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Berry Petroleum Co.

Sun, 14 Dec 2008|



Morning. -- next that's when he minutes or so and talked about Berry petroleum. What what makes very unique. You know -- a conservative company. Very -- based client assets. Not on a treadmill. There is here and -- it makes acquisitions. Going approved areas. Are proved reserves and -- those who serve so. Weird we do very little exploration in the company. And we offer investors -- upside to crude oil which is. Which is about 50% of our reserves are still crude oil -- -- -- 20000 barrels of oil today. Andy at 35 dollar to BT I realize that today we're not 35 dollars and TI. The two weeks -- weird 75 dollar that -- TI and so but any price -- is gonna generate free cash flow. We operate all of our assets. And we have the ability to adjust our capital. Based on commodity prices we'll talk about that just -- minute. -- company that had in 2200. Million girls -- have you on California. We still have a hundred million -- have you well in California. After producing thirty million girls were able to do that by. Developing our legacy assets finding new reserves on the assets we own and through acquisition in California. It's over the time period we've added light oil and natural gas to the portfolio. Today we have with our east Texas acquisition -- 225 million barrels. And in the portfolio. We've been able to do that at a very competitive -- -- with the exception of 2006 when we bought our piceance assets was -- -- probable reserves. Press Andy's been in that eight to ten dollar range as -- convert those kiosks reserves to prove we've brought that up and he backed down. In 2008 see the addition upper east Texas acquisition to -- chaos. For California -- are really low base decline that allows us to free cash flow from those assets and growth draft position. If you 2002 we are producing 141000 girls today. We added our UN to basin assets in 2003. We've been developing a -- a creek acquisition in California. 2005 we had our DJ assets and our production of 23000 girls today 2006 of our piceance assets. In 2008. -- bodies Texas. And ran for production at 35000 girls today today. So 2000 and nine for a various going to be eight year re calibration to you commodity price environment like everyone else we're looking for costs. To come down -- mr. with a declining market prices. For and invest in our high return war projects. -- completions and add production at low costs. -- -- -- costs across the work we're gonna free cash -- any price environment you know that. Very have a history of developing its -- -- cash flow you can see 2003 were generating more cash than we had. Capital expenditures. As we made acquisitions of -- those assets we've developed that within our cash flow. And in 200935. Dollar -- TI will generate a hundred million dollars of free cash flow and you sat pay down that. In any commodity price environment we are gonna generate free cash flow and just -- capital. To do that we've gone from twelve rigs running in 20084. Rigs running today. We have the flexibility to further change that based on commodity prices and we will do that we do operate all of our assets. And we have very little in the way of drilling -- commitments. One thing its interest in about period that might not be self evident is been heavy oil company with higher costs from generating steam. We have very competitive. You get -- margins. In California we have a differential -- -- less about eight dollars. Which provides for pretty healthy margin. In 2008 -- -- we generated about forty dollars ebitda margin limited by our hedges which have a a ceiling of about seventy dollars in 2009. At that same price -- 75 dollars. If you have a little bit of -- from hedging -- generate about Husseini the top margin. When things little unique producing heavy oil we consume a lot of natural gas to do that. Over time one of our reasons she diversify out of California into the -- -- require more natural gas. We did that in 2003 with -- position -- canyon which produces about 40% natural gas in 2005 with the DJ. Which produces about -- -- -- -- natural gas. To position today where we're -- long. But we still have all that consumption that offset some of our production so. And one dollar change in natural gas prices increases are revenue by about thirty million increase Iraq -- by about twelve million so. We have a lot less sensitivity natural gas and -- appeared that have the same production natural gas. And on the downside -- when prices are going down we get a benefit our California operating costs. 2008 will generate about 400 million dollars of free cash flow and spend about 400 million dollars in our capital program. It's only five dollar WTI will spend about 200 million. As commodity prices go down or up we can adjust that capital so at sixty -- -- might -- something like 150 million. You can see most of that drilling is in California -- we have -- return all projects developing our dynamite resource. Well some of the dollar's relative -- the Rockies where we're gonna. -- high impact -- completions in the piceance and developer east Texas assets which have a favorable differential. Very has generated cash and net income in various commodity price environment -- thirty dollar WTI. We're able to generate thirty million of net income. And -- prices change will. We'll continue to. Generate net income cash flow at any price -- In 20092010. Were fairly well here hedged. We have -- fifty dollar -- TI next year we have an average oil hedge price of 65 dollars. One of things we did earlier this year when apple prices for an 125 dollar -- -- put in 5000 barrels they have hedges between -- 10050. For 2009 and 2010. Those oil hedges have considerable value today. Something like a hundred to 200 million dollars in value. The -- on the commodity price. And we can monetize those -- if we so choose. Today we have about one point 15 billion dollars of that made up a few hundred million and he reporter senior secured notes senior unsecured notes. And then 950 million drawn -- over revolver. The borrowing base on under our revolver is one point 25 billion. We have -- commitments today about one point 123 million. And that increased last week by 43 million. We did have a new lender -- and aircraft silly last week to two really great things about that wanted to. To be able to battle and -- your borrowing base in your credit facility. Today's credit market feels pretty good. And two confirming our borrowing base as commodity price declines that at one point 25 billion. What's also pretty positive for us. With that increase our liquidity is about the 175 million dollars. And that's it's and by going to be TI. This is 270 million dollars and in the next year. Dynamite resource something we talk a lot about. -- amount oil here at 330 million barrels well placed on 450 acres. We're talking a 23% recovery factor with some other operators document in recoveries as high as 40%. Which provides additional upside for us. Dynamite resources very coarse rock -- that have you element in a very small -- face. No -- ability. We do three things here we inject steam which. Free -- were -- there's no pressure and the -- we're because it's very -- Fractures the rock. So we don't actually have to practice. These wells these steam actually fractures the -- -- -- heat to let that will flow. So the mechanism production -- -- inject steam. The rocket very impressive also possible the rest of war we stop injecting steam the way to the over were now actually pushes -- pushes the oil to the world war. We don't he's a -- -- the the benefit of this production mechanism is one we don't have these -- like we do in the rest for -- -- production. She we don't have -- fractal well saves on capital costs and next economics that much better. Consider amount of value in the data mining we've given you all the economics here you can -- about you at -- price stack. They -- site here processing for improving recovery factor from 23% 40%. But even -- 23% considerable amount of value in this asset. It's economic forty dollar -- TI will continue to draw this project it. Virtually any price level. In our legacy asset in -- midway sunset. And this is the asset food that's been of the company forever. We're doing a couple things here to offset the base declined. Drilling deeper horizontal wells right -- -- -- contact. That that's helped offset the decline the second thing we're doing is -- drilling. And optimizing steam placement at the -- of the rest war where the -- we're still remains cold. And those two things together it's helped produce the decline here -- at 60% decline. What's gonna return south and we sunset to growth is apple. 1909. We've re looked at this rest were like we do all of our -- -- -- assets. We still have principal amount of oil in place here will recover 21 million barrels here. Over the next few years as we develop this asset part of -- in the dynamite. In assassin part of this and traditional -- so the the contribution of that will be to our. Production base itself -- were turned south and it -- growth. -- as a creek is an asset we purchased in 2003 for three million dollars. We would love to have a ten more these we've ramp production from virtually nothing to over 3000 -- today today. But to continue develop this asset over the next couple of years. In 2010 should be fully developed will peak production at 45 are girls that. Earlier this year we paid 650 million dollars acquired debt to assets in east Texas. 370 BC -- TP reserves. We took over operations here on November 1 from the cellar and we start develop its asset. Couple of reasons we -- Texas. First we want do you find some gas assets that -- price disadvantage from me at differential perspective. In -- -- really -- sort of the low risk for pupil development. Nature carries acquisition profile and talk about that divorce. First field limestone county this is with is really what we bought -- -- -- for. Seven productive sands fell 3.3. BCF per well you our -- and and fill. Development this is this is exactly the kind of development period likes to do. Make acquisitions with proved. With proved reserves and development upside infill development. Second asset. -- and counting. You're productive sands. About one point seven BCF per well to forty Acre infill. And will continue to develop that. Upside here is that haynesville shale from me but we bought this property -- actually wasn't target forests it develops or -- we were closing its acquisition. We drove for for a -- wells here. You can see of one of our peers that has. Use the well -- for mark to appears number six it's one of the best that Haiti. Haynesville wells in the in the chart there. We believe we have a hundred BCF -- potential. And we've we've we've -- that up with our vertical wells will begin -- horizontal development this next year. So next year run she -- the east Texas one. Developing the haynesville another in -- stone county developing. And we have a number of re completions in which it helps to keep this production flat picture. In a 2006. -- about 300 million dollars for two assets most of our development here is on the -- says. -- about 101000 feet the -- -- -- one and a half -- per well you are. -- a little over a hundred wells we have not heard more -- to drill. The big focus in the -- has been reducing days to drill wells. We've dance we've been successful that eleven days is the average today -- -- well in the piceance. -- is still -- competitive. Because the differential Iraqis. In addition to you reducing the drilling days focus in 2009. It's gonna beat you increase you -- leverage on the success other operators and increasing UR. In the -- the combination of reducing drilling days and you warrants will -- the space and be competitive. Really what we need here's more take what capacity. And so we have 35 million a day of firm transportation on Rockies express and we're gonna Taylor development. To -- that firm transportation. And look for additional take quick -- in -- few months. In human to basin we bought these assets of 2003. -- number of wells here in ramp production over 66000. Girls today. The additional development conference standings really in this -- or -- in the actually forest. We have any IDS were -- approval expected in mid 2009 which opened up another 300 or so drilling locations. And that'll be be primary development assassin in the future. Second potential here is water -- development we -- a number of twenty Acre infill wells and leaders -- potential for water flood will be piloting that sometime in 2000. Spending on my friends. So when things people last this is how can we grow production next year by turning our capital budget -- -- entering a rigged by 75%. You see low -- decline -- -- California assets combined with the growth in production that I am right. We add and high impact -- completions in east Texas in the piceance. We grow production from third 2500. To about 36 and a half. Next year. Wrap things up. Barry's gonna make money generated net income and cash flow it low in high commodity prices we're -- just for capital budget to be within cash flow. Our data mining asset has compelling that an asset value it at lower commodity prices. Our asset base is low risk for people development. We have a firm -- -- slow decline. California assets -- which a fund our development. And -- track record of at generating free cash flow. We operate all of our assets. So we have the ability to. We had a billion just for capital budget -- any any money pricing environment. So we have very little -- commitments most of our production is held by production. So next year as we look for commodity prices. Stabilize in costs come down we can grow production. And and just for capital budget -- cash -- With that I will say we had our analyst state last week. We gave a detailed overview of -- dynamite asset. David. That presentation as -- -- website and if you have any questions that entertainment's in Africa.

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