For the first quarter of 2007, net production averaged 25,490 barrels of oil equivalent per day (BOE/d), an increase of 9% from the 23,461 BOE per day achieved in the first quarter of 2006 but down compared to fourth quarter 2006 production of 26,889. The average realized sales price, net of hedging, for the first quarter of 2007 was $43.84 per BOE, down 10% from the $48.45 per BOE received in the 2006 period. Revenues were flat at $117 million for each quarter period. Discretionary cash flow totaled $53 million in the first quarter of 2007, down from $55.5 million in the comparable 2006 period, but higher than the $51.7 million achieved in the fourth quarter. (Discretionary cash flow is a non-GAAP measure; see reconciliation below.)
Net income for the first three months of 2007 was down from the comparable 2006 period due to lower realized oil and gas prices, higher operating costs that reflect a 15% increase in steam volumes in California, and increased depreciation, depletion & amortization (DD&A) charges related to increased development activity and increased interest expense.
Mr. Heinemann stated, "We have a positive outlook for our production volumes going forward. For 2007 we are targeting net average production of between 27,000 and 28,000 BOE/d as we see our production volumes growing in each of the remaining quarters of 2007. For the first quarter, production was down on our Uinta basin assets due to refinery constraints which hampered crude deliveries and caused us to shut in wells. Production is back on track in the Uinta region at approximately 6,000 BOE/d.
"Performance of our California growth assets is good with solid increases in our Poso Creek and Ethel D production. We plan to accelerate development at Poso Creek with over 70 wells this year as the reservoir performance is above expectations. Our diatomite asset is performing well. It averaged 600 Bbl/d in the first quarter of 2007 compared to 400 Bbl/d in the fourth quarter of 2006 and is currently approaching 1,000 Bbl/d with a field-wide steam to oil ratio of 7 to 1. Our next phase for development drilling in the diatomite is scheduled for the second half of the year. Production from our most mature California assets declined and we are focused on improving the subsurface heat transfer here. Additionally, we plan to drill several horizontal infill wells on our South Midway-Sunset properties in the second and third quarters of 2007.
"We are executing our development program as expected in the Piceance and DJ basins. In the Piceance basin, the completion of the Garden Gulch mesa pipeline late in the first quarter will enable significant production growth, and subsequent to the quarter end, three North Parachute Ranch wells and eight Garden Gulch wells have been completed and put on production. Twelve additional wells are expected to be drilled and on production by the end of the second quarter of 2007. We are making excellent progress in reducing our days to drill these wells, and thus reducing the cost, and have expectations to consistently drill our mesa wells in less than 25 days. Production from our Piceance wells is on target with our first 30 days production averaging in excess of 1.2 MMcf/d per well. Companywide we expect production in the second quarter to increase to average nearly 27,000 BOE/d.
"We anticipate that our capital expenditures for 2007 will range from $227 million to $267 million and will vary based on our cash flow and overall well response. Our cash flow from operations is expected to fund a high percentage of our development activities."
During the first quarter of 2007 the Company drilled 124 gross (88 net) wells with a success rate of 99 percent.
Ralph J. Goehring, executive vice president and chief financial officer, stated, "Total oil and gas operating costs of $33.6 million in the first quarter of 2007 were slightly less than the $33.8 million we incurred in the fourth quarter of 2006. On a per BOE basis our cost was up about 7% as production volumes were down. Cost pressures do remain, but we are working to offset them with improved efficiencies. Our cost per BOE was up by 20% from the first quarter of 2006 primarily due to an increase in steam costs, company and contract labor and transportation, compression and gathering costs. We are moving forward on the sale of our Montalvo properties and expect to receive approximately $60 million before adjustments in the second quarter. We have a very active development program for the remainder of the year and expect to see increasing production, and assuming stable oil and gas price realizations, increasing cash flows and earnings for the next several quarters."
Berry Petroleum Company is a publicly traded independent oil and gas production and exploitation company with its headquarters in Bakersfield, California.
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