Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Berry Corp (bry) (BRY, Financial) reported solid financial and operational results with adjusted EBITDA of $69 million and daily production of 25,400 barrels, aligning with projections.
- The company achieved a 10% reduction in lease operating expenses compared to the previous quarter, highlighting successful cost management.
- Berry Corp (bry) (BRY) is enhancing its portfolio through strategic acquisitions, such as increasing working interest in the Round Mountain field.
- The company maintains a strong focus on safety and environmental compliance, reporting zero recordable incidents and no reportable spills for the second consecutive quarter.
- Berry Corp (bry) (BRY) is actively managing its debt, with plans to use adjusted free cash flow to pay down its revolver and considering refinancing options for notes maturing in early 2026.
Negative Points
- Despite stable production, Berry Corp (bry) (BRY) experienced a 4% decrease in commodity revenues due to a 1% drop in oil production and lower oil prices.
- The company's adjusted free cash flow significantly decreased to $1 million in Q1 2024 from $55 million in Q4 2023, primarily due to seasonal working capital uses.
- Berry Corp (bry) (BRY) faces ongoing challenges with the Kern County EIR litigation, which restricts the issuance of new drilling permits, potentially impacting future expansion plans.
- There is uncertainty in the success and capital requirements of the horizontal play in the Uinta Basin, which may necessitate significant capital expenditure or the formation of joint ventures.
- The company did not issue a variable dividend for Q1 2024 due to the nominal adjusted free cash flow generated during the quarter.
Q & A Highlights
Q: Can you discuss the performance of the thermal diatomite and whether its success is a normal fluctuation or a sustained improvement?
A: Fernando Araujo, CEO & Director, Berry Corporation: The thermal diatomite has shown excellent performance, which is not just a normal fluctuation but a sustained improvement. Since Q4 2019, production has increased by 19% through enhanced steam injection and workover activities, without new sidetracks until recently. We expect to provide updates on newly produced sidetracks soon.
Q: Regarding the play in Utah, how is Berry managing the significantly higher capital costs associated with horizontal wells compared to traditional wells?
A: Fernando Araujo, CEO & Director, Berry Corporation: We are aware of the higher costs and are considering forming joint ventures or partnerships to manage the capital commitment for drilling horizontal wells in Utah. We already have interested potential partners, which could help reduce our capital exposure.
Q: What is Berry's strategy for managing the potential increase in CapEx in the event of successful horizontal well development in Utah?
A: Fernando Araujo, CEO & Director, Berry Corporation: In case of success, our strategy includes potentially bringing in partners through joint ventures to share the financial burden and reduce our direct capital commitment, ensuring we manage growth sustainably without overextending our resources.
Q: How does the ongoing Kern County EIR litigation affect Berry's operations, and what are the company's plans in this regard?
A: Danielle Hunter, President, Berry Corporation: The litigation has intermittently restricted new drilling permits. However, our 2024 operations do not rely on new permits thanks to our inventory of workover and sidetrack opportunities. We anticipate it will take 18-24 months for the EIR issues to be resolved, during which we will explore alternative permitting options.
Q: Can you provide insights into Berry's financial performance in Q1 2024, particularly concerning EBITDA and free cash flow?
A: Michael Helm, VP, CAO & CFO, Berry Corporation: Q1 2024 saw an adjusted EBITDA of $69 million, consistent with the previous quarter. Adjusted free cash flow was $1 million, significantly lower than Q4 2023 due to seasonal working capital uses. We are focused on managing debt and expect to use much of our free cash flow to pay down our revolver.
Q: What are Berry's environmental goals, and what steps are being taken to achieve them?
A: Danielle Hunter, President, Berry Corporation: We aim to eliminate at least 80% of methane emissions from our operations by the end of 2025, which we expect to reduce our total Scope 1 GHG emissions by approximately 10%. Plans include replacing all regulated natural gas pneumatic devices with zero-emission devices later this year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
