LETTER TO OUR SHAREHOLDERS

Dear Shareholders,

While 2009 was a year of challenging business fundamentals for the oil and gas industry, by maintaining our focus on execution we accomplished our operational goals and posted solid financial results. For 2009 we reported net income of $54 million or $1.17 per share and discretionary cash flow of $256 million for the year. In review, we highlight the additional following accomplishments:

WE DELIVERED ON OUR 2009 PRODUCTION FORECAST

We were able to generate average production of 30,034 barrels of oil equivalent per day (BOED), achieving the target which we had set for 2009. To do this we had to quickly replace critical California crude oil sales contracts lost in late 2008 by the bankruptcy of Flying J and resulting Bakersfield refinery closing. Our low decline rate legacy oil assets in California and solid performance from the diatomite supported our production totals.

WE IMPLEMENTED A PRICE-SENSITIVE CAPITAL BUDGET AND REDUCED OUR OPERATING COSTS

In response to our operating environment, we reduced our 2009 capital spending to $135 million from $398 million in 2008 and our people worked hard to continue to reduce operating costs where they saw opportunities. These efforts were supported by low natural gas prices that positively impacted our steam costs in California.

WE REPLACED OUR RESERVES

At year-end 2009 our estimated proved reserves were 235 million barrels of oil equivalent (BOE), which, after divestitures, are up 5% over our year-end 2008 total. We made some small acquisitions during 2009 that, when combined with our development capital, enabled the Company to add 21.5 million BOE of proved reserves resulting in a 200% replacement of our 2009 production at a finding, development and acquisition (FD&A) cost of $8.30/BOE.

WE REDUCED OUR DEBT AND INCREASED OUR LIQUIDITY

Our people worked hard at improving our balance sheet. Over the past 15 months or so, in addition to generating excess cash flow, we sold non-core assets, successfully executed two high-yield offerings, hedged oil and gas volumes to support our borrowing base and completed an equity offering in January 2010 to fund an acquisition as well as pay down debt. Our available liquidity after closing the west Texas acquisition on March 5, 2010, exceeds $650 million.

WE RE-FOCUSED OUR STRATEGY ON CRUDE OIL

Approximately 66% of our 2009 production and 55% of our proved reserves are crude oil, and we believe that we have the assets in the Company to materially increase our crude oil exposure. We are testing four heavy-oil pilots in California during 2010. One of these tests is our McKittrick 21Z asset that we acquired in the second quarter of 2009. These projects will add significant value to Berry.
At the end of 2009, we began looking for an oil acquisition in a scalable play that we could accelerate when oil prices are strong to complement our heavy oil assets, and we decided to enter the Wolfberry play in the Permian basin. In early 2010, we purchased 11.2 million BOE of proved reserves primarily in the Wolfberry for $126 million. We expect the assets to produce 1,300 BOED in 2010 and provide us with 130 drilling locations.
In 2010, we intend to maintain our focus on execution and have outlined these goals for the rest of the year:

• We will implement a price sensitive capital budget. Our 2010 capital budget will range from $250 million to $290 million, and will be adjusted as conditions such as commodity prices and opportunities warrant.
• We will return the Company to production growth. Our expectation is to increase overall production by 8% to 10% over 2009 levels, with 2010 production averaging between 32,250 and 33,000 BOED.
• We will maintain our focus on crude oil. We will invest approximately 70% of our capital in oil projects, with the majority of the budget allocated to our California assets.
• We will maintain a strong hedge position. Approximately 75% of our crude oil and 90% of natural gas production are hedged for 2010.
• We will operate within our 2010 cash flow. Our capital budget mid-point of $270 million falls within our anticipated internally generated cash flow of $275 million to $300 million for 2010.

In other items of note from 2009, we want to remember Ronald Robinson, a director of Berry Petroleum since August 2006, who passed away in August 2009. Ron brought with him a strong background of technical knowledge and experience which strengthened our board. Management and the board want to recognize his contributions to Berry during his tenure.

Also, Berry adopted a dividend reinvestment program and stock purchase plan to provide shareholders with the option to reinvest dividends and purchase shares of Berry’s stock directly.

Finally, as many of you are aware, we are proud to celebrate that 2009 marked Berry’s 100th anniversary as an oil and gas producer. We have presented an overview of this history in a commemorative booklet enclosed in this publication.

While much has changed over the last 100 years at the Company and in the oil and gas industry, Berry’s California assets still provide a strong foundation for the Company’s growth. We continue to operate some of the same properties that founded the Company in 1909.

Unchanged is Berry’s focus on execution and its desire for safe and environmentally sound development that has allowed the Company to deliver strong results throughout the commodity cycle. We look forward to 2010 as we chronicle the next chapter of Berry’s growth and development.

Sincerely,

Martin H. Young Jr.
Chairman of the Board

Robert F. Heinemann
President and CEO

March 19, 2010