EX-99 3 earnings021303.txt EARNINGS RELEASE News Release Berry Petroleum Company Phone (661) 616-3900 5201 Truxtun Avenue, Suite 300 E-mail: ir@bry.com Bakersfield, California 93309-0640 Internet:www.bry.com NYSE:BRY Contacts: Jerry V. Hoffman, Chairman, President & CEO Ralph J. Goehring, Senior Vice President & CFO February 13, 2003 For Immediate Release BERRY PETROLEUM'S 2002 EARNINGS ROSE 37% IN 2002 TO $30 MILLION Bakersfield, California - Berry Petroleum Company (NYSE:BRY) today announced net income of $30 million, or $1.38 per share, (basic) on revenues of $132.6 million for the year ended December 31, 2002, up 37% from $21.9 million, or $1.00 per share (basic), on revenues of $138.5 million for the year ended December 31, 2001. These results represent Berry's second highest net income ever. Net income for 2001 was adversely affected by a $4 million after-tax charge for the write-off of electrical receivables deemed uncollectable. However, in the first quarter of 2002, a portion of those proceeds were collected resulting in a $2.2 million after-tax credit. Total production for 2002 was 5.3 million barrels of oil equivalent (BOE), or 14,387 BOE/day, up 4% from 5 million BOE, or 13,820 BOE/day, in 2001. The average sales price/BOE received in 2002 was $19.39, down 2% from $19.79 received during 2001. For the fourth quarter of 2002, the Company earned $7 million, or $.32 per share (basic), on revenues of $36.7 million. This was up 75% from $4 million, or $.19 per share (basic) earned in the fourth quarter of 2001 on revenues of $27.5 million, but down 8% from $7.6 million, or $.35 per share (basic) earned in the third quarter of 2002 on revenues of $35.3 million. Total production for the fourth quarter of 2002 was 1.4 million BOE, or 15,208 BOE/day, up 13% from 1.2 million BOE, or 13,444 BOE/day in the fourth quarter of 2001 and up 5% from 1.3 million BOE, or 14,464 BOE/day, in the third quarter of 2002. The average sales price/BOE received in the fourth quarter of 2002 was $20.41, up 32% from $15.51 received in the fourth quarter of 2001 and down 3% from $21.03 received in the third quarter of 2002. Jerry Hoffman, Chairman, President and Chief Executive Officer, stated "2002 was another solid year for the Company as we achieved a 17% return on capital employed (our three-year average is 18%), and an 18% return on equity (our three-year average is 21%). Production rates were decreased significantly in 2001 due to the suspension of our steam operations as a result of the California energy crisis. Our most important goal for 2002 was to re-establish production rates from our core assets to the levels achieved before the steam interruption. This goal was largely achieved in 2002 with a production exit rate for 2002 of approximately 15,700 BOE/day. Excluding property acquisitions, the Company's 2003 capital budget for additional development of our core properties is $27.6 million, which is down 10% from 2002 capital expenditures. We also expect our steaming operations to rise to levels near 67,000 barrels of steam per day to support our increasing production. Our target average production rate from our existing producing properties for 2003 is 16,400 BOE/day, up 14% from our 2002 average production rate of 14,387 BOE/day and we expect to exit 2003 at 17,700 BOE/day." Operating costs ($/BOE) were $8.49 in 2002, up 6% from $7.99 in 2001. Operating expenses for the fourth quarter of 2002 were $10.17, up 44% from the fourth quarter of 2001. The primary reason for -more- 1 Berry Petroleum Company News Release - February 13, 2003 Page 2 of 5 the increase was high steam costs due to high gas prices, low electricity prices and high volumes of steam from our conven- tional generators. The average cost of natural gas purchases in 2002 was $3.13 per Mmbtu, down from $5.76 in 2001. The average price for the fourth quarter was $3.99 and the current cost of delivered gas is $4.92 per Mmbtu. Total steam injected in 2002 was 21.9 million barrels, up 78% from 12.3 million barrels in 2001. The average sales price per megawatt of electricity was $40.06 in 2002, down from $79.14 in 2001. Management anticipates that operating costs will increase to a range of approximately $8.50 - $9.50 per BOE in 2003 due to high steaming operations and relatively high natural gas prices. During 2002, the majority of the Company's electricity was sold on the open market. However, in January 2003, Berry began delivery of electricity under reinstated Standard Offer contracts with Pacific Gas and Electric Company and Southern California Edison Company, which should result in improved electrical pricing and contribute to lower operating costs for the Company's crude oil production operations. These contracts are scheduled to terminate no later than December 31, 2003. Management will pursue extensions or other longer-term contracts at competitive rates for 2004 and beyond. General and administrative expenses (G&A) in 2002 were $7.9 million, or $1.51 per BOE, up 6% from $7.2 million, or $1.42 per BOE, in 2001. The increase from 2001 was primarily due to costs related to the evaluation of potential acquisitions and rent on the Company's corporate offices. The Company is targeting 2003 G&A costs of approximately $1.50 per BOE. Ralph Goehring, Senior Vice President and Chief Financial Officer, said, "The Company generated a very healthy $57.9 million in cash from operations, up 64% from $35.4 million, in 2001. In the fourth quarter of 2002, Berry adopted SFAS No. 143, "Accounting for Asset Retirement Obligations." The Company has recorded costs for the ultimate abandonment of our wells and facilities for many years under SFAS No. 19 and the effect of the change on 2002 earnings was immaterial. The effect on earnings in 2003 under the newly adopted method will be a charge of approximately $.5 million compared to a charge of approximately $.8 million under the previous method. The most significant effect of the change was to move the current accumulated financial obligation to a long-term liability account. The value of this obligation under our previous method had been recorded as a reduction to the total book value of the Company's property, plant and equipment. The accrued abandonment obligation at December 31, 2002 was $4.6 million." The present value of estimated future net cash flows from Berry's proved reserves, discounted at 10%, was $452 million at December 31, 2002, up 61% from $280 million in 2001. These estimated cash flows were calculated using an unescalated year- end average oil sales price of $24.16 and $14.18 for 2002 and 2001, respectively. Total oil and gas reserves at December 31, 2002 were 101.7 million barrels, down slightly from 102.9 million barrels in 2001. Therefore, the Company replaced 4.1 million barrels, or 77%, of its production in 2002. Jerry Hoffman stated, "While we had a good year financially in 2002, the acquisition environment was, and remains, difficult due primarily to high commodity pricing. However, the Company acquired significant acreage positions in Kansas and Illinois and is in the process of evaluating the development potential of coalbed methane production as part of our plan to diversify Berry's resource base with natural gas production. For 2003, our most important goal is to leverage our excellent balance sheet into growth assets and add a new core area for the Company outside California. We are targeting the U.S. Rockies and the Mid-continent and have established an office in Denver, Colorado to provide improved access to the available opportunities." -more- 2 Berry Petroleum Company News Release - February 13, 2003 Page 3 of 5 An earnings conference call will be held February 14, 2003 at 8:00 a.m. PT. Dial 800-218-0713 to participate. For a digital replay, dial 800-405-2236 (passcode 522795). The digital replay will be available until February 28, 2003 at 11:59 p.m. PT. A webcast is available at www.bry.com. Berry Petroleum Company is a publicly traded independent oil and gas production and exploitation company with headquarters in Bakersfield, California. Visit www.bry.com for more information. "Safe harbor under the Private Securities Litigation Reform Act of 1995:" With the exception of historical information, the matters discussed in this news release 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, but are not limited to, the timing and extent of changes in commodity prices for oil, gas and electricity, a limited marketplace for electricity sales within California, counterparty risk, competition, environmental risks, litigation uncertainties, drilling, development and operating risks, the availability of drilling rigs and other support services, legislative and/or judicial decisions and other government regulations. -more- 3 Berry Petroleum Company News Release - February 13, 2003 Page 4 of 5 CONDENSED STATEMENTS OF INCOME (In thousands, except per share data) (unaudited) Three Months Ended Twelve Months Ended 12/31/02 12/31/01 12/31/02 12/31/01 Revenues: Sales of oil and gas $ 28,736 $ 19,278 $102,026 $100,146 Sales of electricity 7,865 7,829 28,827 35,917 Interest and other income, net 147 372 1,762 2,478 ------- ------- ------- ------- Total 36,748 27,479 132,615 138,541 Expenses: Operating costs - oil and gas production 14,223 8,714 44,604 40,281 Operating costs - electricity generation 7,865 7,616 28,496 35,506 Depreciation, depletion & amortization 4,056 3,982 16,452 16,520 General & administrative 1,758 1,692 7,928 7,174 Interest 179 448 1,042 3,719 Write-off (recovery) of electricity receivable - - (3,631) 6,645 Loss on termination of derivative contracts - 1,458 - 1,458 ------- ------- ------- ------- Total 28,081 23,910 94,891 111,303 Income before income taxes 8,667 3,569 37,724 27,238 Provision (benefit)for income taxes 1,611 (480) 7,634 5,300 ------- ------- ------- ------- Net income before accounting change $ 7,056 $ 4,049 $ 30,090 $ 21,938 Effect of accounting change, net of taxes (66) - (66) - ------- ------- ------- ------- Net income $ 6,990 $ 4,049 $ 30,024 $ 21,938 ======= ======= ======= ======= Basic net income per share $ .32 $ .19 $ 1.38 $ 1.00 Diluted net income per share $ .32 $ .18 $ 1.37 $ .99 Cash dividends per share $ .10 $ .10 $ .40 $ .40 Weighted average common shares: Basic 21,752 21,791 21,741 21,973 Diluted 21,952 22,000 21,939 22,110 CONDENSED BALANCE SHEETS (In thousands) December 31, 2002 December 31, 2001 ASSETS Current assets $ 28,705 $ 28,201 Property & equipment, net 228,475 203,413 Other assets 893 912 ------- ------- $ 258,073 $ 232,526 ======= ======= LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities $ 32,394 $ 22,364 Long-term debt 15,000 25,000 Deferred taxes 33,866 32,009 Other long-term liabilities 4,755 - Shareholders' equity 172,058 153,153 ------- ------- $ 258,073 $ 232,526 ======= ======= -more- 4 Berry Petroleum Company News Release - February 13, 2003 Page 5 of 5 CONDENSED STATEMENTS OF CASH FLOWS (In thousands) Year Ended 12/31/02 12/31/01 Cash flows from operations: Net income $ 30,024 $ 21,938 Depreciation, depletion & amortization 16,452 16,520 Increase (decrease) in deferred income taxes 1,857 (50) Other, net (184) (505) Net changes in operating assets and liabilities 9,746 (2,470) ------- ------- Net cash provided by operations 57,895 35,433 Net cash used in investing activities (36,526) (17,029) Net cash used in financing activities (18,741) (13,897) Net increase in cash & cash equivalents 2,628 4,507 Cash & cash equivalents, beginning of period 7,238 2,731 Cash & cash equivalents, end of period $ 9,866 $ 7,238 COMPARATIVE OPERATING STATISTICS Three Months Ended Year Ended 12/31 12/31 Change 12/31 12/31 Change Oil & Gas /02 /01 /02 /01 Net production-BOE/D 15,208 13,444 +13% 14,387 13,820 +4% Per BOE: Average sales price $20.41 $15.51 +32% $19.39 $19.79 -2% Operating costs* 9.57 6.50 +47% 7.94 7.50 +6% Production taxes .60 .55 +9% .55 .49 +12% Total operating costs 10.17 7.05 +44% 8.49 7.99 +6% Depreciation/ depletion 2.90 3.22 -10% 3.13 3.28 -5% General & administrative expenses 1.26 1.37 -8% 1.51 1.42 +6% Interest expense $ .13 $ .36 -64% $ .20 $ .74 -73% Electricity Net megawatts per day produced 2,126 1,936 +10% 2,050 1,325 +55% Net megawatts per day sold 1,860 1,821 +2% 1,848 1,245 +48% Average sales price per megawatt $43.97 $43.92 -% $40.06 $79.14 -49% Fuel gas cost per Mmbtu $ 3.99 $ 2.44 +64% $ 3.13 $ 5.76 -46% *Excluding production taxes BOE/D - Barrels of oil equivalent per day. 5