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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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.
PART II
Item 5.
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
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
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.
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.
Item 6.
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.
Item 7.
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.
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.
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.
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.
Item 8.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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 ======== ======== ========
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.
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.
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 ======== ======== ========
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) ========= =========
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.
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.
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.
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.
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) ========= ========= ========= =========
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.
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 ======= ======= ======= ======= ======= =======
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
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 ======== ======== ========
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
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.
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.
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.
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.
PART IV
Item 14.
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)
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
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