Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Berry Corp (bry) (BRY, Financial) delivered strong financial and operational results in Q2 2024, generating adjusted EBITDA of $74 million.
- Production was sustained at 25,300 barrels of oil equivalent per day, supported by strong development activity and base production protection.
- The company successfully drilled 19 wells in Q2, with production outperforming expected results.
- Berry Corp (bry) (BRY) achieved significant cost reductions, including an 11% decrease in lease operating expenses and a 10% reduction in adjusted G&A expenses.
- The company reported zero recordable incidents and zero lost time incidents for the third consecutive quarter, highlighting its commitment to safety.
Negative Points
- Berry Corp (bry) (BRY) did not provide specific production rates or expectations for the new wells in Utah, leaving some uncertainty for investors.
- The company's capital expenditures peaked in Q2, which may raise concerns about future cash flow management.
- Despite strong performance, the company faces risks and uncertainties that could impact future results, as highlighted in their safe harbor statement.
- Berry Corp (bry) (BRY) is still in the early stages of its Utah horizontal well development, which carries inherent risks and uncertainties.
- The company is actively seeking additional acquisitions in California, which may involve complex negotiations and potential integration challenges.
Q & A Highlights
Highlights of Berry Corp (BRY) Q2 2024 Earnings Call
Q: Can you provide some guideposts or brackets for the performance of the Uinta wells?
A: The Uinta wells IP-ed at about 1,100 barrels of oil equivalent per day, with 90% oil and 10% gas. Although these rates are slightly lower than those in the deeper end of the basin, Berry has a cost advantage due to lower drilling costs and significant infrastructure in place. (Fernando Araujo, CEO)
Q: Previously, you mentioned 22,000 acres were prospective. Can you clarify the current position?
A: The 22,000 acres referred to the area where we are currently applying for well permits. However, the entire 100,000 acres are prospective for horizontal well activity. (Fernando Araujo, CEO)
Q: What is the significance of being in the shallow end of the basin beyond well costs?
A: Being in the shallow end of the basin means lower drilling costs and lower reservoir pressures. Despite the lower pressures, the economics are robust due to lower capital costs and existing infrastructure. There are also deeper opportunities in the Uinta, Douglas Creek, and Wasatch reservoirs. (Fernando Araujo, CEO)
Q: Can you provide an update on the outlook for additional acquisitions in California?
A: We are exploring several bolt-on opportunities in Kern County, mostly with small private companies. These acquisitions would allow us to realize operational synergies and apply our technical expertise. (Fernando Araujo, CEO)
Q: What are the financial highlights for the second quarter?
A: Adjusted EBITDA was $74 million, $5 million higher than Q1. Lease operating expenses were down 11% to $23.47 per BOE, and adjusted G&A expenses were down 10% to $7.41 per BOE. CapEx for Q2 was $42 million, in line with expectations. Adjusted free cash flow was $19 million, leading to a total dividend of $0.17 per share. (Michael Helm, CFO)
Q: Can you elaborate on the safety and environmental performance?
A: For the third consecutive quarter, Berry had zero recordable incidents and zero lost time incidents. We have also completed 60% of our initiative to eliminate at least 80% of methane emissions by the end of 2025. (Danielle Hunter, President)
Q: What are the future plans for the Utah horizontal well development?
A: We are excited about the potential in Utah. The four wells drilled this year have performed better than expected, and we have nearly 100,000 net operated acres with significant resource potential. We are also exploring farm-out opportunities for 2025 and 2026 to better manage capital and bring additional technical insight. (Fernando Araujo, CEO)
Q: How is Berry managing its debt and balance sheet?
A: We continue to prioritize debt reduction, driving our revolver balance down to $36 million at the end of Q2 and further reducing it to $28 million by the end of July. Our goal is to maintain a debt-to-EBITDA ratio lower than 1.5 times. (Michael Helm, CFO)
Q: What are the operational highlights for the second quarter?
A: We drilled 19 wells, with 15 in California and four in Utah. Production from these wells outperformed expectations. We also received new drilling permits that will support our development plans for 2025. (Fernando Araujo, CEO)
Q: What is Berry's strategy for creating value and generating sustainable free cash flow?
A: Our strategy focuses on generating sustainable free cash flow with high rates of return in low capital intensity projects, optimizing our cost structure, and maintaining balance sheet strength while meeting the highest compliance standards. (Fernando Araujo, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
