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Berry Petroleum Reports Results for the Second Quarter of 2013



  Berry Petroleum Reports Results for the Second Quarter of 2013

Business Wire

DENVER -- August 7, 2013

Berry Petroleum Company (NYSE: BRY) reported net earnings of $61 million, or
$1.10 per diluted share, for the second quarter of 2013. After considering
items such as derivatives and transaction costs, adjusted net earnings were
$41 million, or $0.73 per diluted share. Oil and natural gas revenues were
$275 million during the quarter and discretionary cash flow for the quarter
totaled $145 million, with net cash provided by operating activities of $140
million. Operating margin was approximately $47 per BOE, supported by the
Company's oil-weighted production stream.

Berry's second quarter 2013 production averaged 39,529 BOE/D, up 12% from the
second quarter of 2012. The Company's oil production was 31,456 BOE/D in the
second quarter, up 20% from the second quarter of 2012. Oil mix increased to
80% of Berry's total production in the second quarter. Total production for
the second quarter of 2013, second quarter of 2012 and first quarter of 2013
was as follows:

                                                               
              Second Quarter           Second Quarter           First Quarter 2013
              2013                     2012
Oil           31,456       80  %       26,296       74  %       31,154       79  %
(BOE/D)
Natural
gas           8,073        20  %       9,045        26  %       8,522        21  %
(BOE/D)
Total         39,529       100 %       35,341       100 %       39,676       100 %
(BOE/D)
                                                                                  

Operations

Second quarter Diatomite production increased 615 BOE/D from first quarter
levels, averaging 4,735 BOE/D. This 15% production growth resulted from
positive responses from some redevelopment areas, continued utilization of the
Company's integrated surveillance systems, and steady additions to the
completion count. The Company added 47 new Diatomite completions in the second
quarter and expects to continue its focus on increasing the number of active
completions in the field.

Production from the Company's New Steam Floods asset increased 12% from the
first quarter of 2013 to an average of 2,645 BOE/D. This rise in production
was a result of continued steam flood response at McKittrick 21Z. In the
second quarter, Berry drilled 45 steam injection wells at McKittrick as part
of its continuing focus to expand the steam flood development.

Production from the Company's South Midway properties averaged 12,395 BOE/D in
the second quarter. Berry drilled 8 producing wells at Ethel D and 2 producing
wells at Formax in the second quarter, and plans to drill 17 production wells
during the third quarter. The Company still expects production from its legacy
South Midway properties to decline by 5-8% over the course of 2013.

In the second quarter, the Company's Uinta production averaged 7,315 BOE/D,
compared to 7,305 BOE/D in the first quarter. Utilizing a 2-rig program in the
second quarter, the Company drilled 22 wells, all of which are commingled in
the Wasatch and Green River formations. Delayed completion activity which
negatively affected production in the first quarter continued into the
beginning of the second quarter. This issue has since been improved by
expanded crude oil marketing options and production has responded accordingly.
Berry continued transporting crude oil via rail to markets outside of Utah in
the second quarter and now has over 100 rail cars in service.

Second quarter Permian production averaged 8,000 BOE/D. The Company drilled 13
net wells using a three-rig program during the second quarter. Increasing line
pressure, periodic gas plant downtime and ethane rejection have persisted as a
result of record activity levels in the area.

In the second quarter, production from the Company's natural gas assets in the
Piceance and East Texas declined 5% sequentially on a BOE/D basis with no
capital investment.

Outlook

Berry maintains its forecast for a capital budget of $500 - $600 million to
develop its assets in 2013. Supported by its July production of over 40,500
BOED, the Company is well on track to deliver its previously announced
production guidance of 10-15% oil growth and 5-10% total corporate production
growth for 2013.

Operationally, Berry's asset teams continue to focus on:

  * Increasing margins and proving up more of Lake Canyon in the Uinta
  * Continuously developing the Diatomite
  * Maintaining California base production and high margins while ramping the
    New Steam Floods
  * Focusing Permian development in Ector County and lowering well costs

Berry Petroleum Company is party to an agreement and plan of merger with Linn
Energy, LLC and LinnCo, LLC. The proposed merger transaction requires an
affirmative vote of the Berry stockholders, Linn Energy unitholders, and
LinnCo shareholders when the Form S-4 Registration Statement is approved by
the Securities and Exchange Commission. Such approval is pending resolution of
an SEC inquiry regarding Linn Energy and LinnCo. Please refer to Linn Energy's
press release dated July 1, 2013 for details of the SEC inquiry regarding Linn
Energy and LinnCo.

Teleconference Call

Berry will not host an earnings conference call.

Non-GAAP Financial Measures

This press release includes discussion of “discretionary cash flow,” “adjusted
net earnings,” and “operating margin per BOE,” 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 average sale
price including cash derivative settlements less operating costs—oil and
natural and production taxes, each on a per BOE basis. The Company uses
operating margin per BOE 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. 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.

 
Explanation and Reconciliation of Non-GAAP Financial Measures
                                                                    
Discretionary Cash Flow ($ millions):
                                                                      
                                         Three Months Ended
                                         6/30/2013                   3/31/2013
Net cash provided by operating           $ 140.3                     $  91.7
activities
Net increase in current assets           3.7                         12.6
Net decrease in current
liabilities, including book              1.0                         29.6
overdraft
Discretionary cash flow                  $ 145.0                     $  133.9
                                                                         
                                                                         

                               
Adjusted Net Earnings ($ millions):
                                 
                                Three Months Ended
                                6/30/2013
Adjusted net earnings           $     40.6
After tax adjustments:
Non-cash derivative loss        21.2
Dry hole expense                (0.1          )
Transaction costs               (0.3          )
Net earnings, as reported       $     61.4     
                                               
                                               

                                                                    
Operating Margin Per BOE:
                                                                      
                                         Three Months Ended
                                         6/30/2013                   3/31/2013
Average sales price including cash       $ 75.58                     $  75.95
derivative settlements
Operating cost—oil and natural gas       25.37                       24.13
production
Production taxes                         3.06                        3.02
Operating margin                         $ 47.15                     $  48.80
                                                                         
                                                                         

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
                                       6/30/2013                     3/31/2013
REVENUES
Oil and natural gas sales              $ 274,715                     $ 266,772
Electricity sales                      9,513                         7,589
Natural gas marketing                  2,255                         2,027
Gain on sale of assets                 —                             23
Interest and other income, net         374                           475
                                       286,857                       276,886
EXPENSES
Operating costs—oil and natural        91,277                        86,148
gas production
Operating costs—electricity            6,337                         5,296
generation
Production taxes                       11,004                        10,784
Depreciation, depletion &
amortization—oil and natural gas       69,839                        68,084
production
Depreciation, depletion &
amortization—electricity               433                           394
generation
Natural gas marketing                  2,198                         1,878
General and administrative             19,430                        22,278
Interest                               24,879                        24,687
Dry hole, abandonment,                 872                           962
impairment and exploration
Realized and unrealized loss           (35,622   )                   737
(gain) on derivatives, net
Impairment of oil and natural          —                             2,467
gas properties
                                       190,647                       223,715
Earnings before income taxes           96,210                        53,171
Income tax provision                   34,846                        20,737
Net earnings                           $ 61,364                      $ 32,434
                                                                      
Basic net earnings per share           $ 1.11                        $ 0.59
Diluted net earnings per share         $ 1.10                        $ 0.58
                                                                      
Dividends per share                    $ 0.08                        $ 0.08
                                                                        
                                                                        

 
CONDENSED BALANCE SHEETS
(In thousands)
(unaudited)
 
                                   6/30/2013                       12/31/2012
ASSETS
Current assets                     185,255                         157,025
Oil and natural gas
properties, (successful            3,240,447                       3,128,502
efforts basis) buildings and
equipment, net
Derivative instruments             34,867                          10,891
Other assets                       25,933                          28,984
                                   $ 3,486,502                     $ 3,325,402
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities                404,998                         286,632
Deferred income taxes              311,449                         255,471
Long-term debt                     1,546,000                       1,665,817
Derivative instruments             —                               1,239
Other long-term liabilities        117,551                         101,452
Shareholders’ equity               1,106,504                       1,014,791
                                   $ 3,486,502                     $ 3,325,402
                                                                      
                                                                      

 
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
                                       Three Months Ended
                                       6/30/2013                    3/31/2013
Cash flows from operating
activities:
Net earnings                           $ 61,364                     $ 32,434
Depreciation, depletion and            70,271                       68,478
amortization
Gain on sale of assets                 —                            (23      )
Amortization of debt issuance          1,729                        1,709
costs and net discount
Impairment of oil and natural          —                            2,467
gas properties
Dry hole and impairment                264                          449
Derivatives                            (33,187  )                   3,146
Stock-based compensation expense       2,708                        3,195
Deferred income taxes                  41,991                       19,648
Other, net                             (155     )                   2,381
Change in book overdraft               (14,653  )                   (232     )
Net changes in operating assets        9,930                        (41,954  )
and liabilities
Net cash provided by operating         140,262                      91,698    
activities
                                                                     
                                                                     
Cash flows from investing
activities:
Development and exploration of         (128,565 )                   (174,663 )
oil and natural gas properties
Property acquisitions                  (183     )                   (2,897   )
Capitalized interest                   (1,651   )                   (1,799   )
Proceeds from sale of assets           11,031                       480       
Net cash used in investing             (119,368 )                   (178,879 )
activities
                                                                     
Net cash (used in) provided by         (12,085  )                   86,974    
financing activities
                                                                     
Net increase (decrease) in cash        8,809                        (207     )
and cash equivalents
Cash and cash equivalents at           105                          312       
beginning of period
Cash and cash equivalents at end       $ 8,914                      $ 105     
of period
                                                                              
                                                                              

                                                                             
OPERATING DATA
(unaudited)
                                                                             
                                Three Months Ended                       
                                6/30/2013           3/31/2013           Change
Oil and natural gas:
Heavy oil production            19,775              19,566
(BOE/D)
Light oil production            11,681              11,588   
(BOE/D)
Total oil production            31,456              31,154
(BOE/D)
Natural gas production          48,436              51,132   
(Mcf/D)
Total (BOE/D)                   39,529              39,676
                                                                         
Oil and natural gas, per
BOE:
Average realized sales          $ 74.91             $ 75.27             —   %
price
Average sales price
including cash derivative       75.58               75.95               —   %
settlements
                                                                         
Oil, per BOE:
Average WTI price               $ 94.17             $ 94.36             —   %
Price sensitive royalties       (2.64   )           (2.81   )
Location differential and       (4.00   )           (1.25   )
other
Oil revenue                     $ 87.53             $ 90.30             (3  )%
Oil derivative cash             0.70                0.89     
settlements
Average realized oil            $ 88.23             $ 91.19             (3  )%
price
                                                                         
Natural gas price:
Average Henry Hub price         $ 4.10              $ 3.34              23  %
per MMBtu
Conversion to Mcf               0.28                0.22
Location differential and       (0.29   )           (0.09   )
other
Natural gas revenue per         $ 4.09              $ 3.47              18  %
Mcf
Natural gas derivative          0.09                (0.01   )
cash settlements
Average realized natural        $ 4.18              $ 3.46              21  %
gas price per Mcf
                                                                         
Operating cost - oil and
natural gas production          $ 25.37             $ 24.13             5   %
per BOE
Production taxes per BOE        3.06                3.02     
Total operating costs per       $ 28.43             $ 27.15             5   %
BOE
                                                                         
DD&A - oil and natural          19.42               19.07               2   %
gas production per BOE
General & administrative        5.40                6.24                (13 )%
per BOE
Interest expense per BOE        $ 6.92              $ 6.91              —   %

Contact:

Berry Petroleum Company
Investors and Media
Zach Dailey, 1-303-999-4071
Shawn Canaday, 1-303-999-4000
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