Berry Petroleum Company >>>

Transcription

1 1 Berry Petroleum Company >>> Lehman Brothers CEO Energy Conference Presented by Robert F. Heinemann President and Chief Executive Officer September 6, 2006

2 Safe Harbor Statement Safe harbor under the Private Securities Litigation Reform Act of 1995 Any statements in this presentation that are not historical facts are forwardlooking statements that involve risks and uncertainties. Words such as will, intend, continue, target(s), expect, achieve, strategy, future, or other comparable words or phrases or the negative of those words, and other words of similar meaning indicate forward-looking statements and important factors which could affect actual results. Forward-looking statements are made based on management s current expectations and beliefs concerning future developments and their potential effects upon Berry Petroleum Company. These items are discussed at length in Part I, Item 1A on page 16 of the Company s Form 10-K filed March 3, 2006 with the SEC and as updated in PART II, Item 1A. Risk Factors of Berry's June 30, 2006 Form 10-Q filed on August 9, September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 2

3 3 Berry Petroleum: Founded in California Diatomite Midway- Sunset Montalvo Poso Creek Placerita 1909 Berry Petroleum founded after discovery well at Midway-Sunset 1965 Thermal recovery and operations 1989 Listed on the NYSE 1990 Acquired Montalvo 1995 Purchased first of 3 cogen plants 1999 Acquired Placerita 2001 California electricity crisis forces shut-in of steam injection 2003 Acquired Poso Creek 2004 Initiated Diatomite pilot

4 4 Change is Accelerating but Strategies Remain Intact Move into new oil and gas basins Expand the asset portfolio through acquisition and development Accelerate the execution of our field development plans Deliver powerful results and shareholder value

5 5 A Move Into More Oil & Gas Basins 2003 & 04 Uinta Basin 2005 DJ Basin 2006 Piceance Basin

6 6 Expanding Portfolio of Reserves Reserves will diversify further with the Piceance acquisition resulting in a more balanced reserve portfolio. Berry Jan Berry Estimated Year-End 2005 Berry Estimated Year-End % Increase 74% Heavy oil 16% 77% Heavy oil Increase 60% Heavy oil 100% Heavy oil 8% Light 18% Gas 13% Light 27% Gas 98 MMBOE Proved Reserves 126 MMBOE Proved Reserves 146 MMBOE Proved Reserves

7 7 Accelerating Development and Capital Program $300 $250 $200 $150 $100 $50 $0 Capital Program, $MM $42 $45 $16 $28 $26 $27 Additional Capital added $72 $136 $89 $47 $170 $ Rockies & Mid-Continent California $275 $ Wells Drilled in Wells Drilled Est. Wells for Achieved Reserve Replacement Rate of 296% F&D costs less than $9.50/BOE

8 8 Delivering Consistent Production Increases Total average daily production (BOE) 27,000 24,000 21,000 18,000 15,000 12,000 9,000 6,000 3,000 0 Heavy oil 100% Gas 16% Light oil 14% Heavy oil 70% 4-year CAGR is estimated at 16% Estimate Gas 22% Light oil 15% Heavy oil 63% E

9 9 Berry s Current Portfolio Berry s portfolio of assets is bigger and more concentrated than in the recent past. Acquisition and Divestment Discovery Appraisal Development Production Harvest Uinta BLM Tri-State Bakken S. Midway Sunset So Cal Steamfloods DJ Assets Uinta Assets Piceance N. Midway Diatomite

10 10 Berry s Legacy Asset: Midway-Sunset Field Total average daily production (BOE) 15,000 12,100 12,200 11,500 12,000 10,700 10,000 South Midway-Sunset Properties 13 º Gravity Crude Pre-2004 Horizontals 2004 to Present Horizontals 5, (E) Reserves: 68 MMBOE 54% of total Operator, 90% WI Midway Sunset Horizontal wells Improve ultimate recovery Lower the capital cost and operating cost Accelerate production

11 S. Midway-Sunset Ethel D Redevelopment First property acquired by CJ Berry in 1909 Averaged 150 BOPD over the past 20 years from cyclic steam stimulation New steamflood pilot initiated in mid Expansion to full-scale project planned for ,250 1, Main formation with remaining oil saturation > 50% 0 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 11

12 California Diatomite Expansion Underway 750 Diatomite Pilot Production Electron microscope picture of a diatom Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec Capital: $25 MM, 50 well expansion Test new pattern size and layout; 16 new sevenspot patterns with 31 new producers September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 12

13 13 Pilot Expansion in Heated, Pressurized Tiltmeter data indicates where the reservoir is heated from steam injection and that pilot areas are pressurized 2006 expansion focuses on drilling producing wells in heated areas that will respond quickly Latest well productivities are encouraging Proposed 2006 Prod. (Drilled) Producer 2006 New Prod. (Planned) Producer drilled 2006 Proposed Inj. (Drilled) Injector 2006 New Inj. Injector (Planned) Injector Producer TO P28-34 P33-35

14 14 Project Steam Oil Ratio Continues to Improve SOR Jun-04 Aug-04 Instantaneous & Cumulative SOR Cyclic Steaming with Continuous Injection Oct-04 Dec-04 Feb-05 Apr-05 Injection Flow Back for Drilling and Expansion Jun-05 Aug-05 Oct-05 Return to Injection Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Without new producers, SOR continues to trend downward 2006 drilling program designed to enhance the SOR by filling in many of the inverted 7-spots with significantly more producers than injectors: 38 producers 11 injectors 1 Temperature Observation Original pilot was focused on per well productivity with a higher number of injectors per producer Expansion focuses on bounding injection and reducing number of injectors per producer; resulting in lower SOR

15 Continued Growth at Brundage Canyon 6,000 Total average daily production (BOE) 5,500 5,080 Lake Canyon Greater Altamont/Bluebell 5,000 4,380 4,000 Greater Monument Butte 3,000 2,000 1,000 1,200 Brundage Canyon 0 Acq (E) Reserves: 15 MMBOE (12% of total) Brundage Canyon First light oil acquisition $45 MM 42 degree API gravity waxy crude Large drilling inventory Producing from Green River formation at depths above 6,000 feet Operator, 100% WI September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 15

16 Brundage Canyon Outlook 87 existing wells at purchase 80 wells in drilling program 53 wells in wells in 06; over 350 locations remaining based on: 40-acre infill; two rig running Ashley Forest drilling to the south (8 wells in 06) Currently piloting 20-acre infill Brundage Canyon Field, Uinta Basin, UT (44,000 acres) H

17 Lake Canyon Upside Parallel appraisal and development strategy DLB Barrett Deep Nielsen Marsing 96 Bopd 13 Mcfd (2 zones tested) Taylor Herrick 105 Bopd 346 Mcfd (5 zones tested) 169,000 gross acres, 56.25% WI Drilled two successful Green River tests: Taylor Herrick 163 Boepd Nielsen Marsing 98 Boepd 56.25% WI Plan to drill four to eight confirmation wells in second half of 2006 Permitting 32 locations in the immediate township; will initiate a 200 well EA with BIA assuming the role as federal lead agency; completion of the EA process is expected mid Township resource potential locations assuming 80 ac/well BBC is permitting 7 additional Wasatch tests with the intention of drilling 4 wells in the 4th quarter September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 17

18 18 Niobrara Natural Gas Total average daily production (BOE) 2,500 2,250 2,000 1,600 1,460 1,500 NE 1, CO KS 0 Acq (E) Reserves: 17.4 MMBOE 14% of total Niobrara First mid-continent acquisition 1/ 05 $105 MM for 140 Bcf resource Significant additional development: 500 locations 40-acre infill approved Shallow, repeatable Operator, 50% WI

19 Piceance Basin: 2006 Acquistions Garden Gulch: Acquired January 06 ($159 million) 6,314 gross/3,157 net acres 240 Bcf risked 2P reserves (330 Bcf unrisked N. Parachute Ranch: Acquired June 06 ($153 million) 4,348 gross/ 4,130 net acres 336 Bcf risked 2P reserves (520 Bcf unrisked) Operational synergies Piceance Basin Overview 10,000 Williams Fork (Mesaverde) Long-lived, low geologic risk Over 1,000 drilling locations Currently 3 rigs running, adding 3 by year-end Production of 12 MMcfe/d (gross), 5 MMcfe/d (net) Garden Gulch Berry Leasehold Positions N. Parachute September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 19

20 20 Garden Gulch & N. Parachute Ranch Update Berry Leasehold Positions North Parachute Ranch Garden Gulch Piceance production is currently 20.1 MMcfpd gross, or 7.8 MMcfpd net from 19 active wells. Berry has now completed 11 wells (with another six partially completed) with production results continuing to meet our expectations with well IP s ranging from 1.3 to over 2.0 MMcfpd. Currently drilling with 3 rigs and expect 2 more rigs by the end of the third quarter. Berry has drilled 10 valley wells to date All 3 rig are now drilling their initial Mesa locations with two rigs on Garden Gulch and one rig on North Parachute Ranch Executed an advantageous gathering agreement with EnCana for both the Garden Gulch and the North Parachute Ranch acreage Immediately resolved curtailment issue Connects to a superior system with higher capacity and lower operating pressures

21 Repeatable Development Low Geologic Risk Large blanket resource identified across field Remaining locations are categorized as probable due to surrounding production EUR average of 1.4 Bcfe Known resource, accelerated development an option September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 21

22 22 Berry s Current Portfolio Berry s portfolio of assets is bigger and more concentrated than in the recent past. Acquisition and Divestment Discovery Appraisal Development Production Harvest Uinta BLM Tri-State Bakken S. Midway Sunset So Cal Steamfloods DJ Assets Uinta Assets Piceance N. Midway Diatomite

23 Estimates Net Prod. BOE/Day 25,300-25,800 West Texas Intermediate/Bbl $70.00 Henry Hub Gas/MMBtu $ 8.00 Avg. Sale Price/BOE $52.50 Op Costs/BOE $ $13.25 Production Taxes $ $1.65 Exploration Costs/BOE $.45 - $.65 G&A/BOE $ $3.80 DD&A/BOE $ $7.50 Interest Expense/BOE $.90 - $1.30 Effective Tax Rate 39% - 40%

24 24 Revenues In millions of $ $600 $500 $400 $300 4-year CAGR is estimated at 41% $275 $407 $513 $200 $100 $131 $181 $ E Oil Sales Electricity Sales Natural Gas Sales CAGR=Compound Annual Growth Rate Estimate based on $65/Bbl WTI Crude price and $8/Mcf Henry Hub gas price

25 25 Cash Flow In millions of $ $300 $250 $253 $200 $188 $150 4-year CAGR is estimated at 45% $100 $125 $50 $58 $65 $ E Estimate based on $65/Bbl WTI Crude price and $8/Mcf Henry Hub gas price

26 Proved Reserves In millions BOE 3.3 BOE of reserves per share* 175 Est. Reserve life of 14 years* Est. * Based on proved reserves with Piceance acquisitions, and fully diluted shares of 45 million September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 26

27 Berry Financial Returns Three year Compound Annual Growth Rate 45% Return on Capital Employed and Shareholders Equity Revenue 31.0% 40% 37.63% Earnings 51.4% Cash Flow 42.7% 35% 30% 25% 26.29% 30.05% 33.29% Berry is achieving stellar returns due to strong commodity prices and successful execution of our growth strategy 20% 15% 10% 5% 0% 17.49% 15.44% ROCE ROE September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 27

28 Expectations Double-digit production growth Determine commerciality of CA diatomite project Executing $275 million capital program Accelerating Piceance development program Active appraisal of exploitation opportunities Continued excellent earnings and cash flow Significant increase in proved reserves Targeting 146 MMBOE

29 Outlook Strong future crude oil and natural gas fundamentals Solid free-cash flow generating asset base 2,000 drilling locations will increase production 15% for next four years Have material development opportunities Garden Gulch and North Parachute Ranch Diatomite Lake Canyon Low leverage allows for additional growth through acquisitions Experienced team focused on goals September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 29

30 Contact Information Ralph J. Goehring Executive Vice President & CFO Shawn M. Canaday Treasurer Todd A. Crabtree Investor Relations Specialist Berry Petroleum Company 5201 Truxtun Ave., Ste. 300 Bakersfield, CA Phone: Fax: website: September 6, Berry Petroleum Company Lehman Brothers CEO Energy Conference 30