Berry Petroleum: Promising Resources in Utah, Colorado, and California

| About: Linn Energy, (LINEQ)

Chief Executive Bob Heinemann of buy-recommended Berry Petroleum (BRY) expects more than 10% annual volume growth for several more years despite a temporary curtailment of new light oil production in Utah.

Rocky Mountain crude oil values have been buffeted by more supply from producers like Berry, at the same time large incremental volumes of synthetic light crude oil and heavy oil are flowing south from Canada. Choosing an assured outlet over a higher price, Berry has entered into a 5-year contract that gives it the confidence to continue to pursue expanding production.

Ironically, Berry seemed to be reducing its exposure to market limits by diversifying away from heavy oil in California. Fourth quarter 2006 results reported February 28 exposed the wider crude oil price differential that also contributes to a lower cash flow for 2007. Though net present value [NPV] of $44 a share looks high relative to current cash flow, we see potential in Utah oil, Colorado Piceance Basin natural gas and California diatomite oil to boost future cash flow.

Small cap Berry has a half weighting in our illustrative energy portfolio concentrated on real assets that promise a high return providing clean fuel for global growth.

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