Berry Corporation Reports Second Quarter 2023 Results

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Aug 02, 2023

DALLAS, Aug. 02, 2023 (GLOBE NEWSWIRE) -- Berry Corporation (bry) ( BRY) (“Berry” or the “Company”) announced second quarter 2023 results, including net income of $26 million or $0.33 per diluted share, Adjusted Net Income(1) of $12 million or $0.15 per diluted share, cash flow from operating activities of $63 million and Adjusted EBITDA(1) of $69 million.

Quarterly Highlights

  • Generated Adjusted EBITDA(1) of $69 million and Adjusted Free Cash Flow(1) of $34 million
  • Delivered strong operational results, with a nearly 7% increase in production over first quarter 2023
  • Repurchased more than 1.4 million shares of common stock at an average price of $7.04 per share
  • Declared total dividends of $0.14 per share
  • Signed agreement to acquire Kern County producer Macpherson Energy Corporation for $70 million funded partially through capital reallocation

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(1) Please see “Non-GAAP Financial Measures and Reconciliations” later in this press release for a reconciliation and more information on these Non-GAAP measures.

“In the second quarter we successfully executed on our strategy to deliver meaningful returns,” said Fernando Araujo, Berry’s CEO. “Our operational and financial performance was strong. We delivered a nearly 7% increase, or more than 1,600 boe per day, in production volumes quarter over quarter with less capital than planned. Additionally, we reduced lease operating expenses, net of hedges, by 23% compared to the first quarter, driven by lower fuel prices and a reduction in lease maintenance costs. As a result, we will pay total dividends this quarter of $0.14 per share, fixed plus variable. We also opportunistically repurchased 1.4 million shares in the open market at an average price of $7.04 per share.

“We are excited about our pending acquisition of Macpherson Energy Corporation, achieving our important strategic objective to acquire accretive, producing bolt-on assets. This transaction provides additional production and improved capital efficiency and will be funded partially through a reallocation of $35 million of capital in 2023. The Macpherson assets are high-quality, low decline oil producing properties, and are a natural fit with our existing rural Kern County portfolio. In addition to the attractive base production, we see upside for near-term production enhancement and development opportunities,” Araujo said.

Second Quarter 2023 Results

Net income was $26 million in the second quarter 2023 compared to a net loss of $6 million in the first quarter 2023 while Adjusted EBITDA was $69 million and $59 million, respectively. The 17% increase in Adjusted EBITDA was largely driven by increased production, coupled with lower fuel prices and lease maintenance costs, slightly offset by lower oil prices.

The Company's average daily production increased in the second quarter 2023 to 25,900 boe/d compared to 24,300 boe/d in the first quarter 2023. Company-wide oil production in the second quarter 2023 was 24,000 bbl/d, accounting for 93% of total Company production, with California production contributing 20,800 boe/d or 80% of total production. Production was nearly 7% higher quarter-over-quarter due to improved base production from optimized steam injection in California, as well as making up for first quarter weather-related production downtime.

Company-wide realized oil price, including hedging effects, was $69.87 per bbl for the second quarter 2023 compared to $71.04 per bbl in the first quarter 2023. Excluding hedging effects, California's average realized oil prices were $72.10 per bbl in the second quarter 2023, 93% of Brent, and $76.24 per bbl in the first quarter 2023, 93% of Brent.

Lease operating expenses, which includes fuel gas costs for California steam operations, decreased in the second quarter 2023 from the first quarter 2023 mostly as a result of lower natural gas (fuel) costs for our California steam generation facilities due to a significant price decrease. Lease operating expense excluding fuel decreased $2 million due to lower lease maintenance costs, which were uncharacteristically high in the first quarter 2023 as a consequence of adverse weather conditions.

Taxes, other than income taxes, increased 22%, in the second quarter 2023 compared to the first quarter 2023 due to higher mark-to-market prices for greenhouse gas (“GHG”) allowances in the second quarter.

General and administrative expenses decreased 29% in the second quarter 2023 compared to the first quarter 2023, in large part due to non-recurring executive transition and workforce reduction costs that occurred in the first quarter 2023. Adjusted General and Administrative Expenses(1), which excludes non-cash stock compensation costs and nonrecurring costs, decreased 3% in the second quarter 2023 compared to the first quarter 2023, as a result of the cost savings initiatives that began in early 2023.

The income for the well servicing and abandonment business, C&J Well Services, increased 129% to $5 million in the second quarter 2023 compared to the first quarter 2023, due to increased activity in the second quarter compared to the first quarter which had been impacted by weather-related customer demand.

For the second quarter 2023, capital expenditures were approximately $21 million, excluding acquisitions, asset retirement obligation spending and well servicing and abandonment capital of $1 million. This represented a 5% increase compared to the first quarter 2023 as a result of increased facilities and workover spending. Additionally, the Company spent approximately $6 million for plugging and abandonment activities in the second quarter 2023.

At June 30, 2023, the Company had liquidity of $186 million, consisting of $9 million cash and $177 million available for borrowings under its revolving credit facilities.

“We increased Adjusted EBITDA for the second quarter by 17% over the first quarter and generated solid Adjusted Free Cash Flow of $34 million. Executing on our commitment to return meaningful cash to shareholders, we purchased $10 million of Berry shares in the quarter for an average price of $7.04, and will continue to evaluate opportunities to generate and deliver returns consistent with our shareholder return model,” stated Mike Helm, Berry’s CFO. “Berry is hitting its targets and is well positioned for continued success in maximizing shareholder returns.”

2023 Outlook

We currently anticipate that our full-year results will be in line with previous guidance, before consideration of the Macpherson transaction, except with respect to capital expenditures. We expect 2023 capital expenditures for both Berry and C&J Well Services to be approximately $35 million lower than the $103 million to $113 million initial guidance as a result of the reallocation of capital to fund a portion of the Macpherson purchase price. We will fully update guidance in connection with the transaction close, expected late in the third quarter 2023.

Quarterly Dividends

The Company’s Board of Directors declared dividends totaling $0.14 per share on the Company’s outstanding common stock. The variable portion of $0.02 per share was based on the cumulative Adjusted Free Cash Flow results for the six months ended June 30, 2023 in accordance with the Company's Shareholder Return Model. The fixed portion of $0.12 per share was also declared, and both dividends are payable on August 25, 2023 to shareholders of record at the close of business on August 15, 2023.

Earnings Conference Call

The Company will host a conference call to discuss these results:

Call Date:
Call Time:
Wednesday, August 2, 2023
11:00 a.m. Eastern Time / 10:00 a.m. Central Time / 8:00 a.m. Pacific Time
Join the live listen-only audio webcast at https://edge.media-server.com/mmc/p/yrmp93rj
or at https://bry.com/category/events

If you would like to ask a question on the live call, please preregister at any time using the following link:
https://register.vevent.com/register/BI1dce5edf8c144895becc0633be60f1dc
Once registered, you will receive the dial-in numbers and a unique PIN number. You may then dial-in or have a call back. When you dial in, you will input your PIN and be placed into the call. If you register and forget your PIN or lose your registration confirmation email, you may simply re-register and receive a new PIN.

A web based audio replay will be available shortly after the broadcast and will be archived at
https://ir.bry.com/reports-resources or visit https://edge.media-server.com/mmc/p/yrmp93rj or
https://bry.com/category/events

About Berry Corporation (bry)

Berry is a publicly traded ( BRY) western United States independent upstream energy company with a focus on onshore, low geologic risk, long-lived, conventional oil reserves located primarily in the San Joaquin basin of California, as well as the Uinta basin of Utah. We also have well servicing and abandonment capabilities in California. More information can be found at the Company’s website at bry.com.

Forward-Looking Statements

The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address plans, activities, events, objectives, goals, strategies, or developments that the Company expects, believes or anticipates will or may occur in the future, such as those regarding our financial position; liquidity; cash flows (including, but not limited to, Adjusted Free Cash Flow); financial and operating results; capital program and development and production plans; operations and business strategy; projected G&A savings from workforce reductions; potential acquisition and other strategic opportunities; reserves; hedging activities; capital expenditures; return of capital; our shareholder return model and the payment of future dividends; future repurchases of stock or debt; capital investments; our ESG strategy and initiation of new projects or business in connection therewith; recovery factors; consummation of the acquisition and the timing thereof; projected accretion to financial and production results; projected synergies related to the acquisition; anticipated increases to free cash flow and shareholder returns; our capital expenditures and leverage profile; and other guidance are forward-looking statements. The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although we believe that these assumptions were reasonable when made, these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control. Therefore, such forward-looking statements involve significant risks and uncertainties that could materially affect our expected financial position, financial and operating results, liquidity, cash flows (including, but not limited to, Adjusted Free Cash Flow) and business prospects.

Berry cautions you that these forward-looking statements are subject to all of the risks and uncertainties incident to acquisition transactions and the exploration for and development, production, gathering and sale of natural gas, NGLs and oil most of which are difficult to predict and many of which are beyond Berry’s control. These risks include, but are not limited to, commodity price volatility; legislative and regulatory actions that may prevent, delay or otherwise restrict our ability to drill and develop our assets, including with respect to existing and/or new requirements in the regulatory approval and permitting process; legislative and regulatory initiatives in California or our other areas of operation addressing climate change or other environmental concerns; investment in and development of competing or alternative energy sources; drilling, production and other operating risks; effects of competition; uncertainties inherent in estimating natural gas and oil reserves and in projecting future rates of production; our ability to replace our reserves through exploration and development activities or strategic transactions; cash flow and access to capital; the timing and funding of development expenditures; environmental, health and safety risks; effects of hedging arrangements; potential shut-ins of production due to lack of downstream demand or storage capacity; disruptions to, capacity constraints in, or other limitations on the third-party transportation and market takeaway infrastructure (including pipeline systems) that deliver our oil and natural gas and other processing and transportation considerations; the ability to effectively deploy our ESG strategy and risks associated with initiating new projects or business in connection therewith; our ability to successfully execute and close the acquisition and to integrate the Macpherson assets into our operations; we fail to identify risks or liabilities related to Macpherson, its operations or assets; our inability to achieve anticipated synergies; our ability to successfully execute other strategic bolt-on acquisitions; overall domestic and global political and economic conditions; inflation levels, including increased interest rates and volatility in financial markets and banking; changes in tax laws and the other risks described under the heading “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and subsequent filings with the SEC.

You can typically identify forward-looking statements by words such as aim, anticipate, achievable, believe, budget, continue, could, effort, estimate, expect, forecast, goal, guidance, intend, likely, may, might, objective, outlook, plan, potential, predict, project, seek, should, target, will or would and other similar words that reflect the prospective nature of events or outcomes.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no responsibility to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise except as required by applicable law. Investors are urged to consider carefully the disclosure in our filings with the Securities and Exchange Commission, available from us at via our website or via the Investor Relations contact below, or from the SEC’s website at www.sec.gov.

Tables Following

The financial information and certain other information presented have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column in certain tables. In addition, certain percentages presented here reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers, or may not sum due to rounding.

SUMMARY OF RESULTS

Three Months Ended
June 30, 2023March 31, 2023June 30, 2022
(unaudited)
($ and shares in thousands, except per share amounts)
Consolidated Statement of Operations Data:
Revenues and other:
Oil, natural gas and natural gas liquids sales$157,703$166,357$240,071
Service revenue47,67444,62346,178
Electricity sales3,0785,4457,419
Gains (losses) on oil and gas sales derivatives20,87138,499(40,658)
Other revenues3645120
Total revenues and other229,362254,969253,130
Expenses and other:
Lease operating expenses54,707134,83572,455
Cost of services37,08336,09936,709
Electricity generation expenses1,2732,5006,122
Transportation expenses1,0961,0411,108
Acquisition costs972
General and administrative expenses22,48831,66923,183
Depreciation, depletion and amortization39,75540,12138,055
Taxes, other than income taxes13,70710,46011,214
Losses (gains) on natural gas purchase derivatives14,024(610)10,661
Other operating (income) expenses(1,033)(286)353
Total expenses and other184,072255,829199,860
Other (expenses) income:
Interest expense(8,794)(7,837)(7,729)
Other, net(110)(75)(42)
Total other (expenses) income(8,904)(7,912)(7,771)
Income (loss) before income taxes36,386(8,772)45,499
Income tax expense (benefit)10,616(2,913)2,145
Net income (loss)$25,770$(5,859)$43,354
Net income (loss) per share:
Basic$0.34$(0.08)$0.54
Diluted$0.33$(0.08)$0.52
Weighted-average shares of common stock outstanding - basic76,72176,11279,596
Weighted-average shares of common stock outstanding - diluted79,28576,11283,015
Adjusted Net Income(1)$11,666$5,307$53,591
Weighted-average shares of common stock outstanding - diluted79,28579,21083,015
Diluted earnings per share on Adjusted Net Income(1)$0.15$0.07$0.65
Three Months Ended
June 30, 2023March 31, 2023June 30, 2022
(unaudited)
($ and shares in thousands, except per share amounts)
Adjusted EBITDA(1)$69,055$59,337$109,747
Adjusted Free Cash Flow(1)$33,774$(26,681)$74,382
Adjusted General and Administrative Expenses(1)$19,109$19,737$18,920
Effective Tax Rate29%33%5%
Cash Flow Data:
Net cash provided by operating activities$62,538$1,781$111,242
Net cash used in investing activities$(27,961)$(30,460)$(38,863)
Net cash used in financing activities$(40,128)$(3,454)$(37,844)

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(1) See further discussion and reconciliation in “Non-GAAP Financial Measures and Reconciliations”.

June 30, 2023December 31, 2022
(unaudited)
($ and shares in thousands)
Balance Sheet Data:
Total current assets$134,431$218,055
Total property, plant and equipment, net$1,335,572$1,359,813
Total current liabilities$148,127$234,207
Long-term debt$421,347$395,735
Total stockholders' equity$760,575$800,485
Outstanding common stock shares as of75,66175,768

The following table represents selected financial information for the periods presented regarding the Company's business segments on a stand-alone basis and the consolidation and elimination entries necessary to arrive at the financial information for the Company on a consolidated basis.

Three Months Ended June 30, 2023
E&PWell Servicing and AbandonmentCorporate/
Eliminations
Consolidated Company
(unaudited)
(in thousands)
Revenues(1)$160,817$49,299$(1,625)$208,491