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Berry Corp. First Quarter 2021 Results

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   |    Monday,May 10,2021

Berry Corp. reported its Q1 2021 results.

Berry reported net loss of $21 million or $0.27 per diluted share and Adjusted Net Income⁽¹⁾ of $6 million or $0.07 per diluted share for the first quarter of 2021. The Board of Directors also declared a quarterly dividend of $0.04 per share for the second quarter of 2021.

Quarterly Highlights:

• Generated Adjusted EBITDA⁽¹⁾ of $52 million
• Reduced non-energy OpEx an additional 11% sequentially
• Increased sequential oil production 3% and total production 2% to 27,100 boe/d
• Improving sustainable capital efficiency on development program
• Generated $16 million of Levered Free Cash Flow⁽¹⁾
• Ended the quarter with $99 million in cash

CEO Trem Smith said: "We had a strong quarter. By managing the things within our control, we realized growth in our production on improving capital efficiency and record low non-energy operating expenses by enhancing our cost structure. Furthermore, our results underscore the strength of and success of our natural gas hedging program. As unprecedented cold weather covered much of the central and southern parts of the U.S. in February, our natural gas hedges allowed us to sustain our steam operations despite natural gas prices in California exceeding $100 per mmbtu for a few days. Our 2020 and first quarter results demonstrate that we are well on track to deliver on the commitments we made at the start of the historic downturn early last year.

"More recently, on April 23, Governor Newsom directed CalGEM to initiate regulatory action to end the issuance of new permits for hydraulic fracturing by January 2024. This directive does not materially impact bry's operations and, as defined, does not affect our current or future thermal diatomite production. However, this proposal is not in the best interest of Californians and does not support the state's 2045 net carbon neutrality goal. Studies, including those sponsored by the Governor, show that Californians will still demand transportation fuels well past 2045. Therefore, this ban just shifts the state's supply source from local producers, who provide significant economic value to our communities and operate using rigorous environmental and safety standards, to foreign oil producers that do not contribute to our economy nor share our social or environmental standards. This year bry will pay $40 million in greenhouse gas ("GHG") credits, and the industry as a whole pays more than $1 billion annually to help fund California's GHG programs. We support the state's goal of carbon neutrality by 2045, but to achieve this we need to work together and find solutions that are equitable and affordable for everyone," added Smith.

First Quarter 2021 Results

Adjusted EBITDA⁽¹⁾, on a hedged basis, was $52 million in the first quarter 2021, compared to $54 million in the fourth quarter 2020. The impact of lower hedged oil prices was partially offset by higher natural gas sales in the Rockies, as a result of acutely higher prices from the shortage of natural gas caused by Winter Storm Uri that affected much of the nation. The Company also benefited from improved production and lower operating expenses and general and administrative expenses.

The Company increased average daily production 2% to 27,100 boe/d for the first quarter of 2021 compared to the fourth quarter of 2020, as a result of its 2021 development program. The Company increased oil production for the quarter by 3% to 23,900 bbl/d over fourth quarter 2020. The Company's California production of 21,900 boe/d for the first quarter of 2021 also increased 3% from the fourth quarter 2020.

The Company-wide hedged realized oil price for the first quarter 2021 was $44.81 per bbl, a 21% decrease from the fourth quarter. The financial hedges for oil sales in the first quarter 2021 had an unfavorable impact of $12.08 per bbl on the realized price. The California average oil price before hedges for the first quarter was $57.34 per bbl, or 94% of Brent, which was 37% higher than the $41.74 per bbl in the fourth quarter 2020, which was 92% of Brent.

OpEx consists of lease operating expenses ("LOE"), third-party revenues and expenses from electricity generation, transportation and marketing activities, as well as the effect of derivative settlements (received or paid) for gas purchases, and excludes taxes other than income taxes.

On a hedged basis, operating expenses decreased by 24% or $4.66 per boe to $14.40 for the first quarter 2021, compared to $19.06 for the fourth quarter 2020. During the first quarter the Company continued its cost savings efforts with non-energy operating expenses down an additional $1.61 per boe, or 11%, compared to the fourth quarter of 2020. The decreased operating expenses was also partially due to increased electricity revenues resulting from the higher gas prices. The Company's gas purchase hedges were effective at protecting operating expenses against the higher gas prices. Additionally, improved steam management had a positive effect on overall costs without negatively impacting production.

General and administrative expenses decreased by $3 million, or 16%, to approximately $17 million for the first quarter 2021, compared to the fourth quarter 2020. Adjusted General and Administrative Expenses⁽¹⁾, which exclude non-cash stock compensation costs and nonrecurring costs, decreased 10% to $13 million for the first quarter 2021. The decline in Adjusted General and Administrative Expenses⁽¹⁾ was primarily the result of lower short-term incentive expense and reductions in numerous third-party costs.

Taxes, other than income taxes were $3.93 per boe for the first quarter compared to $4.43 per boe in the fourth quarter 2020. GHG costs were lower in the first quarter of 2021 as the prices remained relatively flat while the emission volumes declined. Severance taxes increased due to higher revenue in Utah, while property taxes in Colorado and California were lower.

For the first quarter 2021, capital expenditures were approximately $24 million on an accrual basis excluding acquisitions and asset retirement obligation spending. Approximately 90% of this capital was directed to California oil operations. Berry also spent approximately $3 million for plugging and abandonment activities in the first quarter 2021.

At March 31, 2021, the Company had liquidity of $292 million consisting of $99 million cash in the bank and $193 million available for borrowings under its RBL Facility which had no borrowings and $7 million of letters of credit outstanding. The RBL Facility has a $200 million borrowing base with an elected commitment of $200 million.

"All in all, we delivered a strong quarter, capitalizing on the impact of the unseasonably high gas prices on our revenues, while leveraging our effective gas purchase hedging program, stated Cary Baetz, chief financial officer, EVP and director. "Additionally, our non-energy OpEx per boe was down 11% and Adjusted General and Administrative Expenses⁽¹⁾ was down 10%, both compared to the fourth quarter 2020. We demonstrated that the way we manage our costs and natural gas hedging strategy positions us to be a low-cost producer of oil in California. On natural gas, we understand we can't count on the gas and electricity sales impact from these unseasonably high prices every quarter, but we can rely on having stable gas purchase costs with our hedging strategy, which in turn provides stability and visibility to our overall cost structure."

Quarterly Dividend

The Company's Board of Directors declared a regular dividend for the second quarter of 2021 at a rate of $0.04 per share on the Company's outstanding common stock, payable on July 15, 2021 to shareholders of record at the close of business on June 15, 2021.

Subject to approval by the Board and depending on a variety of factors, including the Company's financial condition and results of operations, the Company intends to pay a similar dividend in future quarters.