UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2010
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-9735
BERRY PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
|
DELAWARE |
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77-0079387 |
|
(State of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
1999 Broadway, Suite 3700
Denver, Colorado 80202
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (303) 999-4400
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 reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x |
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Accelerated filer o |
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|
|
|
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Non-accelerated filer o |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO x
As of July 21, 2010, the registrant had 51,206,925 shares of Class A Common Stock ($.01 par value) outstanding. The registrant also had 1,797,784 shares of Class B Stock ($.01 par value) outstanding on July 21, 2010 all of which is held by an affiliate of the registrant.
BERRY PETROLEUM COMPANY
SECOND QUARTER 2010 FORM 10-Q
Unaudited Condensed Balance Sheets
(In Thousands, Except Share Information)
|
|
|
June 30, |
|
December 31, |
|
||
|
ASSETS |
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
239 |
|
$ |
5,311 |
|
|
Short-term investments |
|
65 |
|
66 |
|
||
|
Accounts receivable, net of allowance for doubtful accounts of $0 and $38,508, respectively |
|
140,866 |
|
74,337 |
|
||
|
Deferred income taxes |
|
4,006 |
|
5,623 |
|
||
|
Derivative instruments |
|
7,557 |
|
11,527 |
|
||
|
Prepaid expenses and other |
|
11,707 |
|
6,612 |
|
||
|
Total current assets |
|
164,440 |
|
103,476 |
|
||
|
Oil and gas properties (successful efforts basis), buildings and equipment, net |
|
2,343,568 |
|
2,106,385 |
|
||
|
Derivative instruments |
|
6,676 |
|
735 |
|
||
|
Other assets |
|
26,398 |
|
29,539 |
|
||
|
|
|
$ |
2,541,082 |
|
$ |
2,240,135 |
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Accounts payable |
|
$ |
78,902 |
|
$ |
63,096 |
|
|
Revenue and royalties payable |
|
23,234 |
|
25,878 |
|
||
|
Accrued liabilities |
|
24,530 |
|
29,320 |
|
||
|
Line of credit |
|
3,300 |
|
— |
|
||
|
Derivative instruments |
|
23,570 |
|
33,843 |
|
||
|
Total current liabilities |
|
153,536 |
|
152,137 |
|
||
|
Long-term liabilities: |
|
|
|
|
|
||
|
Deferred income taxes |
|
302,065 |
|
237,161 |
|
||
|
Senior secured revolving credit facility |
|
310,000 |
|
372,000 |
|
||
|
8¼% Senior subordinated notes due 2016 |
|
200,000 |
|
200,000 |
|
||
|
10¼% Senior notes due 2014, net of unamortized discount of $12,284 and $13,456, respectively |
|
437,716 |
|
436,544 |
|
||
|
Asset retirement obligation |
|
49,313 |
|
43,487 |
|
||
|
Other long-term liabilities |
|
18,709 |
|
19,711 |
|
||
|
Derivative instruments |
|
29,646 |
|
75,836 |
|
||
|
|
|
1,347,449 |
|
1,384,739 |
|
||
|
Shareholders’ equity: |
|
|
|
|
|
||
|
Preferred stock, $.01 par value, 2,000,000 shares authorized; no shares outstanding |
|
— |
|
— |
|
||
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Capital stock, $.01 par value: |
|
|
|
|
|
||
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Class A Common Stock, 100,000,000 shares authorized; 51,206,925 and 42,952,499 shares issued and outstanding, respectively |
|
512 |
|
430 |
|
||
|
Class B Stock, 3,000,000 shares authorized; 1,797,784 shares issued and outstanding (liquidation preference of $899) |
|
18 |
|
18 |
|
||
|
Capital in excess of par value |
|
319,771 |
|
89,068 |
|
||
|
Accumulated other comprehensive loss |
|
(52,928 |
) |
(60,372 |
) |
||
|
Retained earnings |
|
772,724 |
|
674,115 |
|
||
|
Total shareholders’ equity |
|
1,040,097 |
|
703,259 |
|
||
|
|
|
$ |
2,541,082 |
|
$ |
2,240,135 |
|
The accompanying notes are an integral part of these condensed financial statements.
BERRY PETROLEUM COMPANY
Unaudited Condensed Statements of Income (Loss)
Three Months Ended June 30, 2010 and 2009
(In Thousands, Except Per Share Data)
|
|
|
Three months ended June 30, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
REVENUES AND OTHER INCOME ITEMS |
|
|
|
|
|
||
|
Sales of oil and gas |
|
$ |
151,525 |
|
$ |
118,793 |
|
|
Sales of electricity |
|
7,928 |
|
6,624 |
|
||
|
Gas marketing |
|
5,004 |
|
4,848 |
|
||
|
Realized and unrealized gain (loss) on derivatives, net |
|
56,057 |
|
(31,130 |
) |
||
|
Settlement of Flying J bankruptcy claim |
|
21,992 |
|
— |
|
||
|
Interest and other income, net |
|
1,796 |
|
806 |
|
||
|
|
|
244,302 |
|
99,941 |
|
||
|
EXPENSES |
|
|
|
|
|
||
|
Operating costs - oil and gas production |
|
46,452 |
|
34,738 |
|
||
|
Operating costs - electricity generation |
|
7,839 |
|
6,397 |
|
||
|
Production taxes |
|
5,064 |
|
4,885 |
|
||
|
Depreciation, depletion & amortization - oil and gas production |
|
43,703 |
|
34,371 |
|
||
|
Depreciation, depletion & amortization - electricity generation |
|
793 |
|
1,028 |
|
||
|
Gas marketing |
|
4,357 |
|
4,232 |
|
||
|
General and administrative |
|
12,155 |
|
13,164 |
|
||
|
Interest |
|
16,340 |
|
10,589 |
|
||
|
Extinguishment of debt |
|
— |
|
10,492 |
|
||
|
Transaction costs on acquisitions |
|
1,908 |
|
— |
|
||
|
Dry hole, abandonment, impairment and exploration |
|
266 |
|
17 |
|
||
|
Bad debt recovery |
|
(38,508 |
) |
— |
|
||
|
|
|
100,369 |
|
119,913 |
|
||
|
Income (loss) before income taxes |
|
143,933 |
|
(19,972 |
) |
||
|
Provision (benefit) for income taxes |
|
54,910 |
|
(7,204 |
) |
||
|
Income (loss) from continuing operations |
|
89,023 |
|
(12,768 |
) |
||
|
Loss from discontinued operations, net of taxes |
|
— |
|
(212 |
) |
||
|
|
|
|
|
|
|
||
|
Net income (loss) |
|
$ |
89,023 |
|
$ |
(12,980 |
) |
|
|
|
|
|
|
|
||
|
Basic net income (loss) from continuing operations per share |
|
$ |
1.65 |
|
$ |
(0.28 |
) |
|
Basic net income (loss) per share |
|
$ |
1.65 |
|
$ |
(0.28 |
) |
|
|
|
|
|
|
|
||
|
Diluted net income (loss) from continuing operations per share |
|
$ |
1.64 |
|
$ |
(0.28 |
) |
|
Diluted net income (loss) per share |
|
$ |
1.64 |
|
$ |
(0.28 |
) |
|
|
|
|
|
|
|
||
|
Dividends per share |
|
$ |
0.075 |
|
$ |
0.075 |
|
Unaudited Condensed Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2010 and 2009
(In Thousands)
|
Net income (loss) |
|
$ |
89,023 |
|
$ |
(12,980 |
) |
|
Unrealized losses on derivatives, net of income taxes of $0 and ($44,776), respectively |
|
— |
|
(73,055 |
) |
||
|
Reclassification of realized gains on derivatives included in net income, net of income taxes of $0 and ($5,708), respectively |
|
— |
|
(9,314 |
) |
||
|
Accumulated other comprehensive loss amortization of de-designated hedges, net of income taxes of $2,478 and $0, respectively |
|
4,044 |
|
— |
|
||
|
Comprehensive income (loss) |
|
$ |
93,067 |
|
$ |
(95,349 |
) |
The accompanying notes are an integral part of these condensed financial statements.
BERRY PETROLEUM COMPANY
Unaudited Condensed Statements of Income (Loss)
Six Months Ended June 30, 2010 and 2009
(In Thousands, Except Per Share Data)
|
|
|
Six months ended June 30, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
REVENUES AND OTHER INCOME ITEMS |
|
|
|
|
|
||
|
Sales of oil and gas |
|
$ |
299,332 |
|
$ |
246,662 |
|
|
Sales of electricity |
|
17,861 |
|
16,895 |
|
||
|
Gas marketing |
|
13,276 |
|
12,429 |
|
||
|
Realized and unrealized gain on derivatives, net |
|
57,661 |
|
6,034 |
|
||
|
Settlement of Flying J bankruptcy claim |
|
21,992 |
|
— |
|
||
|
Interest and other income, net |
|
1,960 |
|
1,088 |
|
||
|
|
|
412,082 |
|
283,108 |
|
||
|
EXPENSES |
|
|
|
|
|
||
|
Operating costs - oil and gas production |
|
93,488 |
|
72,122 |
|
||
|
Operating costs - electricity generation |
|
17,509 |
|
15,179 |
|
||
|
Production taxes |
|
10,269 |
|
10,537 |
|
||
|
Depreciation, depletion & amortization - oil and gas production |
|
79,609 |
|
70,769 |
|
||
|
Depreciation, depletion & amortization - electricity generation |
|
1,588 |
|
1,987 |
|
||
|
Gas marketing |
|
12,142 |
|
11,516 |
|
||
|
General and administrative |
|
25,990 |
|
26,457 |
|
||
|
Interest |
|
33,788 |
|
20,639 |
|
||
|
Extinguishment of debt |
|
— |
|
10,494 |
|
||
|
Transaction costs on acquisitions |
|
2,635 |
|
— |
|
||
|
Dry hole, abandonment, impairment and exploration |
|
1,636 |
|
140 |
|
||
|
Bad debt recovery |
|
(38,508 |
) |
— |
|
||
|
|
|
240,146 |
|
239,840 |
|
||
|
Income before income taxes |
|
171,936 |
|
43,268 |
|
||
|
Provision for income taxes |
|
65,244 |
|
14,258 |
|
||
|
Income from continuing operations |
|
106,692 |
|
29,010 |
|
||
|
Loss from discontinued operations, net of taxes |
|
— |
|
(6,991 |
) |
||
|
|
|
|
|
|
|
||
|
Net income |
|
$ |
106,692 |
|
$ |
22,019 |
|
|
|
|
|
|
|
|
||
|
Basic net income from continuing operations per share |
|
$ |
2.01 |
|
$ |
0.63 |
|
|
Basic net loss from discontinued operations per share |
|
$ |
— |
|
$ |
(0.15 |
) |
|
Basic net income per share |
|
$ |
2.01 |
|
$ |
0.48 |
|
|
|
|
|
|
|
|
||
|
Diluted net income from continuing operations per share |
|
$ |
2.00 |
|
$ |
0.63 |
|
|
Diluted net loss from discontinued operations per share |
|
$ |
— |
|
$ |
(0.15 |
) |
|
Diluted net income per share |
|
$ |
2.00 |
|
$ |
0.48 |
|
|
|
|
|
|
|
|
||
|
Dividends per share |
|
$ |
0.15 |
|
$ |
0.15 |
|
Unaudited Condensed Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2010 and 2009
(In Thousands)
|
Net income |
|
$ |
106,692 |
|
$ |
22,019 |
|
|
Unrealized losses on derivatives, net of income taxes of $0 and ($51,773), respectively |
|
— |
|
(84,472 |
) |
||
|
Reclassification of realized gains on derivatives included in net income, net of income taxes of $0 and ($29,083), respectively |
|
— |
|
(47,452 |
) |
||
|
Accumulated other comprehensive loss amortization of de-designated hedges, net of income taxes of $4,563 and $0, respectively |
|
7,444 |
|
— |
|
||
|
Comprehensive income (loss) |
|
$ |
114,136 |
|
$ |
(109,905 |
) |
The accompanying notes are an integral part of these condensed financial statements.
BERRY PETROLEUM COMPANY
Unaudited Condensed Statements of Cash Flows
Six Months Ended June 30, 2010 and 2009
(In Thousands)
|
|
|
Six months ended June 30, |
|
||||
|
|
|
2010 |
|
2009 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
||
|
Net income |
|
$ |
106,692 |
|
$ |
22,019 |
|
|
Depreciation, depletion and amortization |
|
81,197 |
|
74,944 |
|
||
|
Extinguishment of debt |
|
— |
|
10,494 |
|
||
|
Amortization of debt issue costs and net discount |
|
4,218 |
|
2,578 |
|
||
|
Dry hole and impairment |
|
1,428 |
|
9,643 |
|
||
|
Unrealized (gain) loss on derivatives |
|
(46,110 |
) |
8,287 |
|
||
|
Stock-based compensation expense |
|
5,008 |
|
4,980 |
|
||
|
Deferred income taxes |
|
61,142 |
|
8,090 |
|
||
|
Loss on sale of oil and natural gas properties |
|
— |
|
330 |
|
||
|
Other, net |
|
— |
|
(4,963 |
) |
||
|
Cash paid for abandonment |
|
(1,535 |
) |
(176 |
) |
||
|
Allowance for bad debt |
|
(38,508 |
) |
— |
|
||
|
Change in book overdraft |
|
2,007 |
|
(24,988 |
) |
||
|
Increase in current assets other than cash and cash equivalents |
|
(33,176 |
) |
(7,982 |
) |
||
|
Decrease in current liabilities other than book overdraft, line of credit and fair value of derivatives |
|
(7,494 |
) |
(44,076 |
) |
||
|
Net cash provided by operating activities |
|
134,869 |
|
59,180 |
|
||
|
Cash flows from investing activities: |
|
|
|
|
|
||
|
Exploration and development of oil and gas properties |
|
(135,038 |
) |
(73,126 |
) |
||
|
Property acquisitions |
|
(150,674 |
) |
(11,668 |
) |
||
|
Capitalized interest |
|
(13,054 |
) |
(12,626 |
) |
||
|
Proceeds from sale of assets |
|
— |
|
138,597 |
|
||
|
Net cash (used in) provided by investing activities |
|
(298,766 |
) |
41,177 |
|
||
|
Cash flows from financing activities: |
|
|
|
|
|
||
|
Proceeds from issuances on line of credit |
|
159,200 |
|
248,500 |
|
||
|
Payments on line of credit |
|
(155,900 |
) |
(273,800 |
) |
||
|
Proceeds from issuance of 10¼% senior notes |
|
— |
|
304,025 |
|
||
|
Long-term borrowings under credit facility |
|
165,000 |
|
586,275 |
|
||
|
Repayments of long-term borrowings under credit facility |
|
(227,000 |
) |
(937,176 |
) |
||
|
Debt issue costs |
|
— |
|
(21,508 |
) |
||
|
Financing obligation |
|
(169 |
) |
— |
|
||
|
Dividends paid |
|
(8,083 |
) |
(6,831 |
) |
||
|
Proceeds from issuance of common stock, net |
|
224,313 |
|
— |
|
||
|
Proceeds from stock option exercises |
|
1,156 |
|
87 |
|
||
|
Excess tax benefit and other |
|
308 |
|
67 |
|
||
|
Net cash provided by (used in) financing activities |
|
158,825 |
|
(100,361 |
) |
||
|
|
|
|
|
|
|
||
|
Net decrease in cash and cash equivalents |
|
(5,072 |
) |
(4 |
) |
||
|
Cash and cash equivalents at beginning of year |
|
5,311 |
|
240 |
|
||
|
Cash and cash equivalents at end of period |
|
$ |
239 |
|
$ |
236 |
|
The accompanying notes are an integral part of these condensed financial statements.
Berry Petroleum Company
Notes to Condensed Financial Statements
1. Basis of Presentation
These Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting. All adjustments which are, in the opinion of management, necessary to present fairly Berry Petroleum Company’s (the Company) financial position at June 30, 2010 and December 31, 2009 and results of operations and comprehensive income (loss) for the three and six months ended June 30, 2010 and 2009, and its cash flows for the six months ended June 30, 2010 and 2009 have been included. Interim results are not necessarily indicative of expected annual results because of the impact of fluctuations in prices received for oil and natural gas, as well as other factors. In the course of preparing the Condensed Financial Statements, management makes various assumptions, judgments and estimates to determine the reported amounts of assets, liabilities, revenues and expenses, and in the disclosures of commitments and contingencies. Changes in these assumptions, judgments and estimates will occur as a result of the passage of time and the occurrence of future events, and, accordingly, actual results could differ from amounts previously established.
The Company’s Financial Statements have been prepared on a basis consistent with the accounting principles and policies reflected in the Company’s audited financial statements as of and for the year ended December 31, 2009. The year-end Condensed Balance Sheet was derived from audited Financial Statements included in such report, but does not include all disclosures required by GAAP. Certain prior period amounts have been reclassified to properly conform to current period financial statement classification and presentation requirements. We have revised our Condensed Statement of Comprehensive Income (Loss) to reflect the correction of a prior period presentation error. The Company has concluded that the presentation error was immaterial to the previously filed financial statements. See Note 14 to the Condensed Financial Statements.
The Company’s cash management process provides for the daily funding of checks as they are presented to the bank. Included in accounts payable at June 30, 2010 and December 31, 2009 is $17.7 million and $15.7 million, respectively, representing outstanding checks in excess of the bank balance (book overdraft).
2. Bad Debt Allowance
The Company recognized $38.5 million in bad debt expense in the year ended December 31, 2008 related to Flying J, Inc., its wholly owned subsidiary Big West Oil, LLC and its wholly owned subsidiary Big West of California, LLC (BWOC) filing for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on December 22, 2008. On July 6, 2010, the Joint Plan of Reorganization of Flying J, Inc., BWOC, Big West Oil, LLC, Big West Transportation, LLC and Longhorn Partners Pipeline, L.P. was confirmed under Chapter 11 of the United State Bankruptcy Code. Additionally, on July 6, 2010, the United States Bankruptcy Court approved and confirmed that certain June 15, 2010 Stipulation and Agreed Order (the Stipulation) with Flying J Inc. and certain of its affiliates (collectively Flying J), regarding the resolution of the Company’s claim in Flying J’s pending bankruptcy. Pursuant to the Stipulation, each of the Company and Flying J agreed that the total amount owed to the Company by Flying J was $60.5 million and, as a result, the Company received $60.5 million in cash on July 23, 2010. In the second quarter ended June 30, 2010, the Company recorded a settlement of its Flying J bankruptcy claim of $22.0 million and a bad debt recovery of $38.5 million. See Notes 12 and 13 to the Condensed Financial Statements.
3. Fair Value Measurements
The authoritative guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy. The Company utilizes a mid-market pricing convention (the mid-point price between bid and ask prices) for valuation as a practical expedient for assigning fair value. Oil swaps, natural gas swaps and interest rate swaps are valued using models which are based on active market data and are classified within Level 2 of the fair value hierarchy. Derivatives that are valued based upon models with significant unobservable market inputs (primarily volatility), and that are normally traded less actively are classified within Level 3 of the valuation hierarchy. These models are industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic
Berry Petroleum Company
Notes to Condensed Financial Statements
measures. The fair value of all derivative instruments are estimated using a combined income and market valuation methodology based upon forward commodity price and volatility curves. The curves are obtained from independent pricing services, and the Company has made no adjustments to the obtained prices. The pricing services publish observable market information from multiple brokers and exchanges. No proprietary models are used by the pricing services for the inputs. All valuations were compared against counterparty valuations to verify the reasonableness of prices. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative contracts it holds. Level 3 derivatives include oil collars, natural gas collars and natural gas basis swaps. The Company recognizes transfers between levels at the end of the reporting period for which the transfer has occurred.
The following tables set forth by level within the fair value hierarchy the Company’s net derivative assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2010 and December 31, 2009.
Assets and liabilities measured at fair value on a recurring basis
|
June 30, 2010 (in millions) |
|
Total carrying value |
|
Level 2 |
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Commodity derivatives liability, net |
|
$ |
(27.8 |
) |
$ |
(23.8 |
) |
$ |
(4.0 |
) |
|
Interest rate derivatives liability, net |
|
(11.2 |
) |
(11.2 |
) |
— |
|
|||
|
Total derivative liabilities, net at fair value |
|
$ |
(39.0 |
) |
$ |
(35.0 |
) |
$ |
(4.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 (in millions) |
|
Total carrying value on the |
|
Level 2 |
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Commodity derivatives liability, net |
|
$ |
(88.5 |
) |
$ |
(62.5 |
) |
$ |
(26.0 |
) |
|
Interest rate derivatives liability, net |
|
(8.9 |
) |
(8.9 |
) |
— |
|
|||
|
Total derivative liabilities, net at fair value |
|
$ |
(97.4 |
) |
$ |
(71.4 |
) |
$ |
(26.0 |
) |
Changes in Level 3 fair value measurements
The table below includes a rollforward of the Condensed Balance Sheet amounts (including the change in fair value) for financial instruments classified by the Company within Level 3 of the fair value hierarchy. When a determination is made to classify a financial instrument within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable factors to the overall fair value measurement. Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources).
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
(in millions) |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
|
Fair value (liability) asset, beginning of period |
|
$ |
(34.5 |
) |
$ |
137.5 |
|
$ |
(26.0 |
) |
$ |
172.5 |
|
|
Total realized and unrealized gain (loss) included in Realized and unrealized gain (loss) on derivatives |
|
41.2 |
|
(31.1 |
) |
41.9 |
|
6.0 |
|
||||
|
Purchases, sales and settlements, net |
|
(10.7 |
) |
(63.3 |
) |
(19.9 |
) |
(138.8 |
) |
||||
|
Transfers in and/or out of Level 3 |
|
— |
|
— |
|
— |
|
3.4 |
|
||||
|
Fair value (liability) asset, end of period |
|
$ |
(4.0 |
) |
$ |
43.1 |
|
$ |
(4.0 |
) |
$ |
43.1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total unrealized gains (losses) included in income related to financial assets and liabilities still on the Condensed Balance Sheet at June 30, 2010 and 2009 |
|
$ |
30.5 |
|
$ |
(31.1 |
) |
$ |
22.0 |
|
$ |
(8.3 |
) |
The $3.4 million of transfers out of Level 3 for the six months ended June 30, 2009 represent crude oil collars that were converted to crude oil swaps during the first quarter of 2009.
For further discussion related to the Company’s derivatives see Note 4 to the Condensed Financial Statements.
Berry Petroleum Company
Notes to Condensed Financial Statements
Fair Market Value of Financial Instruments
The Company used various assumptions and methods in estimating the fair values of its financial instruments. The carrying amounts of cash and cash equivalents and accounts receivable approximated their fair value due to the short-term maturity of these instruments. The carrying amount of the Company’s credit facilities approximated fair value, because the interest rates on the credit facilities are variable and could be at similar rates today. The fair values of the 8.25% senior subordinated notes due 2016 and the 10.25% senior notes due 2014 were estimated based on quoted market prices. The fair values of the Company’s derivative instruments and other investments are discussed above.
|
|
|
As of June 30, 2010 |
|
||||
|
(in millions) |
|
Carrying |
|
Estimated |
|
||
|
|
|
|
|
|
|
||
|
Line of credit |
|
$ |
3 |
|
$ |
3 |
|
|
Senior secured revolving credit facility |
|
310 |
|
310 |
|
||
|
8.25% Senior subordinated notes due 2016 |
|
200 |
|
194 |
|
||
|
10.25% Senior notes due 2014 |
|
438 |
|
481 |
|
||
|
|
|
$ |
951 |
|
$ |
988 |
|
|
|
|
As of December 31, 2009 |
|
||||
|
(in millions) |
|
Carrying |
|
Estimated |
|
||
|
|
|
|
|
|
|
||
|
Senior secured revolving credit facility |
|
$ |
372 |
|
$ |
372 |
|
|
8.25% Senior subordinated notes due 2016 |
|
200 |
|
196 |
|
||
|
10.25% Senior notes due 2014 |
|
437 |
|
487 |
|
||
|
|
|
$ |
1,009 |
|
$ |
1,055 |
|
4. Derivative Instruments
The Company uses financial derivative instruments as part of its price risk management program to achieve a more predictable, economic cash flow from its oil and natural gas production by reducing its exposure to price fluctuations. The Company has entered into financial commodity swap and collar contracts to fix the floor and ceiling prices received for a portion of the Company’s oil and natural gas production. The terms of the contracts depend on various factors, including management’s view of future crude oil and natural gas prices, acquisition economics on purchased assets and future financial commitments. The Company periodically enters into interest rate derivative agreements to protect against changes in interest rates on its floating rate debt. For further discussion related to the fair value of the Company’s derivatives see Note 3 to the Condensed Financial Statements.
As of June 30, 2010, the Company had the following commodity derivatives:
|
|
|
2010 |
|
2011 |
|
2012 |
|
|
Oil Bbl/D: |
|
15,930 |
|
12,020 |
|
6,000 |
|
|
Natural Gas MMBtu/D: |
|
19,000 |
|
15,000 |
|
15,000 |
|
The Company entered into the following crude oil two-way collars during the six months ended June 30, 2010:
|
|
|
Average |
|
|
|
|
|
|
Barrels |
|
Floor/Ceiling |
|
|
Term |
|
Per Day |
|
Prices |
|
|
Full year 2010 |
|
500 |
|
$75.00/$93.95 |
|
|
Full year 2010 |
|
500 |
|
$75.00/$94.45 |
|
|
Full year 2011 |
|
500 |
|
$75.00/$100.75 |
|
|
Full year 2011 |
|
500 |
|
$75.00/$101.15 |
|
|
Full year 2011 |
|
1,000 |
|
$75.00/$91.25 |
|
|
Full year 2012 |
|
500 |
|
$75.00/$105.00 |
|
|
Full year 2012 |
|
500 |
|
$75.00/$106.00 |
|
|
Full year 2012 |
|
1,000 |
|
$75.00/$95.00 |
|
Berry Petroleum Company
Notes to Condensed Financial Statements
The Company entered into the following crude oil three-way collars during the six months ended June 30, 2010:
|
|
|
Average |
|
|
|
|
|
|
Barrels |
|
Floor/Swap/Ceiling |
|
|
Term |
|
Per Day |
|
Prices |
|
|
Full year 2011 |
|
1,000 |
|
$60.00 / $80.00 / $101.00 |
|
|
Full year 2012 |
|
1,000 |
|
$60.00 / $80.00 / $120.00 |
|
The Company entered into the following natural gas swaps during the six months ended June 30, 2010:
|
|
|
Average |
|
|
|
|
|
|
|
MMBtus |
|
Swap |
|
|
|
Term |
|
Per Day |
|
Prices |
|
|
|
Full year 2011 |
|
5,000 |
|
$ |
5.50 |
|
|
Full year 2012 |
|
5,000 |
|
$ |
5.75 |
|
Discontinuance of cash flow hedge accounting
Prior to January 1, 2010, the Company designated most of its commodity and interest rate derivative contracts as cash flow hedges, whose unrealized fair value gains and losses were recorded to Accumulated other comprehensive loss (AOCL). Effective January 1, 2010, the Company elected to de-designate all of its commodity and interest rate derivative contracts that had been previously designated as cash flow hedges as of December 31, 2009. As a result, subsequent to December 31, 2009, the Company recognizes all gains and losses from changes in commodity derivative fair values immediately in earnings rather than deferring any such amounts in AOCL.
At December 31, 2009, AOCL consisted of $97.4 million, ($60.4 million, net of tax) of unrealized losses, representing the change in the fair value of the Company’s open commodity and interest rate derivative contracts designated as cash flow hedges as of that balance sheet date, less any ineffectiveness recognized. As a result of discontinuing hedge accounting on January 1, 2010, such fair values at December 31, 2009 are frozen in AOCL as of the de-designation date and reclassified into earnings as the original hedge transactions settle. During the three and six months ended June 30, 2010, $6.5 million ($4.0 million, net of tax) and $12.0 million ($7.4 million, net of tax), respectively, of amortization of AOCL relating to de-designated commodity and interest rate hedges were reclassified from AOCL into earnings. As of June 30, 2010, AOCL consisted of $85.4 million ($52.9 million, net of tax) of unrealized losses on commodity and interest rate derivative contracts that had been previously designated as cash flow hedges. The Company expects to reclassify into earnings from AOCL after-tax net losses of $28.2 million related to de-designated commodity and interest rate derivative contracts during the next twelve months.
At June 30, 2010, the net fair value derivative liability was $39.0 million as compared to a net fair value liability of $97.4 million at December 31, 2009 which reflects changes in commodity prices and interest rates. Based on NYMEX strip pricing as of June 30, 2010, the Company expects to make net payments under the existing derivatives of $6.6 million during the next twelve months.
The related cash flow impact of all of the Company’s derivatives is reflected in cash flows from operating activities.
The Company presents its derivative assets and liabilities on its Condensed Balance Sheets on a net basis. The Company nets derivative assets and liabilities whenever it has a legally enforceable master netting agreement with a counterparty to a derivative contract. The Company uses these agreements to manage and reduce its potential counterparty credit risk.
Berry Petroleum Company
Notes to Condensed Financial Statements
The following table disaggregates the Company’s net derivative assets and liabilities into gross components before giving effect to master netting arrangements. Finally, the Company identifies the line items on its Condensed Balance Sheets in which these fair value amounts are included. The gross asset and liability values in the table below are segregated between those derivatives designated in qualifying hedge accounting relationships and those not designated in hedge accounting relationships.
|
|
|
As of June 30, 2010 |
|
||||||||
|
|
|
Derivative Assets |
|
Derivative Liabilities |
|
||||||
|
(in millions) |
|
Balance Sheet |
|
Fair Value |
|
Balance Sheet |
|
Fair Value |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Total derivatives designated as hedging instruments |
|
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Commodity |
|
Current assets |
|
$ |
10.9 |
|
Current liability |
|
$ |
20.6 |
|
|
Commodity |
|
Long term assets |
|
7.1 |
|
Long term liabilities |
|
25.2 |
|
||
|
Interest rate |
|
|
|
|
|
Long term assets |
|
0.4 |
|
||
|
Interest rate |
|
|
|
|
|
Current assets |
|
3.4 |
|
||
|
Interest rate |
|
|
|
|
|
Current liability |
|
3.0 |
|
||
|
Interest rate |
|
|
|
|
|
Long term liabilities |
|
4.4 |
|
||
|
Total derivatives not designated as hedging instruments |
|
|
|
$ |
18.0 |
|
|
|
$ |
57.0 |
|
|
Total derivatives |
|
|
|
$ |
18.0 |
|
|
|
$ |
57.0 |
|
|
|
|
As of December 31, 2009 |
|
||||||||
|
|
|
Derivative Assets |
|
Derivative Liabilities |
|
||||||
|
(in millions) |
|
Balance Sheet |
|
Fair Value |
|
Balance Sheet |
|
Fair Value |
|
||
|
Commodity |
|
Current assets |
|
$ |
15.5 |
|
Current liability |
|
$ |
30.8 |
|
|
Commodity |
|
Long term assets |
|
0.4 |
|
Long term liabilities |
|
74.1 |
|
||
|
Commodity |
|
Current liability |
|
0.2 |
|
|
|
|
|
||
|
Commodity |
|
Long term liabilities |
|
1.2 |
|
|
|
|
|
||
|
Interest rate |
|
Long term assets |
|
0.3 |
|
Current assets |
|
3.5 |
|
||
|
Interest rate |
|
|
|
|
|
Current liabilities |
|
2.7 |
|
||
|
Interest rate |
|
|
|
|
|
Long term liabilities |
|
3.0 |
|
||
|
Total derivatives designated as hedging instruments |
|
|
|
$ |
17.6 |
|
|
|
$ |
114.1 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Commodity |
|
|
|
$ |
— |
|
Current assets |
|
$ |
0.4 |
|
|
Commodity |
|
|
|
— |
|
Current liabilities |
|
0.5 |
|
||
|
Total derivatives not designated as hedging instruments |
|
|
|
$ |
— |
|
|
|
$ |
0.9 |
|
|
Total derivatives |
|
|
|
$ |
17.6 |
|
|
|
$ |
115.0 |
|
Berry Petroleum Company
Notes to Condensed Financial Statements
The tables below summarize the location and the amount of derivative instrument gains (losses) before income taxes reported in the Condensed Statements of Income (Loss) for the periods indicated (in millions):
|
|
|
Location of Gain (Loss) |
|
Three months Ended June 30, |
|
||||
|
Derivatives cash flow hedging relationships |
|
Recognized in Income |
|
2010 |
|
2009 |
|
||
|
Commodity |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
— |
|
$ |
(146.5 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Sales of oil and gas |
|
(4.1 |
) |
16.6 |
|
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
— |
|
(22.6 |
) |
||
|
Interest rate |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
— |
|
$ |
5.9 |
|
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Interest expense |
|
(2.4 |
) |
(1.5 |
) |
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
— |
|
(0.3 |
) |
||
|
|
|
Location of Gain (Loss) |
|
Six Months Ended June 30, |
|
||||
|
Derivatives cash flow hedging relationships |
|
Recognized in Income |
|
2010 |
|
2009(1) |
|
||
|
Commodity |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
— |
|
$ |
(138.3 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Sales of oil and gas |
|
(6.9 |
) |
79.1 |
|
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
— |
|
0.3 |
|
||
|
Interest rate |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
— |
|
$ |
2.1 |
|
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Interest expense |
|
(5.1 |
) |
(2.5 |
) |
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
— |
|
(0.3 |
) |
||
(1) Prior year amounts have been revised. See Note 14 to the Condensed Financial Statements.
Amount of gain or (loss) recognized in income on derivatives not designated as hedging instruments under authoritative guidance for the periods indicated (in millions):
|
Derivatives not designated as Hedging |
|
Location of Gain (Loss) |
|
Three Months Ended June 30, |
|
||||
|
Instruments under authoritative guidance |
|
Recognized in Income |
|
2010 |
|
2009 |
|
||
|
Commodity |
|
Realized and unrealized gain (loss) on derivatives, net |
|
$ |
58.8 |
|
$ |
(8.5 |
) |
|
Interest Rates |
|
Realized and unrealized gain (loss) on derivatives, net |
|
(2.7 |
) |
— |
|
||
|
Derivatives not designated as Hedging |
|
Location of Gain (Loss) |
|
Six Months Ended June 30, |
|
||||
|
Instruments under authoritative guidance |
|
Recognized in Income |
|
2010 |
|
2009 |
|
||
|
Commodity |
|
Realized and unrealized gain (loss) on derivatives, net |
|
$ |
63.7 |
|
$ |
(8.3 |
) |
|
Commodity |
|
Loss from discontinued operations, net of taxes |
|
— |
|
(0.5 |
) |
||
|
Interest Rates |
|
Realized and unrealized gain (loss) on derivatives, net |
|
(6.0 |
) |
— |
|
||
Berry Petroleum Company
Notes to Condensed Financial Statements
Credit risk
The Company does not require collateral or other security from counterparties to support derivative instruments. However, the agreements with those counterparties typically contain netting provisions such that if a default occurs, the non-defaulting party can offset the amount payable to the defaulting party under the derivative contract with the amount due from the defaulting party. As a result of the netting provisions the Company’s maximum amount of loss due to credit risk is limited to the net amounts due to and from the counterparties under the derivative contracts. The maximum amount of loss due to credit risk that the Company would have incurred if all counterparties to its derivative contracts failed to perform at June 30, 2010 was $14.2 million. The credit rating of each of the counterparties was AA-/Aa3, or better as of June 30, 2010. As of June 30, 2010, the Company’s largest three counterparties accounted for 93% of the value of its total derivative positions.
As of June 30, 2010, the counterparties to the Company’s commodity derivative contracts consist of nine financial institutions. The Company’s counterparties or their affiliates are generally also lenders under the Company’s senior revolving credit facility. As a result, the counterparties to the Company’s derivative agreements share in the collateral supporting the Company’s senior revolving credit facility. The Company is not generally required to post additional collateral under derivative agreements.
Certain of the Company’s derivative agreements contain provisions that require cross defaults and acceleration of those instruments to any material debt. If the Company was to default on any of its material debt agreements, it would be a violation of these provisions, and the counterparties to the derivative instruments could request immediate payment on derivative instruments that are in a net liability position at that time. As of June 30, 2010, the Company was in a net liability position with six of the counterparties to the Company’s derivative instruments, totaling $53.2 million.
5. Shareholder’s Equity
In January 2010, the Company issued 8,000,000 shares of Class A Common Stock at a price of $29.25 per share. Net proceeds from this offering were $224.3 million after deducting underwriting discounts and commissions and offering expenses. The Company used the net proceeds from the offering to fund the purchase of the March Acquisition (as defined below) and to repay a portion of the outstanding borrowings under the senior secured revolving credit facility. See Note 6 to the Condensed Financial Statements.
6. Acquisitions and Divestitures
In March 2010, the Company acquired interests in producing properties principally on 6,900 net acres in the Permian basin of West Texas (W. Texas) for $133 million, comprised of an initial purchase price of $126 million, and customary post-closing adjustments of approximately $7 million (the March Acquisition). The March Acquisition was financed with the proceeds from the issuance of the Company’s common stock in January of 2010. In April 2010, the Company closed on the acquisition of an additional 3,200 net acres in the Permian basin for approximately $14 million, including normal post closing adjustments (the April Acquisition and, together with the March Acquisition, the Permian Basin Acquisitions). The Permian Basin Acquisitions included properties with total proved reserves of approximately 13 MMBOE, of which 83% were crude oil and 21% were proved developed.
Berry Petroleum Company
Notes to Condensed Financial Statements
The Permian Basin Acquisitions qualify as business combinations and, as such, the Company estimated the fair value of each property as of the acquisition date (the date on which the Company obtained control of the properties). The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements also utilize assumptions of market participants. The Company used a discounted cash flow model and made market assumptions as to future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. These assumptions represent Level 3 inputs.
The following table summarizes the consideration paid to the seller and the amounts of the assets acquired and liabilities assumed in the March Acquisition. The purchase price allocation is preliminary and subject to customary adjustments.
|
|
|
(In thousands) |
|
|
|
Consideration paid to seller: |
|
|
|
|
|
Cash consideration |
|
$ |
133,313 |
|
|
|
|
|
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
Proved developed and undeveloped properties |
|
134,559 |
|
|
|
Fair value of derivatives |
|
316 |
|
|
|
Asset retirement obligation |
|
(1,367 |
) |
|
|
Other liabilities assumed |
|
(195 |
) |
|
|
|
|
|
|
|
|
Total identifiable net assets |
|
$ |
133,313 |
|
The March Acquisition had an effective date of January 1, 2010, and activity from January 1, 2010 through March 4, 2010 was treated as purchase price adjustments. The preliminary purchase price allocation included an estimate for activity between January 1, 2010 and March 4, 2010; however, actual amounts were greater than the Company’s estimate which resulted in an increase to the total cash consideration paid to the seller. As a result, the initial $1.4 million of Gain on purchase of oil and natural gas properties recorded in the first quarter of 2010 has been reversed in the second quarter of 2010 to reflect the purchase price adjustments.
The following table summarizes the consideration paid to the seller and the amounts of the assets acquired and liabilities assumed in the April Acquisition. The preliminary purchase price allocation is subject to customary adjustments and includes $1.6 million that remains in escrow pending the resolution of certain obligations of the seller that have not yet been satisfied.
|
|
|
(In thousands) |
|
|
|
Consideration paid to seller: |
|
|
|
|
|
Cash consideration |
|
$ |
14,250 |
|
|
|
|
|
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
Proved developed and undeveloped properties |
|
16,192 |
|
|
|
Asset retirement obligation |
|
(1,942 |
) |
|
|
|
|
|
|
|
|
Total identifiable net assets |
|
$ |
14,250 |
|
Acquisition costs of $0.5 million and $2.6 million have been recorded in the Condensed Statements of Income (Loss) under the caption Transaction costs on acquisitions in the three and six months ended June 30, 2010, respectively. Revenues of $6.6 million and $8.7 million generated by the acquired properties have been included in the accompanying Condensed Statements of Income (Loss) in the three and six months ended June 30, 2010, respectively. Earnings of $1.1 million and $1.6 million generated by the Permian Basin Aquisitions have been included in the accompanying Condensed Statements of Income (Loss) in the three and six months ended June 30, 2010, respectively.
Divestitures
On March 3, 2009, the Company entered into an agreement to sell its DJ basin assets and related hedges for $154 million before customary closing adjustments. The closing date of the sale of the assets was April 1, 2009. The Company recorded a pre-tax impairment loss of $9.6 million related to the sale, which is reflected within the $7.0 million Loss from discontinued operations, net of taxes, on its Condensed Statement of Income (Loss) for the six months ended June 30, 2009.
Berry Petroleum Company
Notes to Condensed Financial Statements
Loss from discontinued operations, net of taxes, on the accompanying Condensed Statements of Income (Loss) is comprised of the following (in thousands):
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total revenues |
|
$ |
— |
|
$ |
(330 |
) |
$ |
— |
|
$ |
5,689 |
|
|
Total expenses |
|
— |
|
— |
|
— |
|
16,283 |
|
||||
|
Loss from discontinued operations, before income taxes |
|
— |
|
(330 |
) |
— |
|
(10,594 |
) |
||||
|
Income tax benefit |
|
— |
|
118 |
|
— |
|
3,603 |
|
||||
|
Loss from discontinued operations, net of taxes |
|
$ |
— |
|
$ |
(212 |
) |
$ |
— |
|
$ |
(6,991 |
) |
7. Dry hole, abandonment, impairment and exploration
During the three and six months ended June 30, 2010, the Company incurred dry hole, abandonment, impairment and exploration expense of $0.3 million and $1.6 million, respectively, which was primarily a result of mechanical failure encountered on one well in the Piceance basin. The well was abandoned in favor of drilling a replacement well from the same well pad. During the three months ended June 30, 2009, the Company did not incur any dry hole, abandonment, impairment and exploration expense. During the six months ended June 30, 2009 the Company had dry hole, abandonment, impairment and exploration charges of $0.1 million.
8. Asset Retirement Obligation (ARO)
The following table summarizes the change in the ARO for the six months ended June 30 (in thousands):
|
|
|
2010 |
|
2009 |
|
||
|
Beginning balance at January 1 |
|
$ |
43,487 |
|
$ |
41,967 |
|
|
Liabilities incurred |
|
1,860 |
|
— |
|
||
|
Liabilities settled |
|
(1,534 |
) |
(175 |
) |
||
|
Liabilities assumed |
|
3,309 |
|
— |
|
||
|
Disposition of assets |
|
— |
|
(2,752 |
) |
||
|
Accretion expense |
|
2,191 |
|
1,946 |
|
||
|
Ending balance at June 30 |
|
$ |
49,313 |
|
$ |
40,986 |
|
The ARO reflects the estimated present value of the amount of dismantlement, removal, site reclamation and similar activities associated with the Company’s oil and gas properties. Inherent in the fair value calculation of the ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance.
9. Debt Obligations
Short-term line of credit
Borrowings under the Company’s senior secured money market line of credit (the Secured Line of Credit) may be up to $30 million for a maximum of 30 days. The Secured Line of Credit may be terminated at any time upon written notice by either the Company or the lender.
There was $3.3 million outstanding on the Secured Line of Credit at June 30, 2010 and no outstanding borrowings at December 31, 2009. Interest on amounts borrowed is charged at LIBOR plus a margin of approximately 1.4%. The weighted average interest rate on outstanding borrowings on the Secured Line of Credit at June 30, 2010 and December 31, 2009 was 1.8% and 0%, respectively.
Berry Petroleum Company
Notes to Condensed Financial Statements
Senior secured revolving credit facility
The Company’s senior secured revolving credit facility (the Agreement) has a current borrowing base and lender commitments of $938 million. The LIBOR and prime rate margins are between 2.25% and 3.0% based on the ratio of credit outstanding to the borrowing base and the annual commitment fee on the unused portion of the credit facility is 0.50%.
Covenants under the Agreement are as follows:
|
Total funded debt to EBITDAX (1) ratio not greater than: |
|
Senior secured debt to EBITDAX ratio not greater than: |
|
||||||||
|
2010 |
|
Thereafter |
|
to Sep 2010 |
|
Mar 2011 |
|
Sep 2011 |
|
Thereafter |
|
|
4.50 |
|
4.00 |
|
3.75 |
|
3.50 |
|
3.25 |
|
3.0 |
|
(1) Net income before interest expense, income tax expense, depreciation and amortization expense, exploration expense and non-cash items of income.
The Agreement also contains a current ratio covenant which, as defined, must be at least 1.0. The total outstanding debt at June 30, 2010 under the Agreement, as amended, and the Secured Line of Credit was $310 million and $3 million, respectively, and $24 million in letters of credit have been issued under the facility, leaving $601 million in borrowing capacity available under the Agreement. The maximum amount available is subject to semi-annual redeterminations of the borrowing base, based on the value of the Company’s proved oil and gas reserves, in April and October of each year in accordance with the lenders’ customary procedures and practices. Both the Company and the banks have the bilateral right to one additional redetermination each year. The Company’s borrowing base of $938 million was reconfirmed in April 2010.
10.25% senior notes due 2014
On May 27, 2009, the Company issued in a public offering $325 million principal amount of 10.25% senior notes due 2014 ($325 million Notes). Interest on the $325 million Notes is paid semi-annually in June and December of each year. The $325 million Notes were issued at a discount to par value of 93.546%, and are carried on the Condensed Balance Sheet at their amortized cost. The deferred costs of approximately $9.5 million associated with the issuance of this debt are being amortized over the five year life of the $325 million Notes.
On August 13, 2009, the Company issued in a public offering an additional $125 million principal amount of its 10.25% senior notes due 2014 ($125 million Notes and, together with the $325 million Notes, the Notes). The $125 million Notes were issued at a premium to par value of 104.75%, and are carried on the Condensed Balance Sheet at their amortized cost. The deferred costs of approximately $1.9 million associated with the issuance of this debt are being amortized over the five year life of the $125 million Notes.
The $125 million Notes and the $325 million Notes are treated as a single series of debt securities and are carried on the Condensed Balance Sheet at their combined amortized cost.
8.25% senior subordinated notes due 2016
In 2006, the Company issued in a public offering $200 million of 8.25% senior subordinated notes due 2016 (the Sub notes). Interest on the Sub notes is paid semiannually in May and November of each year. The deferred costs of approximately $5.2 million associated with the issuance of this debt are being amortized over the ten year life of the Sub notes.
Financial Covenants
The Agreement contains restrictive covenants as described above. Under the Company’s Notes and Sub notes as long as the interest coverage ratio (as defined) is greater than 2.5 times, the Company may incur additional debt. The Company was in compliance with all of these covenants as of June 30, 2010.
|
|
|
As of June 30, 2010 |
|
|
Current Ratio (Not less than 1.0) |
|
6.0 |
|
|
Total Funded Debt Ratio to EBITDAX (Not greater than 4.50) |
|
2.8 |
|
|
Interest Coverage Ratio (Not less than 2.5) |
|
4.1 |
|
|
Senior Secured Debt Ratio to EBITDAX (Not greater than 3.75) |
|
0.9 |
|
Berry Petroleum Company
Notes to Condensed Financial Statements
The weighted average interest rate on the Company’s total outstanding borrowings was 7.3% and 7.0% at June 30, 2010 and December 31, 2009, respectively.
10. Income Taxes
The effective income tax rate for the three months ended June 30, 2010 and 2009 was 38.1% and 36.1%, respectively. The effective income tax rate was 37.9% and 33.0% for the six months ended June 30, 2010 and 2009, respectively. The increase in rate is primarily due to a one-time reduction in state deferred rates and uncertain tax positions in the prior periods. Reductions in the rate during the prior periods were the result of acquisitions in more tax favorable jurisdictions that reduced future state tax obligations, as well as favorable state tax incentives. The Company’s estimated annual effective tax rate varies from the 35% federal statutory rate due to the effects of state income taxes and estimated permanent differences.
As of June 30, 2010, the Company had a gross liability for uncertain tax benefits of $5.3 million all of which, if recognized, would affect the effective tax rate. Gross uncertain tax positions were reduced due to new evaluations of tax positions claimed. There were no significant changes to the calculation since December 31, 2009. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense, which is consistent with the recognition of these items in prior reporting periods. The Company had accrued approximately $0.7 million of interest related to its uncertain tax positions as of both June 30, 2010 and December 31, 2009.
11. Earnings per Share
Basic net income per common share is calculated by dividing adjusted net income available to common shareholders by the weighted average number of common shares outstanding during each period. Diluted net income per common share is calculated by dividing adjusted net income by the weighted average number of diluted common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for the diluted earnings per share calculations consist of unvested restricted stock awards and outstanding stock options using the treasury method. When a loss exists, all potentially dilutive securities are anti-dilutive and are therefore excluded from the computation of diluted earnings per share accordingly.
The two-class method of computing earnings per share is required for those entities that have participating securities. The two-class method is an earnings allocation formula that determines earnings per share for participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. Restricted stock issued prior to January 1, 2010 under the Company’s stock incentive plans has the right to receive non-forfeitable dividends, participating on an equal basis with common stock. Restricted stock issued subsequent to January 1, 2010 under the Company’s stock incentive plans no longer has the right to receive non-forfeitable dividends. Therefore, unvested restricted stock issued prior to January 1, 2010 must be allocated to both common stock and these participating securities under the two-class method. Stock units issued to directors under the Company’s nonemployee directors deferred compensation plan also have the right to be credited with non-forfeitable dividends, participating on an equal basis with common stock. Stock options issued under the Company’s stock incentive plans do not participate in dividends.
Berry Petroleum Company
Notes to Condensed Financial Statements
The following table shows the computation of basic and diluted net income (loss) per share from continuing and discontinued operations for the three and six months ended June 30, 2010 and 2009 (in thousands):
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
|
Net income (loss) from continuing operations |
|
$ |
89,023 |
|
$ |
(12,768 |
) |
$ |
106,692 |
|
$ |
29,010 |
|
|
Less: Income allocable to participating securities |
|
1,713 |
|
— |
|
2,133 |
|
712 |
|
||||
|
Income (loss) available for shareholders |
|
$ |
87,310 |
|
$ |
(12,768 |
) |
$ |
104,559 |
|
$ |
28,298 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net loss from discontinued operations |
|
$ |
— |
|
$ |
(212 |
) |
$ |
— |
|
$ |
(6,991 |
) |
|
Less: Income allocable to participating securities |
|
— |
|
— |
|
— |
|
— |
|
||||
|
Loss from discontinued operations available for shareholders |
|
$ |
— |
|
$ |
(212 |
) |
$ |
— |
|
$ |
(6,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic earnings (loss) per share from continuing operations |
|
$ |
1.65 |
|
$ |
(0.28 |
) |
$ |
2.01 |
|
$ |
0.63 |
|
|
Basic loss per share from discontinued operations |
|
— |
|
— |
|
— |
|
(0.15 |
) |
||||
|
Basic earnings (loss) per share |
|
$ |
1.65 |
|
$ |
(0.28 |
) |
$ |
2.01 |
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Diluted earnings (loss) per share from continuing operations |
|
$ |
1.64 |
|
$ |
(0.28 |
) |
$ |
2.00 |
|
$ |
0.63 |
|
|
Diluted loss per share from discontinued operations |
|
— |
|
— |
|
— |
|
(0.15 |
) |
||||
|
Diluted earnings (loss) per share |
|
$ |
1.64 |
|
$ |
(0.28 |
) |
2.00 |
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average shares outstanding - basic |
|
52,965 |
|
44,606 |
|
52,027 |
|
44,594 |
|
||||
|
Add: Dilutive effects of stock options and RSUs |
|
448 |
|
206 |
|
380 |
|
126 |
|
||||
|
Weighted average shares outstanding - dilutive |
|
53,413 |
|
44,812 |
|
52,407 |
|
44,720 |
|
||||
Options to purchase 0.8 million and 1.2 million shares were not included in the diluted earnings per share calculation for the three and six months ended June 30, 2010, respectively, because their effect would have been anti-dilutive. Options to purchase 1.7 million and 1.9 million shares were not included in the diluted earnings (loss) per share calculation for the three and six months ended June 30, 2009, respectively, because their effect would have been anti-dilutive.
12. Commitments and Contingencies
The Company’s contractual obligations not included in its Condensed Balance Sheet as of June 30, 2010 (except Long-term debt and Asset retirement obligations) are as follows (in millions):
|
|
|
Total |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
|||||||
|
Long-term debt and interest |
|
$ |
1,264.6 |
|
$ |
38.6 |
|
$ |
70.5 |
|
$ |
376.9 |
|
$ |
62.6 |
|
$ |
485.7 |
|
$ |
230.3 |
|
|
Asset retirement obligation |
|
49.3 |
|
1.0 |
|
2.9 |
|
2.8 |
|
2.8 |
|
2.9 |
|
36.9 |
|
|||||||
|
Operating lease obligations |
|
15.3 |
|
1.2 |
|
2.6 |
|
2.6 |
|
2.6 |
|
2.6 |
|
3.7 |
|
|||||||
|
Drilling and rig obligations |
|
31.5 |
|
6.0 |
|
25.5 |
|
— |
|
— |
|
— |
|
— |
|
|||||||
|
Firm natural gas transportation contracts |
|
126.7 |
|
9.9 |
|
19.7 |
|
17.6 |
|
15.7 |
|
14.8 |
|
49.0 |
|
|||||||
|
Total |
|
$ |
1,487.4 |
|
$ |
56.7 |
|
$ |
121.2 |
|
$ |
399.9 |
|
$ |
83.7 |
|
$ |
506.0 |
|
$ |
319.9 |
|
Operating leases
The Company leases corporate and field offices in California, Colorado and Texas. Rent expense with respect to its lease commitments was $0.6 million for both the three months ended June 30, 2010 and 2009 and was $1.1 million for both the six months ended June 30, 2010 and 2009.
In 2006, the Company purchased a corporate aircraft which was subsequently sold and contracted under a ten year operating lease beginning December 2006.
Berry Petroleum Company
Notes to Condensed Financial Statements
Drilling obligations
Included in the table above are the Company’s contractual obligations on its Piceance assets in Colorado. As of June 30, 2010, the Company must spud additional wells of its original 120 wells commitment by February 2011 to avoid penalties of $0.2 million per well. The Company’s satisfying this commitment and further developing these assets depends on Piceance infrastructure and access, drilling resources, including capital availability, and other factors, all of which will be further evaluated throughout the remainder of 2010.
Firm natural gas transportation
In July 2009, the Company closed on the financing of its E. Texas gas gathering system for $18.4 million in cash. The Company entered into concurrent long-term gas gathering agreements for the E. Texas production which contained an embedded lease. There is no minimum payment required under these agreements. For the three months ended June 30, 2010 and 2009, the Company incurred $1.5 and $0, respectively, under the agreements. For the six months ended June 30, 2010 and 2009, the Company incurred $2.6 million and $0, respectively, under the agreements.
In June 2009, the Company amended its natural gas firm transportation agreement providing for transportation of its gas from Tex-OK to Orange County, Florida (Zone 1). The agreement provides for minimum volume of 25,000 MMBtu/d and a maximum volume of 55,000 MMBtu/D.
The Company has long-term firm transportation contracts that total 35,000 MMBtu/D on the Rockies Express (REX) pipeline for gas production in the Piceance basin. The Company pays a demand charge for this capacity and its own production did not completely fill that capacity. To maximize the utilization of its firm transportation, the Company bought its partners’ share of the gas produced in the Piceance basin at the market rate for that area and used its excess transportation to move this gas to the sales point. The pre-tax net of its gas marketing revenue and its gas marketing expense in the Condensed Statements of Income (Loss) is $0.6 million for both the three months ended June 30, 2010 and 2009. The pre-tax net of its gas marketing revenue and its gas marketing expense in the Condensed Statements of Income (Loss) is $1.1 million and $0.9 million for the six months ended June 30, 2010 and 2009, respectively.
Berry has signed firm transportation service agreements with El Paso Corporation for an average total of 35,000 MMBtu/D of firm transportation on the proposed Ruby Pipeline from Opal, WY to Malin, OR. The expectation is that the project will proceed and be in service in 2011.
Other commitments
The Company is a party to a crude oil sales contract through June 30, 2013 with a refiner for the purchase of a minimum of 5,000 Bbl/D of its Uinta light crude oil. Pricing under the contract, which includes transportation and gravity adjustments, is at a fixed percentage of WTI. While the contractual differentials under this contract may be less favorable at times than the posted differential, demand for the Company’s 40 degree black wax (light) crude oil can vary seasonally and this contract provides a stable outlet for the Company’s crude oil. Gross oil production from the Company’s Uinta properties averaged approximately 2,720 Bbl/D in the first six months of 2010.
In December 2008, Flying J, Inc., its wholly owned subsidiary Big West Oil and its wholly owned subsidiary BWOC filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Also in December 2008, BWOC informed the Company that it was unable to receive the Company’s California production. Included in the allowance for doubtful accounts is $38.5 million due from BWOC. Of the $38.5 million due from BWOC, $11.8 million represents 20 days of the Company’s December 2008 crude oil sales, an administrative claim under the bankruptcy proceedings, and $26.7 million represents November 2008 and the balance of December 2008 crude oil sales which would have the same priority as other general unsecured claims. The Company has settled its claim in the Flying J bankruptcy and received a payment of $60.5 million on July 23, 2010. See Note 13 to the Condensed Financial Statements.
Berry Petroleum Company
Notes to Condensed Financial Statements
The Company has no material accrued environmental liabilities for its sites, including sites in which governmental agencies have designated the Company as a potentially responsible party, because it is not probable that a loss will be incurred and the minimum cost and/or amount of loss cannot be reasonably estimated. However, because of the uncertainties associated with environmental assessment and remediation activities, future expense to remediate the currently identified sites, and sites identified in the future, if any, could be incurred. Management believes, based upon current site assessments, that the ultimate resolution of any matters will not result in substantial costs incurred. The Company is involved in various other lawsuits, claims and inquiries, most of which are routine to the nature of its business. In the opinion of management, the resolution of these matters will not have a material effect on its financial position, results of operations or liquidity.
Certain of the Company’s royalty payment calculations are being disputed. The Company believes that its royalty calculations are in accordance with applicable leases and other agreements. However, the disputed amounts that the Company may be required to pay are up to approximately $6 million.
In July 2009, the Company received a notice of proposed civil penalty from the Bureau of Land Management (BLM) related to the Company’s alleged non-compliance during 2007 with regulations relating to the operation and position of certain valves in its Uinta basin operations. The proposed civil penalty was $69.6 million and reflects the theoretical maximum penalty amount under applicable regulations, absent mitigating factors. In 2007 the Company immediately remediated the instances of non-compliance, cooperated fully with the BLM’s investigation and the Company believes no production was lost, all royalties were paid and there was no harm to the environment. Due to the above mitigating factors, among others, the Company believes this matter will be resolved by the payment of a penalty that will not exceed $2.1 million and accrued such amount in the second quarter of 2009.
During the California energy crisis in 2000 and 2001, the Company had electricity sales contracts with various utilities and a portion of the electricity prices paid to the Company under such contracts from December 2000 to March 27, 2001 has been under a degree of legal challenge since that time. It is possible that the Company may have a liability pending the final outcome of the California Public Utilities Commission (CPUC) proceedings on the matter. There are ongoing proceedings before the CPUC in which Edison and PG&E are seeking credit against future payments they are to make for electricity purchases based on retroactive adjustments to pricing under contracts with the Company. Whether or not retroactive adjustments will be ordered, how such adjustments would be calculated and what period they would cover are too uncertain to estimate at this time.
13. Subsequent Events
On July 6, 2010, the Joint Plan of Reorganization of Flying J, Inc., BWOC, Big West Oil, LLC, Big West Transportation, LLC and Longhorn Partners Pipeline, L.P. was confirmed under Chapter 11 of the United State Bankruptcy Code. In addition, the United States Bankruptcy Court approved and confirmed that certain June 15, 2010 Stipulation and Agreed Order (the Stipulation) with Flying J Inc. and certain of its affiliates (collectively Flying J), regarding the resolution of the Company’s claim in Flying J’s pending bankruptcy. Pursuant to the Stipulation, each of the Company and Flying J agreed that the total amount owed to the Company by Flying J arising out of Flying J’s voluntary bankruptcy filed December 22, 2008 was $60.5 million and, as a result, the Company received $60.5 million in cash on July 23, 2010. In the second quarter ended June 30, 2010 the Company recorded a settlement of its Flying J bankruptcy claim of $22.0 million and a bad debt recovery of $38.5 million.
14. Correction of Other Comprehensive Income (Loss)
The Company noted a presentation error in the Statements of Comprehensive Income (Loss) and the related disclosures in Note 3 to the audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company has concluded that the presentation error was immaterial to the audited financial statements contained in the 2009 Form 10-K. The effects of the presentation errors are summarized in the tables below:
The components of comprehensive income (loss):
|
|
|
For the twelve months |
|
||||
|
|
|
As Previously Reported |
|
As Revised |
|
||
|
|
|
|
|
|
|
||
|
Net Income |
|
$ |
54,030 |
|
$ |
54,030 |
|
|
Unrealized gains (losses) on derivatives, net of income taxes |
|
205,318 |
|
(129,287 |
) |
||
|
Reclassification of realized (gains) losses, net of income taxes |
|
(31,249 |
) |
(44,782 |
) |
||
|
Comprehensive income (loss) |
|
$ |
228,099 |
|
$ |
(120,039 |
) |
The table below summarizes the impacts of the Company’s derivative instruments gains (losses) before income taxes reported in the Statements of Income (Loss) for the twelve months ended December 31, 2009:
|
|
|
|
|
Twelve Months Ended |
|
||||
|
Derivatives cash flow hedging relationships |
|
Location of Gain (Loss) |
|
Previously |
|
As Adjusted |
|
||
|
Commodity |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
(240.9 |
) |
$ |
(206.4 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Sales of oil and gas |
|
65.0 |
|
79.3 |
|
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
13.7 |
|
(0.6 |
) |
||
|
Interest rate |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
8.8 |
|
$ |
(2.7 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Interest expense |
|
(7.0 |
) |
(7.0 |
) |
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
— |
|
— |
|
||
The Company also noted that the presentation error existed in the quarterly filings for the periods ended March 31, 2009, June 30, 2009, September 30, 2009 and March 31, 2010 and the related disclosures in Note 4 for the periods ended March 31, 2009, June 30, 2009 and September 30, 2009. The Company concluded that the presentation error was immaterial to the previously filed financial statements. The effects of the presentation errors are summarized in the tables below:
The components of comprehensive income (loss):
|
|
|
For the Three Months Ended |
|
||||
|
|
|
As Previously Reported |
|
As Revised |
|
||
|
|
|
|
|
|
|
||
|
Net Income |
|
$ |
34,998 |
|
$ |
34,998 |
|
|
Unrealized gains (losses) on derivatives, net of income taxes |
|
78,577 |
|
(11,417 |
) |
||
|
Reclassification of realized (gains) losses, net of income taxes |
|
(29,022 |
) |
(38,138 |
) |
||
|
Comprehensive income (loss) |
|
$ |
84,553 |
|
$ |
(14,557 |
) |
Berry Petroleum Company
Notes to Condensed Financial Statements
The table below summarizes the impacts of the Company’s derivative instruments gains (losses) before income taxes reported in the Statements of Income (Loss) for the three months ended March 31, 2009:
|
|
|
|
|
Three Months Ended |
|
||||
|
Derivatives cash flow hedging relationships |
|
Location of Gain (Loss) |
|
Previously |
|
As Adjusted |
|
||
|
Commodity |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
45.4 |
|
$ |
8.3 |
|
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Sales of oil and gas |
|
48.2 |
|
62.5 |
|
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
22.7 |
|
22.8 |
|
||
|
Interest rate |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
(3.4 |
) |
$ |
(3.8 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Interest expense |
|
(1.0 |
) |
(1.0 |
) |
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
— |
|
— |
|
||
The components of comprehensive income (loss):
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
||||||||
|
|
|
As Previously |
|
As Revised |
|
As Previously |
|
As Revised |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net (Loss) Income |
|
$ |
(12,980 |
) |
$ |
(12,980 |
) |
$ |
22,019 |
|
$ |
22,019 |
|
|
Unrealized gains (losses) on derivatives, net of income taxes |
|
91,952 |
|
(73,055 |
) |
170,529 |
|
(84,472 |
) |
||||
|
Reclassification of realized (gains) losses, net of income taxes |
|
(9,583 |
) |
(9,314 |
) |
(38,605 |
) |
(47,452 |
) |
||||
|
Comprehensive income (loss) |
|
$ |
69,389 |
|
$ |
(95,349 |
) |
$ |
153,943 |
|
$ |
(109,905 |
) |
The table below summarizes the impacts of the Company’s derivative instruments gains (losses) before income taxes reported in the Statements of Income (Loss) for the six months ended June 30, 2009:
|
|
|
|
|
Six Months Ended June 30, |
|
||||
|
Derivatives cash flow hedging relationships |
|
Location of Gain (Loss) |
|
Previously |
|
As Adjusted |
|
||
|
Commodity |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
175.2 |
|
$ |
(138.3 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Sales of oil and gas |
|
40.2 |
|
79.1 |
|
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
14.6 |
|
0.3 |
|
||
|
Interest rate |
|
|
|
|
|
|
|
||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
(4.6 |
) |
$ |
2.1 |
|
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Interest expense |
|
(1.6 |
) |
(2.5 |
) |
||
|
Gain (Loss) Recognized in Income (Ineffective Portion) |
|
Realized and unrealized gain (loss) on derivatives, net |
|
(0.3 |
) |
(0.3 |
) |
||
Berry Petroleum Company
Notes to Condensed Financial Statements
The components of comprehensive income (loss):
|
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
||||||||
|
|
|
As Previously |
|
As Revised |
|
As Previously |
|
As Revised |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income |
|
$ |
19,007 |
|
$ |
19,007 |
|
$ |
41,026 |
|
$ |
41,026 |
|
|
Unrealized gains (losses) on derivatives, net of income taxes |
|
(563 |
) |
3,306 |
|
169,966 |
|
(81,166 |
) |
||||
|
Reclassification of realized (gains) losses, net of income taxes |
|
(454 |
) |
(2,289 |
) |
(39,059 |
) |
(49,741 |
) |
||||
|
Comprehensive income (loss) |
|
$ |
17,990 |
|
$ |
20,024 |
|
$ |
171,933 |
|
$ |
(89,881 |
) |
The table below summarizes the impacts of the Company’s derivative instruments gains (losses) before income taxes reported in the Statements of Income (Loss) for the three and nine months ended September 30, 2009:
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
Derivatives cash flow |
|
Location of Gain (Loss) |
|
Previously |
|
As Adjusted |
|
Previously |
|
As Adjusted |
|
||||
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gain (Loss) Recognized in AOCL (Effective Portion) |
|
Accumulated other comprehensive income (loss) |
|
$ |
(0.7 |
) |
$ |
9.3 |
|
$ |
174.5 |
|
$ |
(128.9 |
) |
|
Gain (Loss) Reclassified from AOCL into Income (Effective Portion) |
|
Sales of oil and gas |
</ | ||||||||||||