UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1997
Commission file number 1-9735
BERRY PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 77-0079387
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
28700 Hovey Hills Road, P.O. Bin X, Taft, California 93268
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 769-8811
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report:
NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES (X) NO ( )
The number of shares of each of the registrant's classes of capital
stock outstanding as of June 30, 1997 was 21,074,672 shares of Class A
Common Stock ($.01 par value) and 898,892 shares of Class B Stock ($.01 par
value). All of the Class B Stock is held by a shareholder who owns in
excess of 5% of the outstanding stock of the registrant.
<PAGE> 2
BERRY PETROLEUM COMPANY
JUNE 30, 1997
INDEX
PART I. Financial Information Page No.
Report of Coopers & Lybrand L.L.P., Independent Accountants . . . . . 3
Item 1. Financial Statements
Condensed Balance Sheets at
June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . . . . 4
Condensed Income Statements
for the Three Month Periods
Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . 5
Condensed Income Statements
for the Six Month Periods
Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . 6
Condensed Statements of
Cash Flows for the Six Month Periods
Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . .7
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . . 9
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Berry Petroleum Company
We have reviewed the accompanying condensed balance sheet of Berry
Petroleum Company as of June 30, 1997, the condensed statements of income
for the three and six month periods ended June 30, 1997 and 1996, and the
condensed statements of cash flows for the six month periods ended June 30,
1997 and 1996. These interim financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of December 31, 1996, and the related
statements of income, retained earnings and cash flows for the year then
ended (not presented herein); and in our report dated February 28, 1997, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed balance
sheet as of December 31, 1996 is fairly stated, in all material respects,
in relation to the balance sheet from which it has been derived.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
August 1, 1997
3
<PAGE> 4
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets
(In Thousands, Except Share Information)
June 30, December 31,
1997 1996
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 7,532 $ 9,970
Cash-restricted - 2,570
Short-term investments - available for sale 705 704
Accounts receivable 10,002 11,701
Prepaid expenses and other 1,412 1,307
_________ _________
Total current assets 19,651 26,252
Oil and gas properties (successful efforts
basis), buildings and equipment, net 153,974 149,510
Other assets 831 641
_________ _________
$ 174,456 $ 176,403
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,516 $ 5,154
Accrued liabilities 1,556 5,300
Federal and state income taxes payable 892 1,048
Notes payable - 6,900
_________ _________
Total current liabilities 8,964 18,402
Long-term debt 36,000 36,000
Deferred income taxes 23,299 20,992
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares outstanding - -
Capital stock, $.01 par value:
Class A Common Stock, 50,000,000 shares authorized;
21,074,672 shares issued and outstanding at
June 30, 1997 (21,046,885 at December 31, 1996) 211 210
Class B Stock, 1,500,000 shares authorized;
898,892 shares issued and outstanding
(liquidation preference of $899) 9 9
Capital in excess of par value 53,138 53,029
Retained earnings 52,835 47,761
_________ _________
Total shareholders' equity 106,193 101,009
_________ _________
$ 174,456 $ 176,403
========= =========
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Income Statements
Three Month Periods Ended June 30, 1997 and 1996
(In Thousands, Except Per Share Data)
(Unaudited)
1997 1996
Revenues:
Sales of oil and gas $ 15,988 $ 13,219
Interest and other income, net 252 507
________ ________
16,240 13,726
________ ________
Expenses:
Operating costs 4,938 3,748
Depreciation, depletion and amortization 2,353 1,688
General and administrative 1,347 1,294
Interest and other, net 581 75
________ ________
9,219 6,805
________ ________
Income before income taxes 7,021 6,921
Provision for income taxes 2,369 2,523
________ ________
Net income $ 4,652 $ 4,398
======== ========
Net income per share $ .21 $ .20
======== ========
Weighted average number of
shares of capital stock used
to calculate earnings per share 21,973 21,939
======== ========
Cash dividends per share $ .10 $ .10
======== ========
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Income Statements
Six Month Periods Ended June 30, 1997 and 1996
(In Thousands, Except Per Share Data)
(Unaudited)
1997 1996
Revenues:
Sales of oil and gas $ 33,014 $ 25,364
Interest and other income, net 809 965
-------- --------
33,823 26,329
-------- --------
Expenses:
Operating costs 10,506 7,562
Depreciation, depletion and amortization 4,972 3,315
General and administrative 2,948 2,393
Interest and other, net 1,156 75
19,582 13,345
________ ________
Income before income taxes 14,241 12,984
Provision for income taxes 4,772 4,725
________ ________
Net income $ 9,469 $ 8,259
======== ========
Net income per share $ .43 $ .38
======== ========
Weighted average number of
shares of capital stock used
to calculate earnings per share 21,970 21,935
======== ========
Cash dividends per share $ .20 $ .20
======== ========
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Statements of Cash Flows
Six Month Periods Ended June 30, 1997 and 1996
(In Thousands)
(Unaudited)
1997 1996
Cash flows from operating activities:
Net income $ 9,469 $ 8,259
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 4,972 3,315
Increase in deferred income tax liability 2,307 1,019
Other, net (665) 184
________ ________
Net working capital provided by operating
activities 16,083 12,777
Decrease (increase) in accounts receivable,
prepaid expenses and other 1,594 (172)
Decrease in current liabilities (2,538) (1,115)
________ ________
Net cash provided by operating activities 15,139 11,490
Cash flows from investing activities:
Capital expenditures (9,357) (5,183)
Maturities of short-term investments - 8,190
Return of restricted cash 2,570 -
Other, net 491 -
________ ________
Net cash provided by (used in)
investing activities (6,296) 3,007
Cash flows from financing activities:
Dividends paid (4,395) (4,387)
Payment of short-term notes payable (6,900) -
Proceeds from issuance of long-term debt 3,000 -
Payment of long-term debt (3,000) -
Other, net 14 148
________ ________
Net cash used in financing activities (11,281) (4,239)
________ ________
Net increase (decrease) in cash and cash
equivalents (2,438) 10,258
Cash and cash equivalents at beginning of year 9,970 18,759
________ ________
Cash and cash equivalents at end of period $ 7,532 $ 29,017
======== ========
Supplemental disclosures of cash flow information:
Income taxes paid $ 2,685 $ 3,959
======== ========
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Notes to Condensed Financial Statements
June 30, 1997
(Unaudited)
1. All adjustments which are, in the opinion of Management, necessary for
a fair presentation of the Company's financial position at June 30, 1997
and December 31, 1996, results of operations and cash flows for the six
month periods ended June 30, 1997 and 1996 and results of operations for
the three month periods ended June 30, 1997 and 1996 have been included.
All such adjustments are of a normal recurring nature. The results of
operations and cash flows are not necessarily indicative of the results for
a full year.
2. The accompanying unaudited financial statements have been prepared on
a basis consistent with the accounting principles and policies reflected in
the December 31, 1996 financial statements. The December 31, 1996 Form
10-K and the Form 10-Q for the period ended March 31, 1997 should be read
in conjunction herewith. The year-end condensed balance sheet was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
8
<PAGE> 9
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The Company had net income of $4.7 million for the three months ended
June 30, 1997, or $.21 per share, up 7% from net income of $4.4 million, or
$.20 per share, in the second quarter of 1996. For the six months ended
June 30, 1997, the Company had net income of $ 9.5 million or $.43 per
share, up 14% from $8.3 million, or $.38 per share, for the first six
months of 1996.
Three Months Ended Six Months Ended
June 30 March 31 June 30 June 30 June 30
1997 1997 1996 1997 1996
Net Production-BOE/day 12,253 11,697 9,465 11,976 9,276
Average Sales Price/BOE $14.26 $16.16 $15.27 $15.18 $14.96
Operating Costs/BOE* $ 4.43 $ 5.29 $ 4.35 $ 4.85 $ 4.48
Depreciation/Depletion
(DD&A)/BOE $ 2.11 $ 2.49 $ 1.96 $ 2.29 $ 1.96
General and Administrative
Expenses(G&A)/BOE $ 1.21 $ 1.52 $ 1.50 $ 1.36 $ 1.42
*includes production taxes
Operating income from producing operations was $8.7 million in the
second quarter of 1997 and $17.5 million for the six months ended June 30,
1997, up 12% and 21%, respectively, from $7.8 million in the second quarter
of 1996 and $14.5 million in the six months ended June 30, 1996.
Despite weaker oil prices in the second quarter of 1997, the Company
achieved an improvement in operating income in the second quarter and first
half of 1997 compared to the same periods in 1996 due primarily to higher
oil and gas production volumes. Oil and gas production of 12,253 BOE/day
in the second quarter and 11,976 BOE/day for the first six months of 1997
were 29% higher than 9,465 BOE/day in the second quarter of 1996 and 9,276
BOE/day in the first six months of 1996, respectively. The increases were
due to production from properties acquired in the fourth quarter of 1996
and the drilling and workover programs for 1996 and 1997. Production on
the Formax properties, purchased by the Company in December 1996, has
increased by approximately 1,000 BOPD to a current level of approximately
1,950 BOE/day. Further development is planned on these and other
properties operated by the Company in 1997 which should further increase
total production in the third and fourth quarters of 1997. Crude oil price
postings for the Company's 13 degree API gravity crude oil decreased in the
second quarter from a price of $15.38 on April 1, 1997 to a low of $13.00
on June 19, 1997 and closed the quarter at $13.38 The average sales price
per BOE received by the Company declined $1.90, or 12%, to $14.26 in the
second quarter from $16.16 in the first quarter of 1997.
The 1997 capital program, which includes the most active drilling
program in the Company's history, includes 92 new development wells and 93
workover projects, primarily on the properties acquired in 1996 and the
other leases operated in the Midway-Sunset field. As of August 4, 1997, 61
of the development wells and 43 of the workovers were complete.
9
<PAGE> 10
Due to the success to date of the 1997 capital program and the reservoir
response of recent steam stimulation efforts, the Company expects
production to continue the recent trend of quarterly increases for the
remainder of 1997.
Operating costs per BOE were $4.43 in the second quarter of 1997, $.86
or 16%, lower than $5.29 per BOE for the first quarter of 1997 and
comparable to $4.35 per BOE in the second quarter of 1996. The decrease
from the first quarter of 1997 was due primarily to lower fuel gas costs
and costs incurred in the first quarter to integrate the facilities of the
acquired properties into existing operations.
DD&A expense per BOE for the three month period ended June 30, 1997
was $2.11, down $.38, or 15%, from $2.49 in the first quarter of 1997, but
up $.15, or 8%,from $1.96 in the second quarter of 1996. DD&A/BOE has
increased slightly in 1997 due to higher DD&A/BOE incurred on the
properties acquired in the fourth quarter of 1996.
G&A decreased both on an aggregate and per BOE basis to $1.3 million,
or $1.21 per BOE, in the second quarter of 1997 from $1.6 million, or
$1.52, in the first quarter of 1997. G&A was $1.3 million, or $1.50 per
BOE, in the second quarter of 1996. As was anticipated in our first
quarter filing, G&A expressed on a per BOE basis is declining and
Management expects this trend to continue in the second half of 1997.
Liquidity and Capital Resources
Working capital at June 30, 1997 was $10.7 million, down 20% from
$13.4 million at March 31, 1997, but up 35% from $7.9 million at December
31, 1996. Net cash provided by operations was $15.1 million in the first
half of 1997, up 31% from $11.5 million generated in the first six months
of 1996. This improvement in cash flow was a direct result of increased
oil and gas production and revenue while maintaining comparable operating
and G&A costs expressed on a per barrel basis.
In the 1997 six month period, cash was used to retire $6.9 million in
notes payable, fund capital expenditures of $9.4 million, which included
the drilling of development wells and several enhancements to the Midway-
Sunset facilities, and to pay dividends of $4.4 million.
Future Developments
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains, and losses) in a full set of
financial statements. SFAS No. 130 is effective for fiscal years beginning
after December 1997. SFAS No. 131 establishes standards for the way public
business enterprises report information about operating segments in annual
and interim financial statements. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company is currently
evaluating the impact of both SFAS No. 130 and SFAS No. 131 on its
financial statements.
10
<PAGE> 11
BERRY PETROLEUM COMPANY
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting, which was held at the Company's corporate
offices on May 16, 1997, eleven incumbent directors were re-elected. Also,
the firm of Coopers & Lybrand L.L.P. was ratified as the Company's
independent accountants for 1997. The results of voting as reported by the
inspector of elections are noted below:
1. There were 21,972,326 shares of the Company's common stock issued,
outstanding and entitled to vote as of the record date, March 24,
1997.
2. There were present at the meeting, in person or by proxy, the holders
of 19,319,827 shares, representing 87.93% of the total number of
shares outstanding and entitled to vote at the meeting, such
percentage representing a quorum.
PROPOSAL ONE: Election of Directors
VOTES FOR PERCENT WITHHELD
Benton Bejach 18,925,776 86.13% 394,051
William F. Berry 18,924,810 86.13% 395,017
Gerry A. Biller 18,926,510 86.14% 393,317
Ralph B. Busch, III 18,926,363 86.14% 393,464
William E. Bush, Jr. 18,926,610 86.14% 393,217
William B. Charles 18,924,810 86.13% 395,017
Richard F. Downs 18,926,450 86.14% 393,377
John A. Hagg 18,926,750 86.14% 393,077
Jerry V. Hoffman 18,926,910 86.14% 392,917
Thomas J. Jamieson 18,925,910 86.14% 393,917
Roger G. Martin 18,926,710 86.14% 393,117
PROPOSAL TWO: Ratify the selection of Coopers & Lybrand L.L.P. as the
independent accountants for the year 1997.
VOTES FOR 19,248,419 87.60%
AGAINST 1,496 .00%
ABSTAIN 69,912 .31%
BROKER NON-VOTE 0 .00%
11
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
Exhibit 15 - Accountants' Awareness Letter
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BERRY PETROLEUM COMPANY
/s/ Jerry V. Hoffman
Jerry V. Hoffman
Chairman, President and
Chief Executive Officer
/s/ Ralph J. Goehring
Ralph J. Goehring
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Donald A. Dale
Donald A. Dale
Controller
(Principal Accounting Officer)
Date: August 4, 1997
12
<PAGE> 13
EXHIBIT 15. ACCOUNTANTS AWARENESS LETTER
COOPERS 350 South Grand Avenue telephone (213) 356-6000
& LYBRAND L.L.P. Los Angeles, CA 90071-3405 facsimile (213) 356-6363
August 1, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
Re: Berry Petroleum Company
Commission File No. 1-9735
We are aware that our report dated August 1, 1997 on our review of the
interim condensed financial statements of Berry Petroleum Company for the
three and six-month periods ended June 30, 1997, and included in the
Company's quarterly report on Form 10-Q for the quarter then ended, is
incorporated by reference in the registration statements on Form S-8 (File
No. 33-23326 and 33-61337). Pursuant to Rule 436(c) under the Securities
Act of 1933, this report should not be considered a part of the
registration statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand (International)
13
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