Berry Petroleum, owner of the Placerita oil field in Newhall, produced 9 percent more oil and natural gas in 2011 than in 2010 in California, Utah and West Texas and is on track for a similar increase in 2012, according to an earnings statement released Thursday.
The company beat Wall Street expectations with adjusted fourth-quarter profits of $42 million (76 cents per share) and adjusted full-year profits of $149 million ($2.69), after accounting for a $457 million non-cash impairment associated with Berry’s natural gas reserves in East Texas.
The East Texas reserved were reclassified from proved to probable due to current low natural gas prices, and the company wrote them off in the fourth quarter because they probably won’t be developed within five years of the date they were originally recorded as proved.
Before the write-down, Berry’s net losses were $415 million ($7.62) for the quarter and $228 million ($4.21) for the year.
While the company’s overall natural gas reserves were down 15 percent to 89 million barrels as of Dec. 31, Berry invested $527 million in development capital and made another $158 million of oil acquisitions during 2011 to grow its three major basins, which make up 73 percent of the company’s proved reserves – 44 percent in California (chiefly Kern County), 21 percent in West Texas’ Permian basin and 8 percent in Utah’s Uinta basin.
The investment pushed Berry’s proved oil reserves 12 percent higher to 186 million barrels.
Berry CEO Robert Heinemann said the company’s per-barrel profit margin increased in 2011 and the company produced a higher ratio of oil versus gas.
“Our operating margin grew to $45 per (barrel) in 2011 from $36 per (barrel) in 2010 driven by oil production which increased from 66 production of production in 2010 to 70 percent of production in 2011,” he said.
Heinemann said the company plans to invest millions more on oil production in 2012 and expects a $50-per-barrel profit margin.
“In 2012, we will continue to focus on growing oil production in California, the Permian and Utah which should drive improved margins and cash flow. We plan to invest between $600 (and) $650 million and grow total production to between 38,000 (barrels per day) and 39,000 (barrels per day),” he said.
“While the mid-point of our guidance reflects eight percent total production growth over 2011, our oil production is expected to grow by nearly 20 percent in 2012 and our production stream should increase to over 75 percent oil for the year,” he said. “We expect our natural gas assets will decline approximately 20 percent during the year. Growth in our oil assets should allow us to continue growing our margin to approximately $50 per BOE in 2012 at current prices.”
In the statement, COO Michael Duginski said development of the diatomite region in Kern County was impacted in 2011 by regulatory holdups – Gov. Brown fired two regulators late in the year who were holding things up – but the region should pick up for Berry in the second half of 2012.
In addition to drilling new wells in Texas and Utah, Duginski said the company will invest another $120 million in California during 2012 in Kern County’s South Midway-Sunset region, and in steam injection projects at McKittrick, Fairfield, Pan and Main Camp, which are located in the region that includes Placerita. He didn’t specifically mention Placerita.