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 March 31, 2000
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 (661) 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 March 31, 2000, was 21,130,303 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>
BERRY PETROLEUM COMPANY
MARCH 31, 2000
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements
Condensed Balance Sheets at
March 31, 2000 and December 31, 1999 . . . . . . . . . . . . . . 3
Condensed Income Statements for the Three Month Periods
Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . . 4
Condensed Statements of
Cash Flows for the Three Month Periods
Ended March 31, 2000 and 1999 . . . . . . . . . . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of Operations . . . . . . . . 7
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets
(In Thousands, Except Share Information)
March 31, December 31,
2000 1999
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,383 $ 980
Short-term investments available for sale 597 596
Accounts receivable 17,910 15,303
Prepaid expenses and other 1,885 2,080
________ ________
Total current assets 21,775 18,959
Oil and gas properties (successful efforts
basis), buildings and equipment, net 190,426 186,519
Other assets 2,076 2,171
________ ________
$214,277 $207,649
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,976 $ 7,203
Accrued Liabilities 2,815 1,999
Federal and state income taxes payable 3,204 1,322
________ ________
Total current liabilities 16,995 10,524
Long-term debt 44,000 52,000
Deferred income taxes 30,300 28,912
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; 21,130,303 shares issued and
outstanding at March 31, 2000 (21,112,334
at December 31, 1999) 211 211
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 53,599 53,487
Retained earnings 69,163 62,506
________ ________
Total shareholders' equity 122,982 116,213
________ ________
$214,277 $207,649
======== ========
The accompanying notes are an integral part of these financial statements.
3
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Income Statements
Three Month Periods Ended March 31, 2000 and 1999
(In Thousands, Except Per Share Information)
(Unaudited)
2000 1999
Revenues:
Sales of oil and gas $ 26,026 $ 9,225
Interest and other income, net 111 432
________ ________
26,137 9,657
Expenses:
Operating costs 6,705 4,462
Depreciation, depletion and amortization 3,312 2,843
General and administrative 2,710 1,112
Interest 935 927
________ ________
13,662 9,344
________ ________
Income before income taxes 12,475 313
Provision (benefit) for income taxes 3,616 (231)
________ ________
Net income $ 8,859 $ 544
======== ========
Basic net income per share $ .40 $ .02
======== ========
Diluted net income per share $ .40 $ .02
======== ========
Cash dividends per share $ .10 $ .10
======== ========
Weighted average number of shares
of capital stock outstanding (used to
calculate basic net income per share) 22,018 22,009
Effect of dilutive securities:
Stock options 160 6
Other 20 4
________ ________
Weighted average number of shares of
capital stock used to calculate
diluted net income per share 22,198 22,019
======== ========
The accompanying notes are an integral part of these financial statements.
4
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Condensed Statements of Cash Flows
Three Month Periods Ended March 31, 2000 and 1999
(In Thousands)
(Unaudited)
2000 1999
Cash flows from operating activities:
Net income $ 8,859 $ 544
Depreciation, depletion and amortization 3,312 2,843
Deferred income tax liability 1,388 -
Other, net (70) (98)
________ ________
Net working capital provided by operating
activities 13,489 3,289
Increase in accounts receivable, prepaid
expenses and other (2,412) (2,800)
Increase (decrease) in current liabilities 6,471 (1,002)
________ ________
Net cash provided by (used in) operating
activities 17,548 (513)
Cash flows from investing activities:
Capital expenditures (4,053) (2,590)
Property acquisitions (3,034) (34,667)
Other, net 12 (5)
________ ________
Net cash used in investing activities (7,075) (37,262)
Cash flows from financing activities:
Payment of long-term debt (8,000) -
Proceeds from issuance of long-term debt - 34,585
Dividends paid (2,203) (2,201)
Other 133 17
________ ________
Net cash (used in) provided by
financing activities (10,070) 32,401
Net increase (decrease) in cash and
cash equivalents 403 (5,374)
Cash and cash equivalents at beginning of year 980 7,058
________ ________
Cash and cash equivalents at end of period $ 1,383 $ 1,684
======== ========
The accompanying notes are an integral part of these financial statements.
5
BERRY PETROLEUM COMPANY
Part I. Financial Information
Item 1. Financial Statements
Notes to Condensed Financial Statements
March 31, 2000
(Unaudited)
1. All adjustments which are, in the opinion of management, necessary for a
fair presentation of the Company's financial position at March 31, 2000 and
December 31, 1999 and results of operations and cash flows for the three
month periods ended March 31, 2000 and 1999 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, 1999 financial statements. The December 31, 1999 Form 10-K
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 accounting principles generally accepted in the
United States.
6
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 earned net income of $8.9 million, or $.40 per share, in the
first quarter of 2000, on revenues of $26.1 million. This was up 1,680% from
$.5 million, or $.02 per share, earned in the first quarter of 1999 and 10%
higher than $8.1 million, or $.37 per share, earned in the fourth quarter of
1999.
The following table presents certain comparative operating data for the
three month periods:
Three Months Ended
--------------------------
Mar 31, Mar 31, Dec 31,
2000 1999 1999
Net Production - BOE per day 14,297 12,778 14,736
Per BOE:
Average sales price $19.99 $ 8.01 $17.54
Operating costs 4.70 3.21 4.40
Production taxes .45 .67 .46
----- ----- -----
Total operating costs 5.15 3.88 4.86
Depreciation & depletion (DD&A) 2.48 2.47 2.45
General and administrative expenses (G&A) 2.08 .97 1.91
Interest expense .72 .81 .72
Operating income was $16.1 million in the first quarter of 2000, up 705%
from $2.0 million in the first quarter of 1999 and up 15% from $14.0 million in
the fourth quarter of 1999. These operating results were the best ever achieved
by the Company.
The increase in operating income in the first quarter of 2000 compared to
the first quarter of 1999 was due to higher oil prices and higher production.
The average price of crude oil in the first quarter of 2000 was $19.99/BOE,
a 150% increase from $8.01 in the first quarter of 1999. The first quarter of
1999 was hampered by some of the lowest inflation adjusted prices ever
encountered in the industry. The other major factor in the increase in
operating income from the first quarter of 1999 was higher production. Oil
and gas production (BOE/day) in the first three months of 2000 averaged
14,297, 12% higher than 12,778 in the first quarter of 1999, but down 3%
from 14,736 in the fourth quarter of 1999. Production increased from the
first quarter of 1999 due to the acquisition of the Placerita properties in
February 1999 and the effects of the 1999 drilling and workover activity.
Production declined from the fourth quarter of 1999 due to lower steam
availability to the Placerita properties and the temporary disruption
of the South Midway-Sunset properties caused by the 3-D seismic survey in the
first quarter of 2000.
7
The Company has already completed 13 of the 87 new wells included in the
2000 capital budget. The addition of all of these wells, several of which are
horizontal wells, along with the probability of additional steam availability
at Placerita during the summer months should increase production later in the
year.
Operating costs in the first quarter were $6.7 million, or $5.15/BOE,
up 49% from $4.5 million, or $3.88/BOE, in the first quarter of 1999 and 2%
higher than $6.6 million, or $4.86/BOE, in the fourth quarter of 1999. The
largest factor in the increase from the first quarter of 1999 was a 6 square
mile 3-D seismic survey performed on the South Midway-Sunset properties in
the first quarter of 2000 at a cost of approximately $.7 million, or $.54/BOE.
The results of this program will provide additional geologic information about
the South Midway-Sunset properties and will be used to further exploit other
potential accumulations and horizons. In addition, payroll and related
expenses increased in the first quarter of 2000 compared to the first three
months of 1999 due to an increase in employees related to the 1999 property
acquisition. The Company also increased its well work activities to take
advantage of the higher oil prices and performed repairs and maintenance to
the Placerita and South Midway-Sunset water disposal and water treating
facilities and several of the tank farms to handle increased water volumes.
DD&A expense for the first quarter ($/BOE) was $2.48 comparable to $2.47
in the first quarter of 1999 and $2.45 in the fourth quarter of 1999.
G&A expenses were $2.7 million in the first quarter of 2000, up $1.6
million and $.1 million from $1.1 million and $2.6 million in the first and
fourth quarters of 1999, respectively. The increase from the first quarter of
1999 was primarily due to litigation expenses related to the Company's defense
in a lawsuit in Los Angeles County Superior Court, which was settled in
March 2000. The terms of the settlement included the payment of $3.0 million
by the Company for the purchase of the Castruccio lease, adjacent to the
Company's core Placerita properties, the assumption of certain abandonment
obligations and the issuance of certain surface occupancy rights to the
plaintiff in the case. Management estimates that the Castruccio lease will
add at least 2.5 million barrels to the Company's proved reserves.
The Company experienced an effective tax rate of 29% for the three-month
period ending March 31, 2000 compared to an effective tax benefit of 74% for
the same period last year. This significantly higher effective tax rate is
due to the 150% increase in average oil prices in 2000 versus 1999's first
quarter. Due to the Company's significant investment in numerous enhanced
oil recovery projects in 2000, the Company's effective tax rate is anticipated
to be well below the combined federal and state statutory rate.
Liquidity and Capital Resources
Working capital at March 31, 2000 was $4.8 million, down from $8.4 million
at December 31, 1999. Net cash provided by operations was $17.5 million in the
first three months of 2000, up dramatically from $.5 million used in operation
for the same period of 1999. Higher oil prices and production combined to
achieve robust cash flow for the quarter. Cash was used to retire $8.0 million
long-term debt, fund capital expenditures of $4.1 million, make an acquisition
of $3.0 million and pay dividends of $2.2 million. Long-term debt at
March 31, 2000 was $44 million.
8
The Company is currently engaged in a very aggressive capital budget. The
capital budget in 2000 is $22.2 million, a 144% increase from $9.1 million
spent in 1999. The program includes 87 new wells, of which 20 are horizontal
wells, 92 workovers and $5.2 million for facilities and other projects. It
is the Company's goal to accelerate production and reach untapped reserves in
the existing asset base. With success in implementation of the 2000 capital
program, coupled with a modest budget in 2001, the Company expects to average
over 17,000 BOE/day in 2001. Management anticipates that this ambitious
capital program will be fully funded by internally generated funds.
Future Developments
The Company has sold its principal product, California heavy crude oil,
by competitive bid to various pipeline entities for many years. The process
usually resulted in four to eight customers receiving substantially all
available Company operated crude oil production. However, as of April 1, 2000
the Company entered into a long-term arrangement with a major West Coast
crude oil purchaser, whereby they will purchase the bulk of the Company's
crude oil production for a period of 3 years. This arrangement includes
terms which result in pricing in excess of the published postings by the
major buyers of crude oil in California. Management believes that this sales
arrangement will enhance the price realized by the Company for its crude oil
production during the term of the contract.
Forward Looking Statements
"Safe harbor under the Private Securities Litigation Reform Act of 1995":
With the exception of historical information, the matters discussed in this
Form 10-Q are forward-looking statements that involve risks and uncertainties.
Although the Company believes that its expectations are based on reasonable
assumptions, it can give no assurance that its goals will be achieved.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements herein include the timing and extent
of changes in commodity prices for oil, gas and electricity, environmental
risks, drilling and operating risks, uncertainties about the estimates of
reserves, Y2k non-compliance by the vendors, customers, the Company, etc.
and government regulation.
9
BERRY PETROLEUM COMPANY
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
None
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: May 8, 2000
10
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<ARTICLE> 5
<CIK> 0000778438
<NAME> BERRY PETROLEUM COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,383
<SECURITIES> 597
<RECEIVABLES> 17,910
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,775
<PP&E> 286,531
<DEPRECIATION> 96,105
<TOTAL-ASSETS> 214,277
<CURRENT-LIABILITIES> 16,995
<BONDS> 0
0
0
<COMMON> 220
<OTHER-SE> 122,762
<TOTAL-LIABILITY-AND-EQUITY> 214,277
<SALES> 26,026
<TOTAL-REVENUES> 26,137
<CGS> 0
<TOTAL-COSTS> 10,017
<OTHER-EXPENSES> 2,710
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 935
<INCOME-PRETAX> 12,475
<INCOME-TAX> 3,616
<INCOME-CONTINUING> 8,859
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,859
<EPS-BASIC> .40
<EPS-DILUTED> .40
</TABLE>
