SEC Filing | Berry Corporation (bry)

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.

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

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

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

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

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

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

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

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

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

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

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

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

5 0000778438 BERRY PETROLEUM COMPANY 1,000 6-MOS DEC-31-1997 JUN-30-1997 7,532 705 10,002 0 0 19,651 231,645 77,671 174,456 8,964 0 0 0 220 105,973 174,456 33,014 33,823 0 15,478 3,523 0 581 14,241 4,772 9,469 0 0 0 9,469 .43 .43