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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1994
Commission file number 1-9735
BERRY PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 77-0079387
(State of incorporation (I.R.S. Employer
or organization) Identification Number)
28700 Hovey Hills Road
Taft, California 93268
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (805) 769-8811
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, $.01 par value New York Stock Exchange
(including associated stock purchase rights)
Securities registered pursuant to Section 12(g) of the Act: 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 for such shorter period that the
registrant was required to file such report), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [ ]
As of March 6, 1995, the registrant had 21,033,169 shares of Class A
Common Stock outstanding and the aggregate market value of the voting stock
held by nonaffiliates was approximately $108,570,000. This calculation is
based on the closing price of the shares on the New York Stock Exchange on
March 6, 1995 of $9.25. The registrant also had 898,892 shares of Class B
Stock outstanding on March 6, 1995, all of which is held by an affiliate of
the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part III is incorporated by reference from the registrant's definitive
Proxy Statement for its Annual Meeting of Shareholders to be filed, pursuant
to Regulation 14A, no later than 120 days after the close of the registrant's
fiscal year.
BERRY PETROLEUM COMPANY
TABLE OF CONTENTS
PART I
Page
Items 1
and 2. Business and Properties 3
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of
Security Holders 11
Executive Officers 12
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 13
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 43
PART III
Item 10. Directors and Executive Officers of
the Registrant 43
Item 11. Executive Compensation 43
Item 12. Security Ownership of Certain Beneficial
Owners and Management 43
Item 13. Certain Relationships and Related Transactions 43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 44
2
Part I
Items 1 and 2. Business and Properties
Introduction
Berry Petroleum Company ("Berry" or "Company"), a Delaware corporation
formed in 1985 as the successor to Berry Holding Company and various related
entities, is an independent energy company engaged in the business of
production, development, exploration, blending and marketing of crude oil and
natural gas. Information contained in this report on Form 10-K reflects the
business of the Company during the year ended December 31, 1994.
The Company's mission is to enhance shareholder value and achieve real
asset growth. To achieve this, Berry's corporate strategy is to acquire
primarily proved reserves with additional development potential and to
increase its proved reserves and production through further development of
its existing properties by application of enhanced oil recovery (EOR)
methods, advanced reservoir management and developmental drilling. All of
the Company's reserves are located in the United States, and the Company
continues to focus on opportunities in North America. While the Company has
substantial working capital available for acquisitions, the Company will, as
necessary, consider long-term debt or issuance of capital stock to finance a
sizable purchase.
Approximately 89% of the Company's proved reserves are located in the
Midway-Sunset field in the San Joaquin Valley in California. The majority of
these reserves are on properties owned in fee. Net production from this
field in 1994 was 2.9 million barrels of oil equivalent (BOE) or 86% of total
1994 BOE production. The Midway-Sunset field contains predominantly heavy
crude oil (under 20 degrees API gravity), the production of which depends
substantially on steam injection. Berry utilizes primary, cyclic steaming
and steam flooding recovery methods in this field. Production from other
fields utilize primary recovery methods.
Berry operates substantially all of its principal oil producing
properties. Field operations include the initial recovery of the crude oil
and its transport through treating facilities into storage tanks. After the
treating process is completed, which includes removal of water and solids by
mechanical, thermal and chemical processes, the crude oil from the Midway-
Sunset, Montalvo and Rincon properties is metered through L.A.C.T. (Lease
Automatic Custody Transfer) facilities and transferred into crude oil
pipelines owned by other oil companies or transported by truck.
3
Revenues
The percentage of revenues by source for the prior three years is as
follows:
1994 1993 1992
Sales of oil and gas 95% 97% 96%
Interest and other income 5% 3% 4%
See Berry's Statements of Operations and accompanying Notes thereto.
Marketing
The Company believes the market for its crude oil differs substantially
from the oil market in the remainder of the country. Two key factors are
responsible for lower crude prices in California versus the Mid-Continent.
The first is that the Company's crude oil is primarily lower gravity crude
oil and must be heated or blended for transport to refineries. In general,
lower gravity crude oil results in lower yields of light products, such as
gasoline and kerosene, in low conversion refineries. Additional processing,
such as coking and catalytic cracking, increases light product yields, but at
a higher capital cost per barrel of crude oil refined. The refiner or crude
oil buyer generally pays lower prices for such crude oil, as reflected in
lower posted and spot prices. The second factor is that current federal law
prohibits the export of Alaskan North Slope (ANS) crude oil to foreign
countries and, consequently, all ANS crude oil production must go to or by
the West Coast which reduces the price of both ANS and California crude oil.
This federally mandated policy prevents free market prices on the West Coast.
This policy results in California heavy crude price variations not consistent
with prevailing changes in market prices in other parts of the country, thus
making it difficult to hedge the Company's oil prices. The Company continues
to be an advocate of lifting the ban on ANS exports so the Company and other
West Coast producers can receive a fair market price for their crude oil.
While the Company continues to hold a license to export heavy crude oil,
it remains uneconomic to sell crude oil under the license. This license has
been renewed annually since 1993 and is now scheduled to expire on December
31, 1995.
To provide additional market flexibility, the Company owns and operates
a blending facility located near its homebase properties. The Company can
process up to approximately 5,000 barrels per day of heavy crude oil through
the facility. The Company's heavy crude oil can be blended with lighter
crude oils and natural gasolines to produce a blended crude oil of
approximately 27 degree API gravity. At times, this blending operation
allows the Company to improve the profit margin on the sale of its heavy
crude oil. Blending also allows the Company to ship through common carrier
pipelines and sell directly to refiners in the Los Angeles basin, the San
Francisco Bay area and the Mid-Continent. The Company suspended the blending
operations in December 1993 due to the high cost of natural gasoline, the
improved demand for the Company's 13 degree heavy crude oil, and the
narrowing margin between the posted price of the blended crude oil and the
heavy crude oil. Although the Company sold its beginning crude oil inventory
in 1994, no blending occurred during the year. The Company has the ability
to resume blending operations if warranted by market conditions.
4
Environmental and Other Regulations
The operations of Berry are affected in varying degrees by federal,
state, regional and local laws and regulations, including laws governing
allowable rates of production, well spacing, air emissions, water discharges,
endangered species, marketing, pricing, taxes and other laws relating to the
petroleum industry. Berry is further affected by changes in such laws and by
constantly changing administrative regulations.
Berry, as an owner and operator of oil and gas properties, is subject to
various federal, state, regional and local laws and regulations relating to
discharge of materials into, and protection of, the environment. These laws
and regulations may, among other things, impose liability on the owner or the
lessee in the case of leased properties for the cost of pollution clean-up
resulting from operations, subject the owner or lessee to liability for
pollution damages, require suspension or cessation of operations in affected
areas, and impose restrictions on the injection of liquids into subsurface
aquifers that may contaminate groundwater. Such regulation has increased the
length of time and cost of planning, designing, drilling, installing,
operating and abandoning the Company's oil and gas wells and other treating
facilities.
Environmental regulations have an increasing impact upon the Company's
operations. The Company estimates that it spends approximately $.3 million
on technical and managerial time annually to comply with environmental
regulations. In addition, the Company spent approximately $1.1 million for
capital projects, repairs and maintenance, and permits related to
environmental control facilities in 1994 and anticipates spending
approximately $.8 million for similar expenditures in 1995, with additional
expenditures required in future years. The Company believes these are
necessary business costs in the domestic oil and gas industry. Although
environmental requirements do have a substantial impact upon the energy
industry, generally these requirements do not appear to affect Berry to any
greater or lesser extent than other companies in California and in the
domestic industry as a whole. In most cases, foreign produced crude oil
enjoys a competitive advantage since foreign environmental regulations of oil
producing regions are not nearly as stringent or comprehensive as in the
United States and particularly California.
Berry's properties in the Rincon and Montalvo areas, particularly
facilities located offshore, have significant environmental risks due to
their location. Oil leaks that occur offshore generally have a greater
environmental impact than those onshore. In Berry's case, a small offshore
oil spill could immediately involve significant clean-up, regulatory
investigation and penalties, any or all of which could subject the Company to
a significant financial burden. In addition to purchasing insurance to cover
certain environmental risks, the Company mitigates this exposure by the
development and implementation of emergency response and major oil spill
contingency plans and, at Rincon, for pipeline shipments only, has installed
an automatic emergency shut-down system which minimizes the potential
discharge from a pipeline rupture. The Company maintains an on-site spill
containment boom and is a member of Clean Seas, an organization with
significant experience and resources to contain and minimize the effects of
an oil spill.
5
The Company experienced an oil spill due to a ruptured pipe on its West
Montalvo field in December 1993 which required cleanup of the area directly
around the pipe as well as the nearby ocean and an agricultural runoff pond.
A regulatory investigation is proceeding and the Company is potentially
subject to fines and penalties (see Item 3. "Legal Proceedings" and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations").
The Company notified the California Regional Water Quality Control Board
that it had discovered evidence of the presence of petroleum hydrocarbons in
the groundwater underlying the Rincon Facilities. The Company initiated an
investigation to determine the boundaries of the affected groundwater. The
investigation to date has shown that the contamination is below actionable
levels. The Company will continue to monitor the situation and intends to
request a resolution of "no further action required" from the appropriate
review division.
The Company is not aware of any unrecorded environmental claims existing
at December 31, 1994 which would have a material impact on the Company's
financial condition or results of operations.
Competition
The oil and gas industry is highly competitive. As an independent
producer, the Company does not own any refining or retail outlets. It has
little control over the price it receives for its crude oil, and higher
costs, fees and taxes assessed at the producer level cannot necessarily be
passed on to the Company's customers. In exploration and acquisition
activities, significant competition is faced since integrated companies,
independent companies and individual producers and operators are active
bidders for desirable oil and gas properties. Although many of these
competitors have greater financial and other resources than the Company,
Management believes that it is in a position to compete effectively.
Employees
The Company had 92 employees at December 31, 1994.
Oil and Gas Properties
The Company spent a total of $1 million on property acquisitions, $4.7
million on development programs and $1.7 million on exploration programs in
1994. The Company's 1995 budget for capital expenditures on development and
exploration activities during 1995 is $8.7 million. As these activities are
influenced by numerous factors, many of which are outside the Company's
control, the actual expenditure level may vary considerably from budgeted
levels.
The principal oil and gas producing properties of Berry are located in
Kern County and Ventura County, California.
Homebase - Berry owns and operates working interests in thirteen
properties containing 905 acres located in the southern portion of the
Midway-Sunset field. The Company estimates these properties account for
approximately 78% of the Company's proved oil and gas reserves and
approximately 77% of its current daily production on February 8, 1995. These
properties rely on thermally enhanced oil recovery methods, primarily cyclic
6
steaming. Nine of the thirteen properties are owned in fee and are not
burdened by royalties. These nine properties accounted for approximately 71%
of Berry's average daily production during 1994 and represent 65% of the
Company's proved oil and gas reserves. Berry has a 100% working interest in
all the Midway-Sunset properties it operates except one, where the Company
owns a 96.875% working interest.
In December 1994, the Company purchased two adjacent properties totaling
152 acres which are included in the acreage and reserve totals above. The
properties are not currently producing, although a development program is
underway on one of the properties.
Fairfield Properties - Berry owns and operates approximately 1,344 acres
in the northern portion of the Midway-Sunset field which account for
approximately 11% of the Company's proved oil and gas reserves and
approximately 10% of its daily production on February 8, 1995. These
properties rely on thermally enhanced oil recovery methods, primarily cyclic
steaming and steam flooding. Berry's interests consist of four fee
properties comprising 1,009 acres and six leases comprising 335 acres.
McKittrick 21Z - Berry owns and operates 468 acres located near the
historic McKittrick townsite in Kern County, California which account for
approximately 3% of the Company's proved oil and gas reserves and less than
1% of its daily production on February 8, 1995.
Rincon - Berry operates two private leases and four leases owned by the
State of California in the Rincon field in Ventura County, California. These
leases entitle the Company to a 100% working interest in oil and gas wells
located on approximately 1,631 acres. Berry estimates that its Rincon
properties currently account for 2% of its proved oil and gas reserves and
approximately 3% of its daily production on February 8, 1995. These
properties rely on primary production methods.
West Montalvo - Berry owns 100% of the working interest in six leases
in Ventura County, California in the West Montalvo field. Two of the six
leases are owned by the State of California. The Company estimates current
proved reserves from West Montalvo account for approximately 5% of Berry's
proved oil and gas reserves. Total production from these leases, containing
8,563 acres, represents approximately 8% of Berry's total current daily oil
and gas production on February 8, 1995.
Other - The Company has interests in certain other properties located
primarily in California, Louisiana and Texas, which it estimates account for
less than 1% of the Company's proved oil and gas reserves and approximately
1% of the Company's total oil and gas production.
Development
Homebase - South Midway-Sunset Field. During 1994, 14 development wells
were drilled and 25 wells were deepened and/or repaired. The objective of
this work was to maintain productive capacity and develop additional reserves
in the Company's single largest asset. On the Ethel D property, one well was
hydraulically fractured and steam stimulated in an extension of a successful
program begun in 1993.
7
In December 1994, the Company purchased two adjacent properties,
increasing homebase reserves by 1.2 million barrels. Development of the main
property will be undertaken in 1995 by the initial drilling of 5 to 10 wells.
Two major cost saving programs were completed in 1994. These were the
installation of a high voltage power substation and a produced water
recycling plant to supply water to the steam cogeneration plant. These
projects are expected to reduce power costs and steam water supply costs.
At December 31, 1992, the Company had an approximate 11% interest in
University Cogeneration Partners Ltd. 1985-1, a limited partnership, which
owns a cogeneration plant that sells steam to the Company. The Company
purchases approximately 12,500 Bbls/day of steam from the facility which is
used in the steaming operations of the homebase properties. As of December
1994, the Company increased its partnership interest to approximately 45%.
Fairfield - North Midway-Sunset Field. During 1994, the Company drilled
two wells in the Potter sand and one well in the Mya sand reservoir. In
1993, seven wells were deepened and a steam drive project was initiated.
While initial results were disappointing, the project was suspended prior to
maturity due to low crude oil prices.
McKittrick - The Company initiated a Tulare zone steamflood in the first
quarter of 1993. However, because of low oil prices for revenue and high gas
prices for steam generation cost, the steam drive project was shut-in during
1994 and is not expected to resume until the Company can achieve sustained
higher oil prices.
Montalvo - Development, redrill and remedial well activity were postponed
in 1994 while the Company assessed and implemented facility improvements
following the late 1993 oil spill. The program to return idle wells to
production is expected to resume in 1995.
Rincon - Drilling of extended reach wells to develop proven reserves in
the western part of the field was deferred from 1994 to 1995 because of
marginal oil prices.
Exploration
The Company participated in the drilling of four exploratory wells in
1994 in which it owned between 12.5% and 25% working interest in each well.
California - One wildcat well was drilled and abandoned as a dry hole in
December 1994.
Texas - A 3D Seismic survey was made of the Company's Tyler/Lexi
prospects and yielded a significant improvement in structural interpretation
to support the 1994-1995 exploration program. Two 1993 discovery wells
became uneconomic due to a significant decline in production and were written
off in June 1994. A new well in the prospect was prepared for spud at year
end. The Company divested its interests in non-economic oil and gas
properties in East Texas during 1994. These properties were previously
written down in 1993 by $2.9 million.
8
Louisiana - The Earl Chauvin #1, a 1993 discovery, started gas sales in
April 1994. One exploratory well on another prospect was drilled and
abandoned as a dry hole in March 1994.
Nevada - In 1994, two exploratory wells were drilled and abandoned as dry
holes. The Company has four additional prospect wells to drill to fulfill a
six well multicompany exploratory program.
Oil and Gas Reserves
Reserve Reports - The Company engaged DeGolyer and MacNaughton to
estimate the proved oil and gas reserves of the Company for the year ended
December 31, 1994 for all of the Company's properties and for the years ended
December 31, 1993 and 1992 for the Midway-Sunset field and certain properties
located in other fields. The reserves for 1993 and 1992 for the Rincon and
Montalvo fields were prepared by Babson and Sheppard. The reserves at
December 31, 1992 for the Colorado gas properties, which were sold in 1993,
were prepared by Reed W. Ferrill & Associates. These three firms (the
Petroleum Engineers) were also asked to estimate the future net revenues to
be derived from such properties. Each of the Petroleum Engineers is an
independent oil and gas reserve engineering firm. In preparing their
respective reports for December 31, 1994, 1993 or 1992, each Petroleum
Engineer reviewed and examined such geological, economic, engineering and
other data provided by the Company as considered necessary under the
circumstances applicable to each reserve report. Each Petroleum Engineer
also examined the reasonableness of certain economic assumptions regarding
estimated operating and development costs and recovery rates in light of
economic circumstances as of December 31, 1994, 1993 and 1992.
For the Company's operated properties, reserve estimates are filed
annually with the U.S. Department of Energy. Refer to the Supplemental
information about oil and gas producing activities (unaudited) for the
Company's oil and gas reserve disclosures.
Production
The following table sets forth certain information regarding production
for the periods indicated:
Years ended December 31
1994 1993 1992
Net Annual Production(1):
Oil (Mbbls) 3,250 3,617 3,683
Gas (Mmcf) 793 771 1,029
Average Sales Price:
Oil (per bbl) $11.61 $11.43 $12.83
Gas (per mcf) 1.87 1.96 1.83
Average Production Cost (per bbl
equivalent)(2) 6.28 6.35 5.43
(1) Net production represents production owned by Berry and produced to
its interest, less royalty and other similar interests. All oil
and gas produced, other than lease fuel needs, is sold at the well
site. Berry does not refine any of its production.
(2) Equivalent oil and gas information is at a ratio of six thousand
cubic feet of natural gas to one barrel ("bbl") of oil.
9
Acreage and Wells
At December 31, 1994, the Company's properties accounted for the
following developed and undeveloped acres:
Developed Acres Undeveloped Acres
Gross Net Gross Net
California 7,493 7,370 6,812 6,812
Nevada - - 56,768 9,461
Texas 840 277 10,812 3,508
Other 1,170 211 625 156
_______ _______ _______ _______
9,503 7,858 75,017 19,937
======= ======= ======= =======
Gross acres represent all acres in which Berry has a working interest;
net acres represent Berry's aggregate working interests in the gross acres.
Berry currently has 1,615 gross oil wells (1,601 net) and 23 gross gas
wells (7 net). Gross wells represent the total number of wells in which
Berry has a working interest. Net wells represent the number of gross wells
multiplied by the percentages of the working interests owned by Berry. One
or more completions in the same bore hole are counted as one well. Any well
in which one of the multiple completions is an oil completion is classified
as an oil well.
Drilling Activity
The following table sets forth certain information regarding Berry's
drilling activities for the periods indicated:
1994 1993 1992
Gross Net Gross Net Gross Net
Exploratory Wells
Drilled:
Productive (1) 0 0.0 3 0.7 1 0.3
Dry (2) 4 0.8 3 0.5 3 0.9
Development Wells
Drilled:
Productive (1) 14 14.0 18 18.0 25 25.0
Dry (2) 0 0.0 0 0.0 0 0.0
Total Wells Drilled:
Productive (1) 14 14.0 21 18.7 26 25.3
Dry (2) 4 0.8 3 0.5 3 0.9
(1) A productive well is a well that is not a dry well.
(2) A dry well is a well found to be incapable of producing either oil or
gas in sufficient quantities to justify completion as an oil or gas
well.
As of March 6, 1995, one exploratory well was being drilled.
10
Title and Insurance
The Company is not aware of any defect in the title to any of its
principal properties. Notwithstanding the absence of a recent title opinion
or title insurance policy, the Company believes it has satisfactory title to
these properties, subject to such exceptions as the Company believes are
customary and usual in the oil and gas industry and which the Company
believes will not materially impair its ability to recover the proved oil and
gas reserves or to obtain the resulting economic benefits.
The oil and gas business can be hazardous, involving unforeseen
circumstances such as blowouts or environmental damage. To address the
hazards inherent in the oil and gas business, the Company maintains a
comprehensive insurance program.
Item 3. Legal Proceedings
On December 25, 1993, a crude oil spill was discovered on the Company's
West Montalvo Lease in Ventura County, California. The Company estimates
that the total discharge was approximately 2,100 barrels. The Company is
aware that certain governmental authorities are currently investigating the
circumstances surrounding the spill. The Company paid $.6 million to settle
all potential state criminal claims against the Company in August 1994. The
Company is working on dealing with all other potential matters, related
thereto. As of the date of this report, no actions have been filed against
the Company in connection with the spill.
The Company is in a dispute with University Cogeneration Partners Ltd,
1985-1, regarding certain costs related to the cogeneration facility
operations. The Company is a minority owner of University Cogeneration
Partners Ltd, 1985-1, of which the major asset is the cogeneration facility
located on the Company's properties. A Demand for Arbitration was filed
against the Company in early 1995 and the Company answered and filed a
counter Demand for Arbitration, which relates to costs and billings to the
Company. While the outcome of these proceedings against the Company cannot
be predicted with certainty, Management does not expect these matters to have
a material adverse effect on the financial position or results of operations
of the Company.
The information with respect to the issues before the U.S. Tax Court set
forth in Note 8 to the Company's financial statements under Item 8 is
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
None.
11
EXECUTIVE OFFICERS
Listed below are the names, ages (as of December 31, 1994) and positions
of the executive officers of Berry and their business experience during the
past five years.
JERRY V. HOFFMAN, 45, President and Chief Executive Officer since May
1994 and President and Chief Operating Officer from March 1992 until May
1994. Mr. Hoffman was added to the Board of Directors in March 1992. Mr.
Hoffman held the Senior Vice President and Chief Financial Officer positions
from January 1988 until March 1992. Mr. Hoffman, CPA, has held a variety of
other positions with the Company and its prior subsidiaries or successors
since February 1985.
DONALD A. DALE, 48, Controller since December 1985. Mr. Dale, CPA, was
the Controller for Berry Holding Company from September 1985 to December
1985.
RALPH J. GOEHRING, 38, Chief Financial Officer since March 1992 and
Manager of Taxation from September 1987 until March 1992. Mr. Goehring, CPA,
is also the Assistant Secretary for Berry Petroleum Company.
CHESTER L. LOVE, 60, Vice President of Engineering since March 1994 and
Manager of Engineering from May 1992 to March 1994. Mr. Love was previously
a Vice President of Consulting for Scientific Software-Intercomp from 1979 to
1992.
KENNETH A. OLSON, 39, Corporate Secretary since December 1985 and
Treasurer since August 1988. Mr. Olson, CPA, has held a variety of other
positions with the Company and its prior subsidiaries or successors since
July 1985.
STEVEN J. THOMAS, 44, Manager of Production since March 1993 joined the
Company's engineering department in September 1992. Mr. Thomas was an
engineering and petroleum consultant from 1990 to 1992 and was employed by
Chevron USA from 1979 to 1990 in various drilling, production and facilities
engineering positions.
12
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Shares of Class A Common Stock (Common Stock) and Class B Stock, referred
to collectively as the "Capital Stock", are each entitled to one vote and 95%
of one vote, respectively. Each share of Class B Stock is entitled to a
$1.00 per share preference in the event of liquidation or dissolution.
Further, each share of Class B Stock is convertible into one share of Common
Stock at the option of the holder. On December 31, 1991, the Company issued
382,629 shares of unregistered Class A Common Stock and $1,290,000 in cash in
exchange for all of the outstanding common stock of Surprise Oil Corporation.
The Common Stock issued in the merger was registered in a Form S-3
Registration Statement in 1992 and subsequently deregistered in January 1994.
Effective December 31, 1994, the Common Stock issued in the merger can be
sold by the shareholders without restriction.
Between February 28, 1992 and June 30, 1992, the Company operated an odd-
lot purchase program whereby the Company offered to purchase at market price
the outstanding shares from holders of less than 100 shares of the Company's
Common Stock. The buyback program purchased 10,211 shares from 522 odd-lot
shareholders of the Company. In July 1992, the Company initiated the
repurchase of up to $5 million of its Class A Common Stock. During 1992, a
total of 44,200 shares were purchased by the Company in the repurchase
program. No additional shares were purchased in 1993 or 1994 in the
repurchase program, which has been suspended.
In 1989, the Company adopted a Stockholder Rights Agreement and declared
a dividend distribution of one such Right for each outstanding share of
Capital Stock on December 22, 1989. Each share of Capital Stock issued after
December 22, 1989 includes one Right. The Rights expire on December 8, 1999.
See Note 6 of Notes to the Financial Statements.
The Company's Class A Common Stock is listed on the New York Stock
Exchange under the symbol "BRY". The Class B Stock is not publicly traded.
The market data and dividends for 1994 and 1993 are shown below:
Cash
Low High Dividends
1994
First Quarter $ 8 $ 9 7/8 $ .10
Second Quarter 8 10 3/4 .10
Third Quarter 8 7/8 10 1/4 .10
Fourth Quarter 9 11 3/8 .10
1993
First Quarter $ 11 5/8 $ 13 1/2 $ .15
Second Quarter 11 3/4 14 1/4 .15
Third Quarter 10 7/8 13 1/4 .15
Fourth Quarter 8 1/8 11 3/4 .10
The number of holders of record of the Company's Common Stock and Class
B Stock as of March 6, 1995 was approximately 1,030 and 1, respectively.
13
The Company's dividend policy is for the Board of Directors to declare
and pay dividends quarterly in March, June, September and December. The
dividend level may change as it is subject to Board approval, and such
approval is influenced by the price of crude oil, capital commitments and
satisfactory financial results. Effective December 1993, the quarterly
dividend level was reduced 33% from $.15 per share to $.10 per share.
Dividends declared on 4,415,000 shares of certain Common Stock are
restricted, whereby 37.5% of the dividends declared on these shares are paid
by the Company to the surviving member of a group of individuals, the B
group, for as long as this remaining member shall live.
14
15
Item 6. Selected Financial Data
The following table sets forth certain financial information with
respect to the Company and is qualified in its entirety by reference to the
historical financial statements and notes thereto of the Company included
in Item 8, "Financial Statements and Supplementary Data". The statement of
operations and balance sheet data included in this table for each of the
five years in the period ended December 31, 1994 was derived from the
audited financial statements and the accompanying notes to those
financial statements.
1994 1993 1992 1991 1990
Statement of Operations Data:
Operating revenues:
Sales of oil and gas $ 39,451 $ 42,843 $ 49,598 $ 43,439 $ 53,664
Blending, net 87 265 (1,262) (1,156) 420
Operating costs (excluding DD&A
and exploratory dry hole costs) 21,224 23,790 20,931 20,575 20,208
General and administrative expenses
(excluding DD&A) 5,118 5,999 5,511 3,840 6,834
Depletion, depreciation & amortization (DD&A) 7,270 9,983 8,123 5,373 4,217
Net income (loss) (1,129) 32 10,115 16,597 17,656
Net income (loss) per share (1) (.05) - .46 .77 .82
Cash dividends per share .40 .55 .60 .60 .56
Weighted average number of shares outstanding 21,932 21,926 21,915 21,539 21,505
Balance Sheet Data:
Working capital $ 38,273 $ 40,418 $ 50,642 $ 54,420 $ 64,057
Shareholders' equity 88,632 98,323 109,690 113,204 104,521
Total assets 118,254 135,159 140,140 145,594 130,554
Operating Data:
Capital expenditures 6,934 13,983 12,180 14,028 13,617
Average sales price per barrel of oil 11.61 11.43 12.83 12.44 16.75
Average production cost per BOE 6.28 6.35 5.43 6.03 6.34
Total Production:
Oil (Bbls) 3,250 3,617 3,683 3,336 3,114
Gas (Mcf) 793 771 1,029 466 439
Proved reserves:
Oil (Bbls) 75,996 72,078 72,434 71,054 65,187
Gas (Mcf) 6,530 5,476 10,003 11,772 20,264
(1) Less than $.01 per share in 1993.
15
16
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion provides information on the results of
operations for the three years ended December 31, 1994 and the financial
condition, liquidity and capital resources as of December 31, 1994, 1993 and
1992. The financial statements of Berry and the notes thereto contain
detailed information that should be referred to in conjunction with this
discussion.
The profitability of the Company's operations in any particular
accounting period will be directly related to the average realized prices of
oil and gas sold, the type and volume of oil and gas produced and the results
of development and exploration activities. The average realized prices of
oil and gas will fluctuate from one period to another due to world market
conditions and other factors. The California crude oil market is especially
sensitive since a significant portion of California's crude oil needs are met
by imports from Alaska. The aggregate amount of oil and gas produced may
fluctuate based on development and exploration of oil and gas reserves
pursuant to current reservoir management plans. Production rates, steam
costs and maintenance expenses are expected to be the principal influences on
operating costs. Accordingly, the results of operations of the Company may
fluctuate from period to period based on the foregoing principal factors,
among others.
Results of Operations
The Company incurred a net loss in 1994 of $1.1 million compared to net
income of $32,000 and $10.1 million in 1993 and 1992, respectively.
The loss in 1994 was due primarily to three factors. First, the Company
recorded $5.4 million of exploratory dryhole costs for certain properties
which the Company intends to abandon. Second, the Company recorded an
impairment writedown in June 1994 of $2.9 million related to its Poso Creek
and Kern Front properties and a producing well at Rincon. This impairment
was necessary due to low production, low estimated reserves and continued low
oil prices. Third, the Company recorded an additional charge of $1.3 million
in June 1994 related to the December 1993 Montalvo oil spill.
1994 1993 1992
Production - BOE Per Day 9,266 10,261 10,530
Average Sales Price - Per BOE $ 11.60 $ 11.43 $ 12.75
Operating Cost - Per BOE $ 6.28 $ 6.35 $ 5.43
Depreciation/Depletion - Per BOE $ 1.96 $ 2.47 $ 2.03
Operating income from producing operations in 1994 was $11.6 million, up
17% from $9.9 million in 1993, but down 45% from $21.2 million in 1992.
16
Production volumes declined 10% and 12% in 1994 from 1993 and 1992,
respectively, for a number of reasons. First, in December 1993 the PRC 735
lease in the Montalvo field was shut in due to an oil spill and was not
brought back on production until April 1994. Second, the Company shut in a
number of marginal wells and reduced the volume of steam injected in its
enhanced oil recovery operations where it was uneconomic to continue steaming
at the low price levels experienced in early 1994. Third, the PRC 1466 lease
(Rincon Island) was shut down in January to replace an oil shipping line.
This lease was not put back on production until July 1994.
The average sales price in 1994 of $11.60 was slightly higher than the
$11.43 received in 1993, but down 9% from the $12.75 received in 1992. Total
operating costs (excluding depletion, depreciation and amortization, "DD&A")
in 1994 were down 11% from 1993 and comparable to 1992. The cost of steaming
wells represents the largest component of operating costs. In 1994 the
Company reduced its steam injection in its homebase, Fairfield and McKittrick
properties a total of 24% and 15% from 1993 and 1992, respectively. The
Company injected 13,676 bbls/day of steam in 1994 compared to 18,005 bbls/day
in 1993 and 16,129 bbls/day in 1992.
DD&A of $1.96/BOE in 1994 was down 21% and 3% from 1993 and 1992,
respectively. DD&A in 1994 was lower than in 1993 due primarily to the lower
depreciable basis resulting from the impairment and dryhole charges recorded
in the second quarter of 1994. DD&A in 1993 was higher than in 1992 due to
the further development of certain of the Company's properties, which
resulted in a higher depreciable asset base, and higher depletion rates used
on certain of the Company's properties.
To provide additional marketing flexibility for the Company's heavy
crude oil production, the Company owns and operates a blending facility
located near its homebase properties which can process up to approximately
5,000 barrels per day of heavy crude oil. The Company's heavy crude oil can
be blended with lighter crude oil and natural gasolines to produce a blended
crude oil of approximately 27 degree API gravity. Blending allows the
Company to ship through common carrier pipelines and sell directly to
refiners in the Los Angeles basin, the San Francisco Bay Area and the Mid-
Continent and, at times, improve the profit margin on the sale of its heavy
crude oil.
The Company suspended the blending operations in December 1993 due to
the high cost of natural gasoline,the improved demand for the Company's heavy
crude oil, and the narrowing margin between the posted price of the blended
crude oil and the heavy crude oil. The Company sold its beginning crude oil
inventory, but did not blend in 1994. Blending operations will resume in the
future, if warranted by market conditions. After deducting fixed expenses
including labor, line rental, insurance, DD&A, etc., blending and trading
operations resulted in a net loss of $.1 million in 1994.
17
General
Interest income declined to $1.6 million in 1994 from $1.9 million and
$2.8 million in 1993 and 1992, respectively, due primarily to lower average
invested cash balances.
General and administrative expenses were $5.1 million in 1994, down 15%
and 7%, respectively, from $6 million and $5.5 million in 1993 and 1992. The
reduction in 1994 was due primarily to lower payroll related costs and other
benefits from the Company's 1994 cost reduction activities and lower legal
fees.
The Company's pre-tax losses incurred in 1994 and 1993 resulted in
effective tax benefits of 42% and 102% in 1994 and 1993, respectively,
compared to a 36% tax rate in 1992. The most important factor affecting
1994 and 1993 was the impact of certain tax benefits, primarily enhanced oil
recovery credits and percentage depletion as applied to the pre-tax losses.
Liquidity and Capital Resources
Working capital at December 31, 1994 was $38.3 million, down 5% from
$40.4 million at December 31, 1993 and 24% from $50.6 million at December 31,
1992. Working capital declined in 1994 because cash was used for capital
expenditures of $6.9 million and to pay dividends of $8.8 million ($.40 per
share).
Cash flow provided by operating activities of $14.6 million was up 33%
from $11.0 million in 1993, but down 34% from $22.2 million in 1992. Cash
flow was lower in 1994 and 1993 due to lower oil prices compared to 1992. In
addition, cash flow in 1994 was negatively impacted by the decline in
production in 1994 compared to 1993 and 1992. However, 1994 cash flow also
included $1.4 million in income tax refunds with no comparable amounts in
1993 and 1992.
The Company has a $1 million Revolving Credit and Term Loan Agreement
with a major California bank. There are no outstanding borrowings under this
line, and the Company believes it can borrow additional funds should the need
arise for future acquisitions or other corporate purposes.
One of the Company's objectives each year is to replace the oil and gas
produced through acquisitions, exploration or further development of the
Company's existing properties. At December 31, 1994, the total proved
reserves were 77.1 million BOE, up from 73.0 million BOE at December 31, 1993
and 74.1 million BOE at December 31, 1992. Although the Company produced 3.4
million BOE in 1994, total proved reserves increased 6% from the beginning of
the year primarily due to higher oil prices, the acquisition of 1.2 million
barrels, and the further development of the Company's properties.
Environmental regulations have an increasing impact upon the Company's
operations. The Company estimates that it spends approximately $.3 million
on technical and managerial time annually to comply with environmental
regulations. In addition, the Company spent approximately $1.1 million for
capital projects, repairs and maintenance, and permits related to
environmental control facilities in 1994 and anticipates spending
approximately $.8 million for similar expenditures in 1995, with additional
expenditures required in future years.
18
The Company's 1995 capital budget is $9.3 million, up from $5.8 million
in 1994. Of the 1995 budget, 59% relates to the development of the Midway
Sunset properties, 24% for development of the Rincon properties, 9% for
exploration and the remaining 8% for the development of other properties and
general projects.
The Company continues to be an advocate for lifting the federal ban on
Alaska North Slope (ANS) export so the Company and other West Coast producers
can receive a fair market price for their crude oil. Management believes the
likelihood of passage of legislation lifting the ban has been greatly
improved due to the change of members in both the U.S. Senate and House of
Representatives and their approach to free trade issues. If such legislation
were to become law, the Company could experience a noticeable improvement in
the price the Company receives for its crude oil. While the actual effect is
uncertain and governed by numerous factors outside the Company's control,
Management estimates the increase to be from $.75 to $1.50 per barrel.
Impact of Inflation
The impact of inflation on the Company has not been significant in
recent years because of the relatively low rates of inflation experienced in
the United States.
19
Item 8. Financial Statements and Supplementary Data
BERRY PETROLEUM COMPANY
Index to Financial Statements and
Supplementary Data
Page
Report of Coopers & Lybrand L.L.P., Independent Accountants 21
Balance Sheets at December 31, 1994 and 1993 22
Statements of Operations for the
Years Ended December 31, 1994, 1993 and 1992 23
Statements of Shareholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992 24
Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992 25
Notes to the Financial Statements 27
Supplemental Information About Oil & Gas Producing Activities 40
Financial statement schedules have been omitted since they are either not
required, are not applicable, or the required information is shown in the
financial statements and related notes.
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Berry Petroleum Company
We have audited the accompanying balance sheets of Berry Petroleum Company as
of December 31, 1994 and 1993, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Berry Petroleum Company as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
/s/ Coopers & Lybrand L.L.P.
February 22, 1995
Los Angeles, California
21
BERRY PETROLEUM COMPANY
Balance Sheets
December 31, 1994 and 1993
(In Thousands Except Share Information)
1994 1993
ASSETS
Current assets:
Cash and cash equivalents $ 7,466 $ 9,457
Short-term investments available for sale 27,617 26,967
Accounts receivable 9,471 16,089
Deferred income taxes 3,315 3,154
Prepaid expenses and other 1,073 1,872
_________ _________
Total current assets 48,942 57,539
Oil and gas properties (successful
efforts basis), buildings and equipment, net 66,915 75,513
Other assets 2,397 2,107
_________ _________
$ 118,254 $ 135,159
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,032 $ 12,397
Accrued liabilities - oil spill 2,946 2,753
Accrued liabilities - other 1,691 1,971
_________ _________
Total current liabilities 10,669 17,121
Deferred income taxes 18,953 19,715
_________ _________
29,622 36,836
_________ _________
Commitments and contingencies (Notes 7, 8 and 11)
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;
21,033,169 shares issued and outstanding 210 210
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; 52,852 52,641
Retained earnings 35,561 45,463
_________ _________
Total shareholders' equity 88,632 98,323
_________ _________
$ 118,254 $ 135,159
========= =========
The accompanying notes are an integral part of these financial statements.
22
BERRY PETROLEUM COMPANY
Statements of Operations
Years ended December 31, 1994, 1993 and 1992
(In Thousands Except Per Share Data)
1994 1993 1992
Revenues:
Sales of oil and gas $ 39,451 $ 42,843 $ 49,598
Blending operations, net 87 265 (1,262)
Interest 1,616 1,893 2,812
Gain (loss) on sale of assets 113 (1,100) -
Other income, net 68 195 314
________ ________ ________
41,335 44,096 51,462
________ ________ ________
Expenses:
Operating costs 21,224 23,790 20,931
Depreciation, depletion & amortization 7,270 9,983 8,123
Impairment of properties 2,915 2,911 -
Oil spill costs 1,344 2,004 -
Exploratory dry hole costs 5,414 788 916
General and administrative 5,118 5,999 5,511
Interest - - 107
________ ________ ________
43,285 45,475 35,588
________ ________ ________
Income (loss) before income taxes (1,950) (1,379) 15,874
Provision (benefit) for income taxes (821) (1,411) 5,759
________ ________ ________
Net income (loss) $ (1,129) $ 32 $ 10,115
======== ======== ========
Net income (loss) per share $ (.05) $ - $ .46
======== ======== ========
Weighted average number of
shares of capital stock used
to calculate earnings per share 21,932 21,926 21,915
======== ======== ========
The accompanying notes are an integral part of these financial statements.
23
BERRY PETROLEUM COMPANY
Statements of Shareholders' Equity
Years Ended December 31, 1994, 1993 and 1992
(In Thousands Except Per Share Data)
Capital in
Capital Stock Excess of Retained Shareholders'
Class A Class B Par Value Earnings Equity
Balances at
January 1, 1992 $ 210 $ 9 $ 52,458 $ 60,527 $113,204
Stock retired - - (653) - (653)
Stock options
exercised - - 172 - 172
Cash dividends
declared -
$.60 per share - - - (13,148) (13,148)
Net income - - - 10,115 10,115
_______ _______ ________ ________ ________
Balances at
December 31, 1992 210 9 51,977 57,494 109,690
Stock options
exercised - - 664 - 664
Cash dividends
declared -
$.55 per share - - - (12,063) (12,063)
Net income - - - 32 32
_______ _______ ________ ________ ________
Balances at
December 31, 1993 210 9 52,641 45,463 98,323
Stock options - - 211 - 211
Cash dividends
declared -
$.40 per share - - - (8,773) (8,773)
Net loss - - - (1,129) (1,129)
________ _______ ________ ________ ________
Balances at
December 31, 1994 $ 210 $ 9 $ 52,852 $ 35,561 $ 88,632
======== ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
24
BERRY PETROLEUM COMPANY
Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
1994 1993 1992
Cash flows from operating activities:
Net income (loss) $ (1,129) $ 32 $ 10,115
Depletion, depreciation and amortization 7,270 9,983 8,123
(Gain) loss on sale of assets (113) 1,100 -
Exploratory dryhole costs 5,090 170 174
Impairment of properties 2,915 2,911 -
Increase in deferred income tax liability (762) 1,536 3,641
Other, net 504 (377) (74)
________ ________ ________
Net working capital provided
by operating activities 13,775 15,355 21,979
(Increase) decrease in current assets other
than cash, cash equivalents and short-term
investments 7,256 (9,248) 5,771
Increase (decrease) in current liabilities (6,452) 4,850 (5,581)
________ ________ ________
Net cash provided by operating activities 14,579 10,957 22,169
________ ________ ________
Cash flows from investing activities:
Capital expenditures (6,934) (13,983) (12,180)
Purchase of short-term investments (30,524) (15,560) (38,330)
Maturities of short-term investments 29,874 30,290 41,018
Other, net (213) (197) 118
________ ________ ________
Net cash used in investing activities $ (7,797) $ 550 $ (9,374)
________ ________ ________
The accompanying notes are an integral part of these financial statements.
25
BERRY PETROLEUM COMPANY
Statements of Cash Flows, Continued
Years Ended December 31, 1994, 1993 and 1992
(In Thousands)
1994 1993 1992
Cash flows from financing activities:
Dividends paid $ (8,773) $(12,063) $(13,148)
Proceeds from exercise of stock options - 664 172
Purchase and retirement of Company's
common stock - - (653)
Other, net - - (66)
________ ________ ________
Net cash used in financing activities (8,773) (11,399) (13,695)
________ ________ ________
Net increase (decrease) in cash and
cash equivalents (1,991) 108 (900)
Cash and cash equivalents at beginning
of year 9,457 9,349 10,249
________ ________ ________
Cash and cash equivalents at end
of year $ 7,466 $ 9,457 $ 9,349
======== ======== ========
Supplemental disclosures of cash
flow information:
Interest paid $ 5 $ 8 $ 107
======== ======== ========
Income taxes paid $ 484 $ 765 $ 3,230
======== ======== ========
The accompanying notes are an integral part of these financial statements.
26
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
1. Summary of significant accounting policies
Cash and cash equivalents
Cash equivalents consist principally of commercial paper and money
market funds. The Company considers all highly liquid investments purchased
with a remaining maturity of three months or less to be cash equivalents.
Cash equivalents of $5,979,000 and $6,169,000 at December 31, 1994 and 1993,
respectively, are stated at cost, which approximates market.
Short-term investments
All short-term investments are classified as available for sale. Short-
term investments consist principally of United States treasury notes,
corporate notes, state and local municipal bonds and auction market preferred
stock with remaining maturities of more than three months at date of
acquisition. Such investments are stated at cost, which approximates market.
The Company utilizes specific identification in computing realized gains and
losses on investments sold. For the three years ended December 31, 1994,
realized and unrealized gains and losses were insignificant to the financial
statements. United States treasury notes with an aggregate market value of
$4,500,000 are pledged as collateral to the California State Lands Commission
(SLC) for the estimated future dismantlement, restoration and abandonment of
the Company's Rincon leases, and $550,000 of United States treasury notes are
pledged as collateral to the SLC as a performance bond on the Company's
Montalvo properties.
Oil and gas properties, buildings and equipment
The Company accounts for its oil and gas exploration and development
costs using the successful efforts method. Under this method, costs to
acquire mineral interests in oil and gas properties, to drill and complete
development wells and drill and complete exploratory wells that find proved
reserves are capitalized. Exploratory dryhole costs and other exploratory
costs, including geological and geophysical costs, are charged to expense
when incurred. The costs of carrying and retaining unproved properties are
also expensed when incurred. Depletion of oil and gas producing properties
is computed using the units-of-production method. The estimated costs, net
of salvage value, of plugging and abandoning oil and gas wells and related
facilities are accrued using the units-of-production method and are taken
into account in determining depletion, depreciation and amortization expense.
Buildings and equipment are recorded at cost. Depreciation is provided
on a straight-line basis over estimated useful lives ranging from 5 to 30
years for buildings and improvements and 3 to 10 years for machinery and
equipment. When assets are sold, the applicable costs and accumulated
depreciation are removed from the accounts and any gain or loss is included
in income. Expenditures for maintenance and repairs are expensed as
incurred.
27
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
1. Summary of significant accounting policies (cont'd)
The Company evaluates its oil and gas properties for impairment on a
field by field basis. If it is determined through an internal engineering
study that the net realizable value of a producing property is lower than its
net book value, an impairment allowance will be recorded for the difference.
In performing these studies, the Company uses standard industry techniques
and considers numerous factors, including but not limited to: production
history, the Company's perception of future crude oil and natural gas prices
and lease operating expenses, estimated capital expenditures, and the
experience of the Company with the specific operations in the particular
field or geological area.
Income Taxes
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". The provision for income taxes is based on
pretax financial accounting income. Deferred tax assets and liabilities are
recognized for the future expected tax consequences of temporary differences
between income tax and financial reporting and principally relate to
differences in the tax bases of assets and liabilities and their reported
amounts, using enacted tax rates in effect for the year in which differences
are expected to reverse. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized.
Earnings per share
Earnings per share is computed by dividing net income by the weighted
average number of capital shares and dilutive common stock equivalents, if
any, outstanding during the year.
Postretirement and post employment benefits
The Company adopted SFAS No. 106, "Employers' Accounting for Post-
retirement Benefits Other Than Pensions" using the immediate recognition
method and SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
in 1993. The impact of such adoption on the Company's financial statements
was immaterial.
Reclassifications
Certain reclassifications have been made to the 1993 and 1992 financial
statements to conform with the 1994 presentation.
28
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
2. Fair value of financial instruments
Financial instruments consist of cash and short-term investments, whose
carrying amounts are not materially different from their fair values because
of the short maturity of those instruments. The Company's available-for-sale
short-term investments at December 31, 1994 consist primarily of United
States treasury notes (62%), corporate notes (27%), and municipal bonds and
auction market preferred stock (11%). Of the short-term investments at
December 31, 1994, 47% mature in one year or less and 53% mature in 13 to 24
months. The Company has no involvement with derivative financial
instruments.
3. Concentration of Credit Risks
The Company sells oil, gas and natural gas liquids to pipelines and
refineries. Credit is extended based on an evaluation of the customer's
financial condition. For the three years ended December 31, 1994 the Company
has experienced no credit losses on the sale of oil, gas and natural gas
liquids.
The Company places its temporary cash investments with high credit
quality financial institutions and limits the amount of credit exposure to
any one financial institution. For the three years ended December 31, 1994,
the Company has not incurred losses related to these investments.
The following summarizes the accounts receivable balances at December
31, 1994 and sales activity with significant customers for each of the years
ended December 31, 1994, 1993 and 1992 (in thousands):
Accounts Sales
Receivable For the Year Ended December 31,
Customer December 31, 1994 1994 1993 1992
A $ 710 $ 16,027 $ 16,747 $ 4,286
B 1,040 11,319 11,686 20,136
C - - - 6,561
D - - - 4,966
________ ________ ________ ________
$ 1,750 $ 27,346 $ 28,433 $ 35,949
======== ======== ======== ========
The loss of any of these customers could have a temporarily adverse
impact on the Company's revenues.
29
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
4. Oil and gas properties, buildings and equipment
Oil and gas properties, buildings and equipment consist of the following
at December 31 (in thousands):
1994 1993
Oil and gas:
Proved properties:
Producing properties, including
intangible drilling costs $ 56,216 $ 59,978
Lease and well equipment 67,232 66,925
Unproved properties 383 464
_________ _________
123,831 127,367
Less accumulated depletion,
depreciation and amortization 59,909 55,221
_________ _________
63,922 72,146
_________ _________
Commercial and other:
Land 151 151
Buildings and improvements 3,806 3,785
Machinery and equipment 3,969 3,784
_________ _________
7,926 7,720
Less accumulation depreciation 4,933 4,353
_________ _________
2,993 3,367
_________ _________
$ 66,915 $ 75,513
========= =========
The following sets forth costs incurred for oil and gas property
acquisition, exploration and development activities, whether capitalized or
expensed (in thousands):
1994 1993 1992
Acquisition of properties $ 1,023 $ - $ 2,311
Exploration 1,701 3,336 1,470
Development 4,678 10,958 9,286
________ ________ ________
$ 7,402 $ 14,294 $ 13,067
======== ======== ========
30
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
4. Oil and gas properties, buildings and equipment (cont'd)
Results of operations from oil and gas producing and exploration activities
The results of operations from oil and gas producing and exploration
activities (excluding blending operations, corporate overhead and interest
costs) for the three years ended December 31 are as follows (in thousands):
1994 1993 1992
Sales to unaffiliated parties $ 39,451 $ 42,843 $ 49,598
Production costs (21,224) (23,790) (20,931)
Exploration expenses (5,414) (788) (916)
Depletion, depreciation and
amortization (6,627) (9,143) (7,429)
________ ________ ________
6,186 9,122 20,322
Income tax expenses (1,723) (2,225) (7,373)
________ ________ ________
Results of operations from
producing and exploration activities $ 4,463 $ 6,897 $ 12,949
======== ======== ========
In 1994, the Company recorded an impairment writedown of $2.9 million
related to its Poso Creek and Kern Front properties and a producing well at
Rincon. Similarly, in 1993 the Company recorded an impairment writedown of
$2.9 million related to certain properties in East Texas which were
subsequently transferred to another company in December 1994 at no gain or
loss to the Company.
5. Debt obligations
The Company has a Revolving Credit and Term Loan Agreement (Agreement)
with a major California bank. In June 1994 the Company decreased the amount
available under this Agreement from $5,000,000 to $1,000,000. The funds from
this Agreement can be used for the acquisition of oil and gas properties,
other investments, letters of credit and general corporate purposes. At
December 31, 1994, the Company had no outstanding borrowings or letters of
credit under the Agreement.
6. Shareholders' equity
Shares of Class A Common Stock (Common Stock) and Class B Stock,
referred to collectively as the "Capital Stock" are each entitled to one vote
and 95% of one vote, respectively. Each share of Class B Stock is entitled
to a $1.00 per share preference in the event of liquidation or dissolution.
Further, each share of Class B Stock is convertible into one share of Common
Stock at the option of the holder.
31
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
6. Shareholders equity (cont'd)
In December 1989, the Company adopted a Stockholder Rights Agreement and
declared a dividend distribution of one Right for each outstanding share of
Capital Stock. Each Right, when exercisable, entitles the holder to purchase
one one-hundredth of a share of a Series A Junior Participating Preferred
Stock, or in certain cases other securities, for $38.00. The exercise price
and number of shares issuable are subject to adjustment to prevent dilution.
The Rights would become exercisable, unless earlier redeemed by the Company,
10 days following a public announcement that a person or group has acquired,
or obtained the right to acquire, 20% or more of the outstanding shares of
Common Stock or, 10 business days following the commencement of a tender or
exchange offer for such outstanding shares which would result in such person
or group acquiring 20% or more of the outstanding shares of Common Stock,
either event occurring without the prior consent of the Company.
The Rights will expire in December 1999 or may be redeemed by the
Company at 1 cent per Right prior to that date unless they have theretofore
become exercisable. The Rights do not have voting or dividend rights, and
until they become exercisable, have no diluting effect on the earnings of the
Company. 250,000 shares of the Company's Preferred Stock have been
designated Series A Junior Participating Preferred Stock and reserved for
issuance upon exercise of the Rights.
In July 1992, the Company authorized the repurchase of up to $5 million
of its Class A Common Stock. During 1992, a total of 44,200 shares were
purchased by the Company. No additional shares were purchased in 1993 or
1994. On February 28, 1992, the Company initiated an odd-lot purchase
program whereby the Company offered to purchase the outstanding shares from
holders of less than 100 shares of the Company's Common Stock at market
price. The odd-lot program, which ended in June 1992, resulted in the
purchase of 10,211 shares from 522 odd-lot shareholders of the Company.
During 1994, 1993 and 1992, the Company issued -0-, 44,536, and 14,028
shares, respectively, through its Nonstatutory Stock Option Plan.
Dividends declared on 4,415,000 shares of certain Common Stock are
restricted, whereby 37.5% of the dividends declared on these shares are paid
by the Company to the surviving member of a group of individuals, the B
Group, as long as this remaining member shall live.
32
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
7. Transactions with affiliates
University Cogeneration Partners, Ltd. 1985-1
The Company increased its investment in University Cogeneration
Partners, Ltd. 1985-1, a limited partnership (the Cogeneration Partnership)
to an approximate 45% limited partner interest at December 31, 1994. The
Cogeneration Partnership was formed in 1985 to finance the construction of a
cogeneration plant on the Company's properties. The Company also committed
to purchase the steam generated by the plant and supply the natural gas to
fuel the plant. At December 31, 1994 and 1993, the receivable due from the
Cogeneration Partnership for natural gas purchases, net of the steam sales to
the Company, was $820,000 and $997,000, respectively. The investment of
$1,898,000 is accounted for at cost. For the years ended December 31, 1994,
1993 and 1992, the Company recognized as revenue distributions from the
Cogeneration Partnership of $0, $72,085 and $146,000, respectively.
The Company has committed to purchase the steam generated by the
Cogeneration Partnership through 1996 at a target cost which compares
favorably to the alternative cost of burning crude oil. Amounts paid by the
Company for the steam in 1994, 1993 and 1992 were $4.6 million, $4.3 million
and $4.9 million, respectively. To provide water to the cogeneration plant,
the Company committed to purchase a minimum of 18,000 barrels of water per
day in 1992 through 1994 and 6,333 barrels per day in 1995 from a water
district at a cost of $.045 per barrel. Amounts paid by the Company for this
water in 1994, 1993 and 1992 were $.4 million, $.3 million and $.3 million,
respectively.
8. Income taxes
In the first quarter of 1992, the Company adopted SFAS No. 109. The
Company previously followed SFAS No. 96. There was no current or cumulative
effect of adoption on continuing operations.
The provision (benefit) for income taxes consists of the following (in
thousands):
1994 1993 1992
Current:
Federal $ 158 $ (873) $ 2,497
State (56) (74) 1,052
________ ________ ________
102 (947) 3,549
Deferred:
Federal (1,077) (369) 1,664
State 154 (95) 546
________ ________ ________
(923) (464) 2,210
________ ________ ________
$ (821) $ (1,411) $ 5,759
======== ======== ========
33
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
8. Income taxes (cont'd)
The current deferred tax assets and liabilities are offset and presented
as a single amount in the financial statements. Similarly, the noncurrent
deferred tax assets and liabilities are presented in the same manner. The
following table summarizes the components of the total deferred tax assets
and liabilities before such financial statement offsets. The components of
the net deferred tax liability are as follows (in thousands):
Dec 31, Dec 31,
1994 1993
Federal benefit of state taxes $ 1,334 $ 1,213
Differences between financial reporting
and tax bases of assets acquired 3,226 3,256
Net operating loss carryforwards 1,470 2,057
Credit/deduction carryforwards 3,037 1,935
Other, net 712 1,073
Valuation allowance (3,089) (3,089)
_________ _________
Total deferred tax asset 6,690 6,445
_________ _________
Depreciation and depletion (16,567) (18,038)
State taxes, net (3,795) (3,641)
Other, net (1,966) (1,327)
_________ _________
Total deferred tax liability (22,328) (23,006)
_________ _________
Net deferred tax liability $ (15,638) $ (16,561)
========= =========
34
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
8. Income taxes (cont'd)
A reconciliation of the Company's provision for income taxes and the
amount computed by applying the U.S. statutory federal income tax rate of 34%
to pretax income is as follows (in thousands):
1994 1993 1992
Tax computed at 34% $ (663) $ (469) $ 5,400
Increase (decrease) in taxes resulting
from:
Asset acquisition/sale differences 394 637 (45)
Nontaxable income (171) (323) (154)
Percentage depletion (290) (286) (290)
State taxes, net 98 (113) 1,203
Enhanced oil recovery, nonconventional
fuel tax and alternative minimum
tax credits (406) (1,199) (506)
Other, net 217 342 151
________ ________ ________
$ (821) $ (1,411) $ 5,759
======== ======== ========
Effective Tax Rate (42.1)% (102.3)% 36.3%
======== ======== ========
The Company has $4.3 million of loss carryforwards which may be utilized
in future years to reduce the Company's federal income taxes. The expiration
dates and amounts are as follows; 1999 - $.4 million, 2000 - $3.9 million.
The Company also has approximately $2.5 million of various tax credits and
$1.6 million of statutory depletion carryforwards available to reduce future
federal income taxes. If not fully utilized, certain enhanced oil recovery
tax credits of $1.4 million and $.6 million will expire in the years 2008 and
2009, respectively. The other credits may be carried forward indefinitely.
For the years ended December 31, 1987 through 1989, the Internal Revenue
Service (IRS) has proposed various adjustments with which the Company
disagrees. One issue was settled and three issues went to trial in U.S. Tax
Court in April 1993. These issues involved disputes related to 1) a
deduction upon expiration of a purchase option, 2) deductibility versus
capitalization of litigation costs defending the Company's fiduciary
responsibility, and 3) the appropriate IRC 382 limitation associated with a
change of ownership upon the stock purchase of an existing corporation. In
1991, the Company paid under protest the proposed assessment of $1.1 million
relating to these issues. The Company is awaiting the outcome of this case,
which may also impact future years with respect to issues two and three
above. The Company believes that adequate accruals have been provided for
all years.
35
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
9. Stock option and stock appreciation rights plans
The Company has a 1987 Nonstatutory Stock Option Plan (the NSO Plan) and
a 1987 Stock Appreciation Rights Plan (the SAR Plan). The NSO Plan provides
for the granting of options (Options) to purchase up to an aggregate of
700,000 shares of Common Stock. The SAR Plan authorizes a maximum of 700,000
shares of Common Stock which may be subject to stock appreciation rights
(SARs). Holders of SARs have the right upon exercise to receive a payment,
payable at the discretion of the Compensation Committee in cash or in shares
of Common Stock, equal to the amount by which the market price exceeds the
Base Price (as defined) with respect to the shares subject to such SARs on
the date of exercise. The Base Price with respect to shares subject to SARs
still available for grant shall in no case be less than 80% of the fair
market value of such shares on the date of grant. All Options and SARs are
granted at the discretion of the Board of Directors. The term of each Option
or SAR may not exceed ten years from the date of grant.
On December 2, 1994, the Board of Directors of the Company adopted,
subject to shareholder approval, the Berry Petroleum Company 1994 Stock
Option Plan (the 1994 Plan). The 1994 Plan provides for the granting of
stock options to purchase up to an aggregate of 1,000,000 shares of Common
Stock. All Options, with the exception of the formula grants to non-employee
directors, will be granted at the discretion of the Compensation Committee of
the Board of Directors. The term of each Option may not exceed ten years
from the date the Option is granted.
Included in general and administrative expenses is $0 in 1994, $(18,000)
in 1993 and $.2 million in 1992 for compensation expense related to the
Options and SARs granted to date. The credit in 1993 was due to the decline
in the Company's stock price during that year. Because the options issued on
December 2, 1994 were all issued at current market value, there is no
accounting charge to the Company in connection with the current Option
grants. At December 31, 1994 and 1993, the accrued liabilities for the NSO
and SAR Plans are $.2 million and $.4 million, respectively.
36
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
9. Stock option and stock appreciation rights plans (cont'd)
1994 1993
Options SARs Options SARs
Balance outstanding,
January 1 142,941 69,020 413,902 213,300
Granted 333,000 - - -
Exercised - (5,380) (270,961) (142,980)
Canceled/expired (77,800) (23,900) - (1,300)
________ ________ ________ ________
Balance outstanding,
December 31 398,141 39,740 142,941 69,020
======== ======== ======== ========
Balance exercisable
at December 31 65,141 39,740 142,941 57,800
======== ======== ======== ========
Available for future
grant 860,800 - 116,000 283,960
======== ======== ======== ========
Exercise Price $ 9.80 $ 9.80 $ 9.80 $ 9.80
to 10.75 to 10.00 to 10.00 to 10.00
======== ======== ======== ========
Market price at date $ 10.50 $ 11.63
of exercise $ - to 10.875 $ 13.13 to 13.13
======== ======== ======== ========
During 1992 41,160 Options and 8,160 SARs were exercised at an exercise
price ranging from $9.80 to $10.00 and a market price ranging from $11.13 to
$12.88.
On December 2, 1994, 300,000 Options were issued to certain key employees
at an exercise price of $10.75 per share which was the closing market price
of the Company's Class A Common Stock on the New York Stock Exchange on that
date. The Options vest 25% per year for four years. The 1994 Plan also
allows for Option grants to the Board of Directors under a formula plan
whereby all non-employee directors are eligible to receive Options. On
December 2, 1994, an aggregate of 33,000 Options (3,000 Options each) were
issued to the eleven non-employee directors at an exercise price of $10.75
per share. The Options granted to the non-employee directors vest
immediately. The formula plan provides for the annual grant of 3,000 Options
to each non-employee director holding office on each December 2nd at the fair
market value on the date of grant.
The Options granted on December 2, 1994 utilized all 193,800 remaining
Options from the 1987 Nonstatutory Stock Option Plan and 139,000 shares from
the 1994 Plan. The Board of Directors adopted a resolution to terminate the
1987 Stock Appreciation Rights Plan without utilizing the 307,860 SARs which
were still available for issuance. The 39,740 currently outstanding SARs are
still available for exercise under the original terms of issuance.
37
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
10. Retirement Plan
The Company sponsors a defined contribution retirement or thrift plan
(401(k) Plan) to assist all employees in providing for retirement or other
future financial needs. Employee contributions (up to 6% of their earnings)
are matched by the Company dollar for dollar. Effective November 1, 1992,
the 401(k) Plan was modified to provide for increased Company matching of
employee contributions whereby Company matching contributions will range from
6% to 9% of eligible participating employee earnings, if certain financial
results are achieved. For 1994, 1993 and 1992, all matching contributions
were at the 6% rate. The Company's contributions to the 401(k) Plan were $.2
million in 1994, $.3 million in 1993 and $.3 million in 1992.
11. Oil Spill
On December 25, 1993, the Company experienced a crude oil spill on its
PRC 735 State lease located in the West Montalvo field in Ventura County,
California. The spill required clean-up of the area directly around the pipe
as well as the nearby ocean and an agricultural runoff pond. Working closely
with the United States Coast Guard, the California Department of Fish and
Game, and other regulatory agencies, the Company substantially completed the
clean-up of the spill in January 1994. Certain governmental authorities,
including the United States Coast Guard and the California Department of Fish
and Game, are currently investigating the circumstances surrounding the
spill. The Company negotiated a resolution of the state criminal
investigation for a total of $600,000 in August 1994. Investigations
continue regarding potential civil and federal criminal penalties, if any.
Management believes the Company has an adequate amount of insurance
coverage for the majority of the costs associated with the spill and has
received preliminary coverage letters from its insurance carriers tendering
coverage, subject to certain reservations. Definitive determination will not
become known until some time in the future. The Company estimates the total
cost of the spill, net of insurance reimbursement, to be a minimum of $3.3
million and a maximum of $5.1 million. Since no other amount in the range is
more likely to occur, the minimum amount was expensed by the Company ($1.3
million in the second quarter of 1994 and $2 million in 1993). The costs
incurred and estimated to be incurred in connection with the spill not yet
paid by the Company are included in accounts payable and accrued liabilities
at December 31, 1994, and the probable remaining minimum insurance
reimbursement is included in accounts receivable. As of December 31, 1994,
the Company had received approximately $7.2 million under its insurance
coverage as reimbursement for costs incurred and paid by the Company
associated with the spill.
38
BERRY PETROLEUM COMPANY
Notes to the Financial Statements
12. Quarterly financial data (unaudited)
The following is a tabulation of unaudited quarterly operating results
for 1994 and 1993 (in thousands). Certain reclassification have been made to
the 1993 columns to conform with the 1994 presentation.
Operating Gross Net Income Net Income (Loss)
1994 Revenues Profit (Loss) Per Share
First Quarter $ 7,205 $ (18) $ (598) $ (.03)
Second Quarter 9,827 (5,916)(A) (4,665) (.21)
Third Quarter 11,640 4,602 2,609 .12
Fourth Quarter 10,866 3,141 1,525 .07
_________ _________ _________ _________
$ 39,538 $ 1,809 $ (1,129) $ (.05)
========= ========= ========= =========
1993
First Quarter $ 10,980 $ 2,361 $ 753 $ .03
Second Quarter 12,428 2,744 344 .02
Third Quarter 11,016 14 (B) (538) (.02)
Fourth Quarter 8,684 (973)(C) (527) (.03)
_________ _________ _________ _________
$ 43,108 $ 4,146 $ 32 $ -
========= ========= ========= =========
(A) Includes property impairment of $2.9 million and additional oil spill
costs accrual of $1.3 million.
(B) Includes property impairment of $2.9 million.
(C) Includes accrual of oil spill costs of $2.0 million.
39
BERRY PETROLEUM COMPANY
Supplemental information about oil & gas producing activities (unaudited)
The following estimates of proved oil and gas reserves, both developed
and undeveloped, represent interests owned by the Company located solely
within the United States. Proved reserves represent estimated quantities of
crude oil and natural gas which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved
developed oil and gas reserves are the quantities expected to be recovered
through existing wells with existing equipment and operating methods. Proved
undeveloped oil and gas reserves are reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells for
which relatively major expenditures are required for completion.
Disclosures of oil and gas reserves which follow are based on estimates
prepared primarily by independent engineering consultants for the three years
ended December 31, 1994. Such estimates are subject to numerous
uncertainties inherent in the estimation of quantities of proved reserves and
in the projection of future rates of production and the timing of development
expenditures. These estimates do not include probable or possible reserves.
Changes in estimated reserve quantities
The net interest in estimated quantities of proved developed and
undeveloped reserves of crude oil and natural gas at December 31, 1994, 1993
and 1992, and changes in such quantities during each of the years then ended
were as follows (in thousands):
1994 1993 1992
Oil Gas Oil Gas Oil Gas
Mbbls Mmcf Mbbls Mmcf Mbbls Mmcf
Proved developed
and undeveloped
reserves:
Beginning of year 72,078 5,476 72,434 10,003 71,054 11,772
Revision of pre-
vious estimates 6,002 1,847 3,203 (5,735) 5,058 (1,943)
Production (3,250) (793) (3,617) (771) (3,683) (1,029)
Discoveries - - 58 1,979 - 109
Purchase of reserves
in place 1,166 - - - 5 1,094
_______ _______ _______ _______ _______ _______
End of year 75,996 6,530 72,078 5,476 72,434 10,003
======= ======= ======= ======= ======= =======
Proved developed
reserves:
Beginning of year 62,261 4,810 65,516 6,797 58,514 7,359
======= ======= ======= ======= ======= =======
End of year 62,718 4,727 62,261 4,810 65,516 6,797
======= ======= ======= ======= ======= =======
40
BERRY PETROLEUM COMPANY
Supplemental information about oil & gas producing activities (unaudited)
(cont'd)
Standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves (in thousands):
The standardized measure has been prepared assuming year-end sales
prices adjusted for fixed and determinable contractual price changes, year-
end costs and statutory income tax rates previously legislated, and a ten
percent annual discount rate. No deduction has been made for depletion,
depreciation or any indirect costs such as general corporate overhead or
interest expense.
1994 1993 1992
Future cash inflows $ 960,412 $ 607,137 $ 874,966
Future production and development costs 317,735 473,903 486,751
Future income tax expenses 213,225 37,332 139,445
_________ _________ _________
Future net cash flows 429,452 95,902 248,770
10% annual discount for estimated timing
of cash flows 248,499 59,276 147,716
_________ _________ _________
Standardized measure of discounted future
net cash flows $ 180,953 $ 36,626 $ 101,054
========= ========= =========
Average sales prices at December 31:
Oil ($/bbl) $ 12.49 $ 8.25 $ 11.85
Gas ($/Mcf) 1.78 2.18 1.53
41
BERRY PETROLEUM COMPANY
Supplemental information about oil & gas producing activities
(unaudited)(cont'd)
Changes in standardized measure of discounted future net cash flows from
proved oil and gas reserves (in thousands):
1994 1993 1992
Standardized measure - beginning of year $ 36,626 $101,054 $101,149
________ ________ ________
Sales of oil and gas produced,
net of production costs (18,227) (18,697) (27,282)
Revisions to estimates of proved reserves:
Net changes in sales prices and
production costs 194,099 (110,914) 5,000
Revisions of previous quantity estimates 24,315 2,261 12,214
Change in estimated future development costs (5,470) 6,751 (10,636)
Extensions, discoveries and improved recovery
less related costs - 2,929 -
Purchases of reserves in place 3,815 - 328
Development costs incurred during the period 4,678 10,958 9,285
Accretion of discount 4,602 15,555 15,450
Income taxes (68,416) 36,920 (2,064)
Other 4,931 (10,191) (2,390)
________ ________ ________
Net increase (decrease) 144,327 (64,428) (95)
________ ________ ________
Standardized measure - end of year $180,953 $ 36,626 $101,054
======== ======== ========
42
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The information called for by Item 10 is incorporated by reference from
information under the caption "Election of Directors" in the Company's
definitive proxy statement to be filed pursuant to Regulation 14A no later
than 120 days after the close of its fiscal year. The information on
Executive Officers is contained in Part I of this Form 10-K.
Item 11. Executive Compensation
The information called for by Item 11 is incorporated by reference from
information under the caption "Executive Compensation" in the Company's
definitive proxy statement to be filed pursuant to Regulation 14A no later
than 120 days after the close of its fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is incorporated by reference from
information under the caption "Voting Securities" and "Principal Shareholders
and Ownership by Management" in the Company's definitive proxy statement to
be filed pursuant to Regulation 14A no later than 120 days after the close of
its fiscal year.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons beneficially owning
greater than ten percent of the outstanding Shares, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Based solely on a review of the copies of such forms furnished
to the Company, or written representations that no Form 5 was required, the
Company believes that all Section 16(a) filing requirements were complied
with, except that one report for one transaction was filed late by Mr.
Bryant.
Item 13. Certain Relationships and Related Transactions
The information called for by Item 13 is incorporated by reference from
information under the caption "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement to be filed
pursuant to Regulation 14A no later than 120 days after the close of its
fiscal year.
43
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A. Financial Statements and Schedules
See Index to Financial Statements and Supplementary Data in Item 8.
B. Reports on Form 8-K
None
C. Exhibits
Exhibit No. Description of Exhibit Page
3.1* Registrant's Restated Certificate of Incorporation
(filed as Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1 filed on June 7, 1989, File No.
33-29165)
3.2* Registrant's Restated Bylaws (filed as Exhibit 3.2 to
the Registrant's Registration Statement on Form S-1 on
June 7, 1989, File No. 33-29165)
3.3* Registrant's Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock
(filed as Exhibit 3.3 to the Annual Report on Form 10-K
for the year ended December 31, 1989, File No. 0-11708)
4.1* Rights Agreement between Registrant and Bank of America
dated as of December 8, 1989 (filed as Exhibit 1 to Form
8-K filed on December 20, 1989, File No. 0-11708)
10.1* Description of Cash Bonus Plan of Berry Petroleum Company
(filed as Exhibit 10.7 to the Annual Report on Form 10-K
for the year ended December 31, 1990, File No. 1-9735)
10.2* Energy Supply Agreement dated January 18, 1985, as amended
by and between Registrant and University Cogeneration, Inc.
(filed as Exhibit 10.10 to the Registration Statement on
Form S-4 filed on April 7, 1987, File No. 33-13240)
10.3* Salary Continuation Agreement dated as of March 20, 1987,
as amended August 28, 1987, by and between Registrant
and Jerry V. Hoffman (filed as Exhibit 10.11 to the
Registration Statement on Form S-1 filed on June 7, 1989,
File No. 33-29165)
10.4* Form of Salary Continuation Agreements dated as of March 20,
1987, as amended August 28, 1987, by and between Registrant
and selected employees of the Company (filed as Exhibit 10.12
to the Registration Statement on Form S-1 filed on June 7,
1989, File No. 33-29165)
10.5* Instrument for Settlement of Claims and Mutual Release by
and among Registrant, Victory Oil Company, the Crail Fund
and Victory Holding Company effective October 31, 1986
(filed as Exhibit 10.13 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 filed on
May 22, 1987, File No. 33-13240)
44
C. Exhibits (cont'd)
Exhibit No. Description of Exhibit Page
10.6* 1987 Nonstatutory Stock Option Plan and 1987 Stock
Appreciation Rights Plan as amended March 18, 1988
(filed as Exhibit 10.14 in Registrant's Registration
Statement on Form S-8 filed on July 28, 1988, File
No. 33-23326)
10.7* Service Contract by and between Registrant and Pride
Petroleum Services, Inc. dated November 1, 1989 (filed
as Exhibit 10.23 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989, File
No. 0-11708)
10.8 1994 Stock Option Plan 47
23.1 Consent of Coopers & Lybrand L.L.P. 65
23.2 Consent of Babson and Sheppard 66
23.3 Consent of Reed W. Ferrill & Associates 67
23.4 Consent of DeGolyer and MacNaughton 68
27. ** Financial Data Schedule 69
99.1 Undertaking for Form S-8 Registration Statement 70
99.2* Form of Indemnity Agreement of Registrant (filed as
Exhibit 28.2 in Registrant's Registration Statement
on Form S-4 filed on April 7, 1987, File No. 33-13240)
99.3* Form of "B" Group Trust (filed as Exhibit 28.3 to
Amendment No. 1 to Registrant's Registration Statement
on Form S-4 filed on May 22, 1987, File No. 33-13240)
* Incorporated by reference
** Included in the Company's electronic filing on EDGAR
45
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereto duly authorized on March 17, 1995.
BERRY PETROLEUM COMPANY
/s/ JERRY V. HOFFMAN /s/ RALPH J. GOEHRING /s/ DONALD A. DALE
JERRY V. HOFFMAN RALPH J. GOEHRING DONALD A. DALE
President and Chief Chief Financial Officer Controller (Principal
Executive Officer (Principal Financial Officer) (Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates so indicated.
Name Office Date
/s/ Harvey L. Bryant Chairman of the Board and March 17, 1995
Harvey L. Bryant Director
/s/ Jerry V. Hoffman President, Chief Executive March 17, 1995
Jerry V. Hoffman Officer and Director
/s/ Benton Bejach Director March 17, 1995
Benton Bejach
/s/ William F. Berry Director March 17, 1995
William F. Berry
/s/ Gerry A. Biller Director March 17, 1995
Gerry A. Biller
/s/ Ralph B. Busch, Jr. Director March 17, 1995
Ralph B. Busch, Jr.
/s/ William E. Bush, Jr. Director March 17, 1995
William E. Bush, Jr.
/s/ William B. Charles Director March 17, 1995
William B. Charles
/s/ Richard F. Downs Director March 17, 1995
Richard F. Downs
/s/ John A. Hagg Director March 17, 1995
John A. Hagg
/s/ Thomas J. Jamieson Director March 17, 1995
Thomas J. Jamieson
/s/ Roger G. Martin Director March 17, 1995
Roger G. Martin
46