Berry Petroleum Enters Agreement With SoCal Edison: Restarts Its 42 Megawatt Cogeneration Facility and Provides Update.

Business Editors

TAFT, Calif.--(BUSINESS WIRE)--July 19, 2001

Berry Petroleum Co. (NYSE:BRY) today announced that it has entered into an agreement with Southern California Edison Company (Edison) whereby Edison will buy all the power generated at Berry's Placerita 42 megawatt (Mw) cogeneration facility located in northern Los Angeles County, Calif.

This agreement has allowed Berry to restart both 21 Mw units that had been shut down since February and April 2001 due to nonpayment and contract issues with Edison.

Jerry V. Hoffman, chairman, president and chief executive officer, stated: "We have been generating almost 90 Mw of power through our cogeneration facilities since we restarted both our Placerita cogeneration units on June 27, 2001, when we entered into the agreement.

"The agreement was approved by the California Public Utilities Commission on July 12, 2001, and became effective by Edison's notice to Berry, which was received on July 18, 2001. The previously terminated contracts with Edison have been amended to reflect revised pricing, a stay of litigation against Edison which may last as long as 180 days, and other necessary modifications.

"The contracts will continue with their original termination dates: March 2009 for Placerita I and May 2002 for Placerita II. We believe the amended pricing formulas under these contracts will be positive for Berry and will result in negligible steam cost."

Hoffman continued: "In the last eight months, our business has been dramatically impacted by the events surrounding the California electricity crisis; these include nonpayment by the utilities for electricity deliveries, the Pacific Gas & Electric Company (PG&E) bankruptcy, political and regulatory uncertainty, litigation issues and uncharacteristically high natural gas prices.

"We believe we have successfully maneuvered Berry through these issues and can now, once again, focus our efforts on developing our reserve base, increasing our oil production and property acquisitions. We will begin our drilling program in August and are planning 10 horizontal wells on our South Midway-Sunset properties, which should have the most impact to our production rate, which averaged about 13,600 barrels of oil equivalent per day in the second quarter."

There remains a significant concern as to Edison's solvency; thus, under the terms of the agreement, Berry will be prepaid for each month's power deliveries. Edison and PG&E owe Berry approximately $15 million and $12 million, respectively, plus interest for a total exceeding $27 million for power deliveries from November 2000 to March 27, 2001.

Subject to the Edison stay of litigation and PG&E bankruptcy procedures, Berry continues its efforts to recover these amounts. Berry's cogeneration facilities are producing electricity for the citizens of California and steam for the company's heavy oil production operations.

Ralph J. Goehring, senior vice president and chief financial officer, added: "In late May the company entered into a one-year zero cost collar hedge contract on 3,000 barrels of oil per day (BOPD). The purpose of this hedge is to protect the company's cash flow from a severe decline in crude oil prices.

"We have established a $25.60 per barrel West Texas Intermediate (WTI) floor or approximately a $20 per barrel price for 13 degrees heavy oil floor on 3,000 BOPD beginning on June 1, 2001. On a WTI monthly average basis, Berry will receive payment if WTI trades between $25.60 and $20.00 and Berry will pay on the hedge if WTI trades between $29.38 and $33.00.

"In addition, the company has subscribed to 12,000 MCF/D of firm capacity on the Kern River Pipeline beginning approximately May 1, 2003, to provide for shipment of natural gas to Berry's operations as part of our long-term strategy of securing low-priced gas for fuel used in steam production."

Berry Petroleum is a publicly traded independent oil and gas production and exploitation company with its headquarters in Taft.

Safe harbor under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties. Although the company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include, but are not limited to, the timing and extent of changes in commodity prices for oil, gas and electricity, So Cal border pricing for natural gas, pipeline capacity for natural gas to and within California, a limited marketplace for electricity purchases and sales within California, competition, environmental risks, litigation uncertainties, drilling, development and operating risks, uncertainties about the estimates of reserves, the prices of goods and services, the availability of drilling rigs and other support services, legislative, California Public Utilities Commission, Federal Energy Regulatory Commission, and/or judicial decisions and other government regulation.