

$

937,261

$

870,773

Electricity sales

8,586

9,514

29,940

34,953

Natural gas marketing

2,253

1,939

7,631

13,832

Gain on sale of assets

12

170

1,782

Interest and other income, net

307

286

1,985

1,784

260,069

244,825

978,599

921,342

EXPENSES

Operating costs—oil and natural gas production

84,862

70,778

272,180

237,296

Operating costs—electricity generation

5,975

4,727

19,975

25,690

Production taxes

9,326

9,700

39,374

33,617

Depreciation, depletion & amortization—oil and natural gas production

67,023

58,887

225,892

213,859

Depreciation, depletion & amortization—electricity generation

426

461

1,808

1,963

Natural gas marketing

1,956

1,753

6,873

13,038

General and administrative

18,293

17,767

71,766

61,727

Interest

21,690

20,572

83,136

72,807

Impairment of oil and natural gas properties

79

625,564

Dry hole, abandonment, impairment and exploration

13,486

2,729

20,931

5,482

Gain on purchase

(1,046

)

Extinguishment of debt

41,545

15,544

Realized and unrealized (gain) loss on derivatives, net

(8,306

)

28,287

(64,620