Quarterly / Earnings Reports | Third Quarter (3Q) Update

Berry Petroleum Details Q3 Results

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Berry Petroleum Corp. reported net income of $53 million or $0.65 per diluted share and adjusted net income of $33 million or $0.40 per diluted share for the third quarter of 2019. In addition, the Board approved a fourth quarter dividend of $0.12 per share, as it has done each quarter since becoming a public company in 2018.

Highlights for the Quarter

• Adjusted EBITDA of $84 million and Unhedged Adjusted EBITDA of $69 million
• Third quarter production of 29,600 BOE/D up 7.7% compared to second quarter
• Third quarter production mix 87% oil with September improving to 88% oil
• Capital Expenditures of $63 million with fourth quarter expected to be $35-$40 million
• Added to 2019 and 2020 oil hedges; more than 60% oil production covered for Q4 2019 and more than 50% for 2020
• Full-year production and spending are on track for mid-point of guidance

"It is clear from Berry's strong third quarter production that our California oil assets respond to investment and the capital deployed during the first half of the year is now driving value. We expect Berry's production for the year will be at the mid-point of our guidance, while spending will come in just under the mid-point of guidance," stated Trem Smith, Berry Board Chair, Chief Executive Officer and President. "Since becoming a public company in 2018, we have grown production and consistently paid a substantial dividend within levered free cash flow. Our focus continues to be on responsible production while creating value for our shareholders through a combination of growth and return of capital. This year we expect to see double-digit production growth at about 12% company-wide, provide an attractive dividend yield, and buy back 4% of our stock. We are well positioned to continue this strategy in 2020 as we are well hedged for the remainder of 2019 and throughout 2020. In short, Berry is in a strong position to continue to create and deliver top-tier value in the market."

Third Quarter Results

Adjusted EBITDA, on a hedged basis, increased to $84 million in the third quarter from $63 million in the second quarter. Results include the impact of higher production, lower oil prices, higher oil hedge settlements received and lower gas hedge settlement payments. Adjusted EBITDA, on an unhedged basis, was $69 million in the third quarter compared to $66 million in the second quarter.

Average daily production was 8% higher in the third quarter compared to the second quarter driven by our development capital spending in 2019. Our California production of 23.0 MBoe/d for the third quarter of 2019 was up 10% compared to the second quarter of 2019.

California oil prices before hedges for the third quarter averaged 95% of Brent, or $59.00/Bbl which were 8% lower than the $63.91/Bbl in the second quarter. The Company realized oil prices before hedges of $57.92/Bbl which was 6% lower than the second quarter average of $61.69/Bbl.

For the third quarter on an unhedged basis, Operating Expenses ("OpEx") decreased to $18.13 per Boe for the third quarter 2019 compared to $18.94 for the second quarter 2019. The decrease includes a net $0.47 per Boe benefit from higher seasonal electricity sales and a $0.44 per Boe reduction in lease operating expense.

Additionally, operating expenses, including hedge effects, decreased to $18.90 per Boe in the third quarter 2019 from $20.38 in the second quarter due to these same factors and a $0.67 per Boe decrease in gas hedge settlement payments.

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.

General and administrative expenses were $6.04 per Boe for the third quarter compared to $6.47 per Boe for the second quarter. Adjusted general and administrative expenses were $5.13 per Boe for the third quarter compared to $4.92 per Boe for the second quarter primarily due to insurance renewals and continued development and growth of our Corporate Affairs department and its activities.

"We have been building our capabilities and expertise in our Corporate Affairs department to support our participation in the regulatory, political and legislative processes primarily in California. Initial achievements are an outcome of the team's ongoing efforts to partner with the state to responsibly deliver affordable energy to its citizens and become less reliant on foreign energy sources. As a result of this initiative, as well as our continuing efforts to improve our internal systems and comply with public company requirements, our full year adjusted G&A will be on the high side of guidance. A major focus in 2020 will be on reducing overall general and administrative expenses on a per Boe basis," said Cary Baetz, Chief Financial Officer, Executive Vice President and Board Director.

Taxes, other than income taxes were $3.40 per Boe for the third quarter compared to $4.54 per Boe in the second quarter, due to lower market rates for greenhouse gas allowance requirements.

Capital expenditures totaled $63 million for the third quarter compared to $57 million for the second quarter and was largely focused on California drilling, as well as equipping and hydraulic stimulation of previously drilled wells.

Net income for the third quarter 2019 was $53 million compared to $32 million in the second quarter. This difference was largely driven by increased production and derivative gains that offset lower oil prices. Adjusted net income was $33 million for the third quarter, representing a 63% increase over the second quarter of 2019. The increase was generally attributable to the same factors impacting Adjusted EBITDA.

At September 30, 2019, funds available under our $400 million reserve-based revolver were $381 million with $9 million of outstanding letters of credit and borrowings of $10 million on our revolver in order to fund monthly working capital fluctuations and asset retirement payments during the third quarter. The Company expects to have little to no revolver borrowings by year-end.

"We are very pleased that our projected production for 2019 will be at the mid-point of our guidance, especially when taking into account that capital spending is expected to come in below the mid-point of the range. While our operating costs continue to improve, we expect operating expenses to be at the higher side of guidance for the year due to the unseasonably high gas prices experienced in the first quarter," stated Baetz.

Dividend Announcement

On November 6, 2019 the Board declared a regular dividend for the fourth quarter at a rate of $0.12 per share on the Company's outstanding common stock. This is the Company's sixth regular quarterly dividend, and the Company intends to pay a similar dividend in future quarters, subject to Board approval.

The fourth quarter dividend is payable on January 15, 2019 to shareholders of record at the close of business on December 13, 2019.