Berry Corporation (bry) (NASDAQ: BRY) (“Berry” or the “Company”)
today reported net loss of $65 million or $0.81 per diluted share
and Adjusted Net Income(1) of $5 million or $0.06 per diluted share
for the second quarter of 2020.
Quarterly Highlights
- Kept all employees safe and maintained continuous operations
while planning for continued COVID/oil demand uncertainty
- Reduced Unhedged OpEx 16% quarter over quarter through our
cost-savings initiative
- Generated positive Levered Free Cash Flow(1); began building
cash reserves as planned in July
- Achieved Adjusted EBITDA(1) of $57 million on strong hedge
position and cost savings
- Enhanced 2021 financial hedge portfolio at $46/Bbl Brent;
currently over 75% of first half targeted oil production
_______
(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.
“Our flexible and adaptable business structure
and strong culture of teamwork, leadership and communication
enabled us to adapt our work processes quickly in response to the
challenges posed by COVID-19. We safely transitioned to a work from
home environment for our office employees, and then returned to the
office, without any problems with operations, accounting, financial
reporting or internal controls. In all of our locations, we
implemented CDC-aligned safety and health protocols, which have
kept employees and their families safe and healthy while
successfully supporting continuous operations," said Trem Smith,
Berry board chair and chief executive officer.
“While market conditions improved over the
latter part of the quarter we still anticipate, and have planned
for, a prolonged impact of the global demand destruction caused
primarily by COVID-19 to continue for the next few quarters. Our
experienced Berry management team is successfully managing through
this downturn by protecting our cash flow, maintaining our strong
liquidity position and positioning the company to thrive when the
market returns. Through sustainable cost and cash savings and
efficiency improvements, we reduced our Unhedged OpEx costs by 16%
quarter over quarter. We also improved our hedge position in 2021
to weather the continued volatility we expect through the first
half of next year and we are determined to continue to build cash
through the year. We currently plan to recommence drilling with one
rig in early October, which would continue to work throughout 2021.
As we have said before, the Berry business model is designed to
create value in any cycle, and we are confident we will continue to
do so in this one.”
Second Quarter 2020 Results
Adjusted EBITDA(1), on a hedged basis, was $57
million in the second quarter 2020 compared to $72 million in the
first quarter 2020. The decrease was mostly due to historically low
oil prices caused by the OPEC+ supply increase and COVID-19 demand
destruction Additionally, second quarter greenhouse gas ("GHG")
costs were higher as they returned to historical levels following a
significant decrease in the first quarter 2020 from a GHG allowance
market dislocation which allowed us to purchase significant
allowances at low prices. These decreases were largely offset by
higher oil hedge settlements received and lower costs including
OpEx.
Average daily production decreased 5% for the
second quarter of 2020 compared to the first quarter of 2020,
largely due to natural declines as a result of ending our drilling
activity in April and improved steam management which reduced costs
but temporarily increased water disposal needs and consequently
caused a slight decrease in production. Inventory also increased in
the second quarter. In the second quarter of 2020 we reduced
capital 58% and drilled only four wells. The Company's California
production of 23.4 MBoe/d for the second quarter of 2020 decreased
6% from the first quarter 2020.
The Company-wide hedged realized oil price for
the second quarter 2020 was $54.40 per Boe, only a 5% reduction
from the first quarter although the average Brent price declined
34%. The California average oil price before hedges for the second
quarter was $29.53/Bbl, or 88% of Brent, which was 39% lower than
the $48.38/Bbl in the first quarter 2020, which was 95% of Brent.
The financial hedges for oil sales for the second quarter 2020
added $27.78 per Bbl to the California realized price, highlighting
the effectiveness of our oil hedge positions.
On an unhedged basis, operating expenses
decreased by 16% or $2.90 per Boe to $15.33 for the second quarter
2020, compared to $18.23 for the first quarter 2020. The decrease
was driven by the effectiveness of our cost savings and efficiency
initiatives which resulted in $2.77 per Boe lower lease operating
expense. Additionally, operating expenses, including hedge effects,
decreased to $18.11 per Boe in the second quarter 2020 from $19.81
in the first quarter 2020 due to the same factors and $1.20 per Boe
higher gas hedge settlement paid period over period.
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 decreased by
$0.6 million, or 3%, to less than $19 million for the three months
ended June 30, 2020, compared to the three months ended March 31,
2020. Adjusted general and administrative expenses(1), which
exclude non-cash stock compensation costs and nonrecurring costs,
were $14 million for the second quarter 2020 compared to $15
million for the first quarter 2020. The cost reduction reflected
various cost savings initiatives partially offset by a slight
increase in bonus costs as the cost savings targets are met.
Taxes, other than income taxes were $3.94 per
Boe for the second quarter compared to $1.56 per Boe in the first
quarter 2020, as market rates for GHG requirements returned to more
historic levels from the unsustainable levels experienced in the
first quarter.
Net loss for the second quarter 2020 was $65
million compared to $115 million in the first quarter 2020.
Adjusted Net Income(1) was $5 million for the second quarter,
representing a 75% decrease from the first quarter 2020 due to
significantly lower oil prices, as well as higher GHG, DD&A and
income tax expenses.
For the second quarter of 2020, capital
expenditures were approximately $17 million, on an accrual basis
including capitalized overhead but excluding capitalized interest,
acquisitions and asset retirement spending. Approximately 96% of
this total was directed to California oil operations. In the second
quarter of 2020, the vast majority of capital spent was used for
activities which had no impact on current production, including
capital for facilities, equipping and cogeneration maintenance. We
also expended approximately $6 million for plugging and abandonment
activities. The Company currently has 185 wells permitted for
drilling and nearly 200 more in process at the regulatory
agencies.
The Company acquired approximately 740 net acres
in the North Midway Sunset Field for approximately $5 million. This
property is adjacent to, and extends, our existing producing area
in the Potter formation and we have identified numerous future
drilling locations.
At June 30, 2020, the Company had $142 million
available for borrowings under its RBL Facility which included $1
million of outstanding borrowings and $7 million of letters of
credit. The RBL Facility has a $200 million borrowing base with an
elected commitment of $200 million, limited to $150 million until
the next semi annual redetermination.
“While we have realized substantial market
improvements since April, these remain difficult times for our
industry. We continue to focus on our cash position in order to
provide Berry with the flexibility to move quickly in this cyclical
trough. We are continuing to plan for a two-year cyclical low;
however, our improved cost structure coupled with oil prices being
substantially better than our earlier estimates give us more
confidence in putting a drilling rig to work the last quarter of
this year and throughout 2021. We have and will continue to live by
our financial policy. We achieved positive Levered Free Cash Flow
in the second quarter, and even increased it compared to the first
quarter. We expect Levered Free Cash Flow for 2020 to be nearly
$100 million,” stated Cary Baetz, chief financial officer, EVP and
director._______
(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.
Earnings Conference Call
The Company will host a conference call August 5, 2020 to
discuss these results:
Live Call Date: |
Wednesday, August 5, 2020 |
Live Call Time: |
9:00 a.m. Eastern Time (6 a.m.
Pacific Time) |
Live Call Dial-in: |
877-491-5169 from the
U.S. |
|
720-405-2254 from
international locations |
Live Call Passcode: |
2488098 |
|
|
A replay of the audio webcast will also be archived on the
“Events” section of Berry’s
website at bry.com/category/events.An audio replay will
be available shortly after the broadcast:
Replay Dates: |
Through Wednesday, August 26, 2020 |
Replay Dial-in: |
855-859-2056 from the
U.S. |
|
404-537-3406 from
international locations |
Replay Passcode: |
2488098 |
|
|
A replay of the audio webcast will also be
archived on the “Events” section of Berry’s
website at bry.com/category/events. In addition, an
investor presentation will be available on the Company’s
website.
About Berry Corporation
(bry)
Berry is a publicly traded (NASDAQ: BRY) western
United States independent upstream energy company with a focus on
the conventional, long-lived oil reserves in the San Joaquin basin
of 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 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
statements forward-looking statements involve significant risks and
uncertainties that could materially affect our expected results of
operations, liquidity, cash flows and business prospects. Without
limiting the generality of the forgoing, such statements
specifically include our expectations, beliefs or projections as to
our future:
- financial position;
- liquidity;
- cash flows;
- anticipated financial and operating results;
- our capital program and development and production plans;
- business strategy;
- potential acquisition opportunities;
- other plans and objectives for operations;
- maintenance capital requirements;
- expected production and costs;
- reserves;
- hedging activities;
- return of capital;
- payment of future dividends;
- future repurchases of stock or debt; and
- capital investments and other guidance.
Actual results may differ materially from
expectations, and reported results should not be considered an
indication of future performance. Known factors (but not all the
factors) that could cause actual results to differ materially from
those discussed in the forward-looking statements include:
- the length, scope and severity of the recent COVID-19 pandemic,
including the effects of related public health concerns and the
impact of actions taken by governmental authorities and other third
parties in response to the pandemic and its impact on commodity
prices, supply and demand considerations, and storage
capacity;
- global economic trends, geopolitical risks and general economic
and industry conditions, such as those resulting from the COVID-19
pandemic and from the actions of OPEC+, including the escalation of
tensions between Saudi Arabia and Russia and changes in OPEC+'s
production levels;
- volatility of oil, natural gas and NGL prices, including the
sharp decline in crude oil prices that occurred in the first
quarter and has continued into the second quarter of 2020;
- supply of and demand for oil, natural gas and NGLs;
- disruptions to, capacity constraints in, or other limitations
on the pipeline systems that deliver our oil and natural gas and
other processing and transportation considerations;
- inability to generate sufficient cash flow from operations or
to obtain adequate financing to fund capital expenditures,
meet our working capital requirements or fund planned
investments;
- price fluctuations and availability of natural gas and
electricity and the cost of steam;
- our ability to use derivative instruments to manage commodity
price risk;
- the regulatory environment, including availability or timing
of, and conditions imposed on, obtaining and/or maintaining permits
and approvals, including those necessary for drilling and/or
development projects;
- our ability to meet our planned drilling schedule, including
due to our ability to obtain permits on a timely basis or at all,
and to successfully drill wells that produce oil and natural gas in
commercially viable quantities;
- the impact of current, pending and/or future laws and
regulations, and of legislative and regulatory changes and other
government activities, including those related to drilling,
completion, well stimulation, operation, maintenance or abandonment
of wells or facilities, managing energy, water, land, greenhouse
gases or other emissions, protection of health, safety and the
environment, or transportation, marketing and sale of our
products;
- the California and global energy future, including the factors
and trends that are expected to shape it, such as concerns about
climate change and other air quality issues, the transition to a
low-emission economy and the expected role of different energy
sources;
- uncertainties associated with estimating proved reserves and
related future cash flows;
- our ability to replace our reserves through exploration and
development activities;
- drilling and production results, including lower-than-expected
production, reserves or resources from development projects or
higher-than-expected decline rates;
- our ability to obtain timely and available drilling and
completion equipment and crew availability and access to necessary
resources for drilling, completing and operating wells;
- changes in tax laws;
- effects of competition;
- uncertainties and liabilities associated with acquired and
divested assets;
- our ability to make acquisitions and successfully integrate any
acquired businesses;
- large or multiple customer defaults on contractual obligations,
including defaults resulting from actual or potential
insolvencies;
- geographical concentration of our operations;
- the creditworthiness and performance of our counterparties with
respect to our hedges;
- impact of derivatives legislation affecting our ability to
hedge;
- failure of risk management and ineffectiveness of internal
controls;
- catastrophic events, including wildfires, earthquakes and
pandemics;
- environmental risks and liabilities under federal, state,
tribal and local laws and regulations (including remedial
actions);
- potential liability resulting from pending or future
litigation;
- our ability to recruit and/or retain key members of our senior
management and key technical employees;
- information technology failures or cyber attacks; and other
material risks that appear in the Risk Factors section of our most
recent Quarterly Report on Form 10-Q, Annual Report on Form 10-K
and other periodic reports filed with the Securities and Exchange
Commission.
You can typically identify forward-looking
statements by words such as aim, anticipate, achievable, believe,
continue, could, 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
obligation 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, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ and shares in thousands, except per share amounts) |
Statement of
Operations Data: |
|
|
|
|
|
Revenues and
other: |
|
|
|
|
|
Oil, natural gas and natural gas liquids sales |
$ |
70,515 |
|
|
|
$ |
122,098 |
|
|
|
$ |
136,908 |
|
|
Electricity sales |
4,884 |
|
|
|
5,461 |
|
|
|
5,364 |
|
|
(Losses) gains on oil derivatives |
(42,267 |
) |
|
|
211,229 |
|
|
|
27,276 |
|
|
Marketing revenues |
292 |
|
|
|
453 |
|
|
|
414 |
|
|
Other revenues |
29 |
|
|
|
24 |
|
|
|
104 |
|
|
Total revenues and other |
33,453 |
|
|
|
339,265 |
|
|
|
170,066 |
|
|
|
|
|
|
|
|
Expenses and
other: |
|
|
|
|
|
Lease operating expenses |
40,733 |
|
|
|
50,752 |
|
|
|
47,879 |
|
|
Electricity generation expenses |
3,022 |
|
|
|
3,946 |
|
|
|
3,164 |
|
|
Transportation expenses |
1,789 |
|
|
|
1,822 |
|
|
|
1,694 |
|
|
Marketing expenses |
280 |
|
|
|
430 |
|
|
|
421 |
|
|
General and administrative expenses |
18,777 |
|
|
|
19,337 |
|
|
|
16,158 |
|
|
Depreciation, depletion and amortization |
37,512 |
|
|
|
35,329 |
|
|
|
23,654 |
|
|
Impairment of oil and gas properties |
— |
|
|
|
289,085 |
|
|
|
— |
|
|
Taxes, other than income taxes |
10,449 |
|
|
|
4,352 |
|
|
|
11,348 |
|
|
Losses on natural gas derivatives |
925 |
|
|
|
12,035 |
|
|
|
9,449 |
|
|
Other operating (income) expenses |
(1,192 |
) |
|
|
2,202 |
|
|
|
3,119 |
|
|
Total expenses and other |
112,295 |
|
|
|
419,290 |
|
|
|
116,886 |
|
|
|
|
|
|
|
|
Other (expenses)
income: |
|
|
|
|
|
Interest expense |
(8,676 |
) |
|
|
(8,920 |
) |
|
|
(8,961 |
) |
|
Other, net |
(6 |
) |
|
|
(6 |
) |
|
|
— |
|
|
Total other (expenses) income |
(8,682 |
) |
|
|
(8,926 |
) |
|
|
(8,961 |
) |
|
Reorganization items, net |
— |
|
|
|
— |
|
|
|
(26 |
) |
|
(Loss) income before
income taxes |
(87,524 |
) |
|
|
(88,951 |
) |
|
|
44,193 |
|
|
Income tax (benefit)
expense |
(22,623 |
) |
|
|
26,349 |
|
|
|
12,221 |
|
|
Net (loss)
income |
$ |
(64,901 |
) |
|
|
$ |
(115,300 |
) |
|
|
$ |
31,972 |
|
|
|
|
|
|
|
|
Net (loss) income per
share: |
|
|
|
|
|
Basic |
$ |
(0.81 |
) |
|
|
$ |
(1.45 |
) |
|
|
$ |
0.39 |
|
|
Diluted |
$ |
(0.81 |
) |
|
|
$ |
(1.45 |
) |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
Weighted-average shares of
common stock outstanding - basic |
79,795 |
|
|
|
79,608 |
|
|
|
81,519 |
|
|
Weighted-average shares of
common stock outstanding - diluted |
79,795 |
|
|
|
79,608 |
|
|
|
81,683 |
|
|
|
|
|
|
|
|
Adjusted Net Income(1) |
$ |
4,609 |
|
|
|
$ |
18,175 |
|
|
|
$ |
20,046 |
|
|
Weighted-average shares of
common stock outstanding - diluted |
80,640 |
|
|
|
79,945 |
|
|
|
81,683 |
|
|
Diluted earnings per share on
Adjusted Net Income |
$ |
0.06 |
|
|
|
$ |
0.23 |
|
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ and shares in thousands, except per share amounts) |
Adjusted EBITDA(1) |
$ |
57,433 |
|
|
|
$ |
71,800 |
|
|
|
$ |
62,756 |
|
|
Adjusted EBITDA
unhedged(1) |
$ |
5,559 |
|
|
|
$ |
52,175 |
|
|
|
$ |
66,082 |
|
|
Levered Free Cash Flow(1) |
$ |
32,229 |
|
|
|
$ |
13,901 |
|
|
|
$ |
(12,560 |
) |
|
Levered Free Cash Flow
unhedged(1) |
$ |
(19,645 |
) |
|
|
$ |
(5,724 |
) |
|
|
$ |
(9,234 |
) |
|
Adjusted General and
Administrative expenses(1) |
$ |
14,081 |
|
|
|
$ |
14,556 |
|
|
|
$ |
12,277 |
|
|
Effective Tax Rate |
26 |
|
% |
|
(30 |
) |
% |
|
28 |
|
% |
Cash Flow
Data: |
|
|
|
|
|
Net cash provided by operating
activities |
$ |
41,939 |
|
|
|
$ |
44,483 |
|
|
|
$ |
74,396 |
|
|
Net cash used in investing
activities |
$ |
(22,480 |
) |
|
|
$ |
(43,038 |
) |
|
|
$ |
(59,608 |
) |
|
Net cash used in financing
activities |
$ |
(19,460 |
) |
|
|
$ |
(1,444 |
) |
|
|
$ |
(16,223 |
) |
|
__________
(1) See further discussion and
reconciliation in “Non-GAAP Financial Measures and
Reconciliations”.
|
June 30, 2020 |
|
December 31, 2019 |
|
($ and shares in thousands) |
Balance Sheet
Data: |
|
|
|
Total current assets |
$ |
156,602 |
|
|
$ |
100,432 |
|
Total property, plant and
equipment, net |
$ |
1,288,844 |
|
|
$ |
1,576,267 |
|
Total current liabilities |
$ |
94,687 |
|
|
$ |
156,628 |
|
Long-term debt |
$ |
394,262 |
|
|
$ |
394,319 |
|
Total equity |
$ |
789,515 |
|
|
$ |
972,448 |
|
Outstanding common stock
shares as of |
79,871 |
|
|
79,543 |
|
SUMMARY BY AREA
The following table shows a summary by area of
our selected historical financial information and operating data
for the periods indicated.
|
California (San Joaquin and Ventura
basins) |
|
|
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
($ in thousands, except prices) |
|
|
|
|
|
Oil, natural gas and natural gas liquids sales |
$ |
62,943 |
|
|
$ |
109,519 |
|
|
|
$ |
120,917 |
|
|
Operating income
(loss)(1) |
$ |
32,469 |
|
|
$ |
(113,203 |
) |
|
|
$ |
48,112 |
|
|
Depreciation,
depletion, and amortization (DD&A) |
$ |
36,518 |
|
|
$ |
30,918 |
|
|
|
$ |
20,460 |
|
|
Impairment of oil
and gas properties |
$ |
— |
|
|
$ |
163,879 |
|
|
|
$ |
— |
|
|
Average daily
production (MBoe/d) |
23.4 |
|
|
24.9 |
|
|
|
20.8 |
|
|
Production (oil %
of total) |
100 |
% |
|
100 |
|
% |
|
100 |
|
% |
Realized sales
prices: |
|
|
|
|
|
Oil (per Bbl) |
$ |
29.53 |
|
|
$ |
48.38 |
|
|
|
$ |
63.91 |
|
|
NGLs (per Bbl) |
$ |
— |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
Gas (per Mcf) |
$ |
— |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
Capital expenditures(2) |
$ |
15,916 |
|
|
$ |
38,072 |
|
|
|
$ |
52,374 |
|
|
|
Utah (Uinta basin) |
|
Colorado (Piceance basin) |
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
($ in thousands, except prices) |
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and natural gas liquids sales |
$ |
6,439 |
|
|
|
$ |
11,278 |
|
|
|
$ |
14,153 |
|
|
$ |
1,132 |
|
|
$ |
1,299 |
|
|
$ |
1,817 |
|
|
Operating (loss)
income(1) |
$ |
(584 |
) |
|
|
$ |
(127,700 |
) |
|
|
$ |
1,078 |
|
|
$ |
6 |
|
|
$ |
384 |
|
|
$ |
(74 |
) |
|
Depreciation, depletion, and
amortization (DD&A) |
$ |
905 |
|
|
|
$ |
4,311 |
|
|
|
$ |
2,939 |
|
|
$ |
43 |
|
|
$ |
55 |
|
|
$ |
255 |
|
|
Impairment of oil and gas
properties |
$ |
— |
|
|
|
$ |
125,206 |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Average daily production
(MBoe/d) |
4.4 |
|
|
|
4.5 |
|
|
|
5.1 |
|
|
1.3 |
|
|
1.4 |
|
|
1.5 |
|
|
Production (oil % of
total) |
49 |
|
% |
|
53 |
|
% |
|
53 |
% |
|
2 |
% |
|
1 |
% |
|
2 |
|
% |
Realized sales prices: |
|
|
|
|
|
|
|
|
|
|
|
Oil (per Bbl) |
$ |
23.11 |
|
|
|
$ |
39.64 |
|
|
|
$ |
44.79 |
|
|
$ |
20.67 |
|
|
$ |
42.54 |
|
|
$ |
55.07 |
|
|
NGLs (per Bbl) |
$ |
5.82 |
|
|
|
$ |
13.16 |
|
|
|
$ |
16.86 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Gas (per Mcf) |
$ |
1.68 |
|
|
|
$ |
2.22 |
|
|
|
$ |
2.29 |
|
|
$ |
1.53 |
|
|
$ |
1.70 |
|
|
$ |
1.99 |
|
|
Capital expenditures(2) |
$ |
82 |
|
|
|
$ |
857 |
|
|
|
$ |
1,363 |
|
|
$ |
145 |
|
|
$ |
6 |
|
|
$ |
80 |
|
|
__________
(1) Operating income (loss) includes oil,
natural gas and NGL sales, marketing revenues, other revenues, and
scheduled oil derivative settlements, offset by operating expenses,
general and administrative expenses, DD&A, impairment of oil
and gas properties, and taxes, other than income taxes.
(2) Excludes corporate capital
expenditures.
COMMODITY PRICING
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
Realized Sales Prices
(weighted-average) |
|
|
|
|
|
Oil without hedges ($/Bbl) |
$ |
28.98 |
|
|
$ |
47.61 |
|
|
$ |
61.69 |
|
Effects of scheduled
derivative settlements ($/Bbl) |
$ |
25.42 |
|
|
$ |
9.67 |
|
|
$ |
0.13 |
|
Oil with hedges ($/Bbl) |
$ |
54.40 |
|
|
$ |
57.28 |
|
|
$ |
61.82 |
|
Natural gas ($/Mcf) |
$ |
1.62 |
|
|
$ |
2.00 |
|
|
$ |
2.16 |
|
NGLs ($/Bbl) |
$ |
5.82 |
|
|
$ |
13.16 |
|
|
$ |
16.86 |
|
|
|
|
|
|
|
Index
Prices |
|
|
|
|
|
Brent oil ($/Bbl) |
$ |
33.39 |
|
|
$ |
50.82 |
|
|
$ |
68.47 |
|
WTI oil ($/Bbl) |
$ |
28.42 |
|
|
$ |
46.35 |
|
|
$ |
59.86 |
|
Kern, Delivered natural gas
($/MMBtu)(1) |
$ |
1.45 |
|
|
$ |
1.97 |
|
|
$ |
2.07 |
|
Henry Hub natural gas
($/MMBtu) |
$ |
1.70 |
|
|
$ |
1.91 |
|
|
$ |
2.57 |
|
__________
(1) Kern, Delivered Index is the relevant
index used for gas purchases in California.
CURRENT HEDGING SUMMARY
As of June 30, 2020, we had the following crude oil production
and gas purchases hedges.
|
Q3 2020 |
|
Q4 2020 |
|
FY 2021 |
|
|
|
|
|
|
Fixed Price Oil Swaps
(Brent): |
|
|
|
|
|
Hedged volume (MBbls) |
2,208 |
|
2,208 |
|
4,678 |
Weighted-average price ($/Bbl) |
$ |
59.85 |
|
$ |
59.85 |
|
$ |
45.99 |
Purchased Oil Calls
Options (Brent): |
|
|
|
|
|
Hedged volume (MBbls) |
276 |
|
276 |
|
— |
Weighted-average price ($/Bbl) |
$ |
65.00 |
|
$ |
65.00 |
|
$ |
— |
Fixed Price Gas
Purchase Swaps (Kern, Delivered): |
|
|
|
|
|
Hedged volume (MMBtu) |
5,060,000 |
|
5,060,000 |
|
14,580,000 |
Weighted-average price ($/MMBtu) |
$ |
2.89 |
|
$ |
2.76 |
|
$ |
2.72 |
Fixed Price Gas
Purchase Swaps (SoCal Citygate): |
|
|
|
|
|
Hedged volume (MMBtu) |
460,000 |
|
155,000 |
|
— |
Weighted-average price ($/MMBtu) |
$ |
3.80 |
|
$ |
3.80 |
|
$ |
— |
In July 2020, we added fixed price oil swaps
(Brent) of 4,663 Bbls/d at nearly $46 beginning January through
June 2021.
OPERATING EXPENSES
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ in thousands except per Boe amounts) |
Lease operating expenses |
$ |
40,733 |
|
|
$ |
50,752 |
|
|
$ |
47,879 |
|
Electricity generation
expenses |
3,022 |
|
|
3,946 |
|
|
3,164 |
|
Electricity sales(1) |
(4,884 |
) |
|
(5,461 |
) |
|
(5,364 |
) |
Transportation expenses |
1,789 |
|
|
1,822 |
|
|
1,694 |
|
Transportation sales(1) |
(29 |
) |
|
(24 |
) |
|
(104 |
) |
Marketing expenses |
280 |
|
|
430 |
|
|
421 |
|
Marketing revenues(1) |
(292 |
) |
|
(453 |
) |
|
(414 |
) |
Derivative settlements paid
(received) for gas purchases(1) |
7,362 |
|
|
4,411 |
|
|
3,593 |
|
Total operating expenses(1) |
$ |
47,981 |
|
|
$ |
55,423 |
|
|
$ |
50,869 |
|
|
|
|
|
|
|
Lease operating expenses
($/Boe) |
$ |
15.37 |
|
|
$ |
18.14 |
|
|
$ |
19.18 |
|
Electricity generation
expenses ($/Boe) |
1.14 |
|
|
1.41 |
|
|
1.27 |
|
Electricity sales ($/Boe) |
(1.84 |
) |
|
(1.95 |
) |
|
(2.15 |
) |
Transportation expenses
($/Boe) |
0.67 |
|
|
0.65 |
|
|
0.68 |
|
Transportation sales
($/Boe) |
(0.01 |
) |
|
(0.01 |
) |
|
(0.04 |
) |
Marketing expenses
($/Boe) |
0.11 |
|
|
0.15 |
|
|
0.17 |
|
Marketing revenues
($/Boe) |
(0.11 |
) |
|
(0.16 |
) |
|
(0.17 |
) |
Derivative settlements paid
(received) for gas purchases ($/Boe) |
2.78 |
|
|
1.58 |
|
|
1.44 |
|
Total operating expenses ($/Boe) |
$ |
18.11 |
|
|
$ |
19.81 |
|
|
$ |
20.38 |
|
Total unhedged operating expenses ($/Boe)(2) |
$ |
15.33 |
|
|
$ |
18.23 |
|
|
$ |
18.94 |
|
|
|
|
|
|
|
Total MBoe |
2,650 |
|
|
2,798 |
|
|
2,497 |
|
__________
(1) We report electricity, transportation
and marketing sales separately in our financial statements as
revenues in accordance with GAAP. However, these revenues are
viewed and used internally in calculating operating expenses which
is used to track and analyze the economics of development projects
and the efficiency of our hydrocarbon recovery. We purchase
third-party gas to generate electricity through our cogeneration
facilities to be used in our field operations activities and view
the added benefit of any excess electricity sold externally as a
cost reduction/benefit to generating steam for our thermal recovery
operations. Marketing revenues and expenses mainly relate to
natural gas purchased from third parties that moves through our
gathering and processing systems and then is sold to third parties.
Transportation sales relate to water and other liquids that we
transport on our systems on behalf of third parties and have not
been significant to date. Operating expenses also include the
effect of derivative settlements (received or paid) for gas
purchases.
(2) Total unhedged operating expenses
equals total operating expenses, excluding the derivative
settlements paid (received) for gas purchases.
PRODUCTION STATISTICS
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
Net Oil, Natural Gas
and NGLs Production Per
Day(1): |
|
|
|
|
|
Oil
(MBbl/d) |
|
|
|
|
|
California |
23.4 |
|
24.9 |
|
20.8 |
Utah |
2.2 |
|
2.4 |
|
2.7 |
Colorado |
— |
|
— |
|
— |
Total oil |
25.6 |
|
27.3 |
|
23.5 |
Natural gas
(MMcf/d) |
|
|
|
|
|
California |
— |
|
— |
|
— |
Utah |
11.5 |
|
10.5 |
|
11.7 |
Colorado |
7.7 |
|
8.0 |
|
9.1 |
Total natural gas |
19.2 |
|
18.5 |
|
20.8 |
NGLs
(MBbl/d) |
|
|
|
|
|
California |
— |
|
— |
|
— |
Utah |
0.3 |
|
0.4 |
|
0.4 |
Colorado |
— |
|
— |
|
— |
Total NGLs |
0.3 |
|
0.4 |
|
0.4 |
Total Production
(MBoe/d)(2) |
29.1 |
|
30.8 |
|
27.4 |
__________
(1) Production represents volumes sold
during the period.
(2) Natural gas volumes have been
converted to Boe based on energy content of six Mcf of gas to one
Bbl of oil. Barrels of oil equivalence does not necessarily result
in price equivalence. The price of natural gas on a barrel of oil
equivalent basis is currently substantially lower than the
corresponding price for oil and has been similarly lower for a
number of years. For example, in the three months ended June 30,
2020, the average prices of Brent oil and Henry Hub natural gas
were $33.39 per Bbl and $1.70 per MMBtu respectively, resulting in
an oil-to-gas ratio of approximately 3 to 1 on an energy equivalent
basis.
CAPITAL EXPENDITURES (ACCRUAL BASIS)
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
(in thousands) |
Capital expenditures (accrual basis) |
$ |
16,528 |
|
|
$ |
39,415 |
|
|
$ |
56,645 |
|
NON-GAAP FINANCIAL MEASURES AND
RECONCILIATIONS
Adjusted Net Income (Loss) is not a measure of
net income (loss), Levered Free Cash Flow is not a measure of cash
flow, and Adjusted EBITDA is not a measure of either, in all cases,
as determined by GAAP. Adjusted EBITDA, Adjusted Net Income (Loss)
and Levered Free Cash Flow are supplemental non-GAAP financial
measures used by management and external users of our financial
statements, such as industry analysts, investors, lenders and
rating agencies.
We define Adjusted EBITDA as earnings before
interest expense; income taxes; depreciation, depletion, and
amortization; derivative gains or losses net of cash received or
paid for scheduled derivative settlements; impairments; stock
compensation expense; and other unusual, out-of-period and
infrequent items, including restructuring costs and reorganization
items. We define Levered Free Cash Flow as Adjusted EBITDA less
capital expenditures, interest expense and dividends.
Our management believes Adjusted EBITDA provides
useful information in assessing our financial condition, results of
operations and cash flows and is widely used by the industry and
the investment community. The measure also allows our management to
more effectively evaluate our operating performance and compare the
results between periods without regard to our financing methods or
capital structure. Levered Free Cash Flow is used by
management as a primary metric to plan capital allocation to
sustain production levels and for internal growth opportunities, as
well as hedging needs. It also serves as a measure for assessing
our financial performance and our ability to generate excess cash
from operations to service debt and pay dividends.
Adjusted Net Income (Loss) excludes the impact
of unusual, out-of-period and infrequent items affecting earnings
that vary widely and unpredictably, including non-cash items such
as derivative gains and losses. This measure is used by management
when comparing results period over period. We define Adjusted
Net Income (Loss) as net income (loss) adjusted for derivative
gains or losses net of cash received or paid for scheduled
derivative settlements, other unusual, out-of-period and infrequent
items, including restructuring costs and reorganization items and
the income tax expense or benefit of these adjustments using our
effective tax rate.
While Adjusted EBITDA, Adjusted Net Income
(Loss) and Levered Free Cash Flow are non-GAAP measures, the
amounts included in the calculation of Adjusted EBITDA, Adjusted
Net Income (Loss) and Levered Free Cash Flow were computed in
accordance with GAAP. These measures are provided in addition to,
and not as an alternative for, income and liquidity measures
calculated in accordance with GAAP. Certain items excluded from
Adjusted EBITDA are significant components in understanding and
assessing our financial performance, such as our cost of capital
and tax structure, as well as the historic cost of depreciable and
depletable assets. Our computations of Adjusted EBITDA, Adjusted
Net Income (Loss) and Levered Free Cash Flow may not be comparable
to other similarly titled measures used by other companies.
Adjusted EBITDA, Adjusted Net Income (Loss) and Levered Free Cash
Flow should be read in conjunction with the information contained
in our financial statements prepared in accordance with GAAP.
Adjusted General and Administrative Expenses is
a supplemental non-GAAP financial measure that is used by
management and external users of our financial statements, such as
industry analysts, investors, lenders and rating agencies. We
define Adjusted General and Administrative Expenses as general and
administrative expenses adjusted for restructuring and other
non-recurring costs and non-cash stock compensation
expense. Management believes Adjusted General and
Administrative Expenses is useful because it allows us to more
effectively compare our performance from period to period.
We exclude the items listed above from general
and administrative expenses in arriving at Adjusted General and
Administrative Expenses because these amounts can vary widely and
unpredictably in nature, timing, amount and frequency and stock
compensation expense is non-cash in nature. Adjusted General and
Administrative Expenses should not be considered as an alternative
to, or more meaningful than, general and administrative expenses as
determined in accordance with GAAP. Our computations of Adjusted
General and Administrative Expenses may not be comparable to other
similarly titled measures of other companies.
ADJUSTED NET INCOME (LOSS)
The following table presents a reconciliation of
the GAAP financial measure of net income (loss) to the non-GAAP
financial measure of Adjusted Net Income (Loss).
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ thousands, except per share amounts) |
Net (loss) income |
$ |
(64,901 |
) |
|
$ |
(115,300 |
) |
|
$ |
31,972 |
|
Add (Subtract): discrete income tax items |
— |
|
|
46,700 |
|
|
— |
|
Add (Subtract): |
|
|
|
|
|
Losses (gains) on oil and natural gas derivatives |
43,192 |
|
|
(199,194 |
) |
|
(17,827 |
) |
Net cash received (paid) for scheduled derivative settlements |
51,874 |
|
|
19,625 |
|
|
(3,326 |
) |
Other operating (income) expenses |
(1,192 |
) |
|
2,202 |
|
|
3,119 |
|
Impairment of oil and gas properties |
— |
|
|
289,085 |
|
|
— |
|
Non-recurring costs |
316 |
|
|
1,862 |
|
|
1,513 |
|
Reorganization items, net |
— |
|
|
— |
|
|
26 |
|
Total additions, net |
94,190 |
|
|
113,580 |
|
|
(16,495 |
) |
|
|
|
|
|
|
Income tax (expense) benefit
of adjustments at effective tax rate(1) |
(24,680 |
) |
|
(26,805 |
) |
|
4,569 |
|
Adjusted Net Income
(Loss) |
$ |
4,609 |
|
|
$ |
18,175 |
|
|
$ |
20,046 |
|
|
|
|
|
|
|
Basic EPS on Adjusted Net
Income |
$ |
0.06 |
|
|
$ |
0.23 |
|
|
$ |
0.25 |
|
Diluted EPS on Adjusted Net
Income |
$ |
0.06 |
|
|
$ |
0.23 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
Weighted average shares of
common stock outstanding - basic |
79,795 |
|
|
79,608 |
|
|
81,519 |
|
Weighted average shares of
common stock outstanding - diluted |
80,640 |
|
|
79,945 |
|
|
81,683 |
|
__________
(1) Excludes prior year income tax credits
from the total additions, net line item and the tax effect the
prior tax credits have on the current year effective tax rate.
ADJUSTED EBITDA AND ADJUSTED EBITDA
UNHEDGED
The following tables present a reconciliation of
the GAAP financial measures of net income (loss) and net cash
provided or used by operating activities to the non-GAAP financial
measures of Adjusted EBITDA and Adjusted EBITDA Unhedged.
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ thousands) |
Net (loss) income |
$ |
(64,901 |
) |
|
$ |
(115,300 |
) |
|
$ |
31,972 |
|
Add (Subtract): |
|
|
|
|
|
Interest expense |
8,676 |
|
|
8,920 |
|
|
8,961 |
|
Income tax (benefit) expense |
(22,623 |
) |
|
26,349 |
|
|
12,221 |
|
Depreciation, depletion and amortization |
37,512 |
|
|
35,329 |
|
|
23,654 |
|
Impairment of oil and gas properties |
— |
|
|
289,085 |
|
|
— |
|
Derivative loss (gain) |
43,192 |
|
|
(199,194 |
) |
|
(17,827 |
) |
Net cash received (paid) for scheduled derivative
settlements |
51,874 |
|
|
19,625 |
|
|
(3,326 |
) |
Other operating (income) expense |
(1,192 |
) |
|
2,202 |
|
|
3,119 |
|
Stock compensation expense |
4,579 |
|
|
2,922 |
|
|
2,443 |
|
Non-recurring costs |
316 |
|
|
1,862 |
|
|
1,513 |
|
Reorganization items, net |
— |
|
|
— |
|
|
26 |
|
Adjusted EBITDA |
$ |
57,433 |
|
|
$ |
71,800 |
|
|
$ |
62,756 |
|
Net cash (received) paid for
scheduled derivative settlements |
(51,874 |
) |
|
(19,625 |
) |
|
3,326 |
|
Adjusted EBITDA unhedged |
$ |
5,559 |
|
|
$ |
52,175 |
|
|
$ |
66,082 |
|
|
|
|
|
|
|
Net cash provided by operating
activities |
$ |
41,939 |
|
|
$ |
44,483 |
|
|
$ |
74,396 |
|
Add (Subtract): |
|
|
|
|
|
Cash interest payments |
648 |
|
|
14,879 |
|
|
1,272 |
|
Cash income tax payments |
— |
|
|
2 |
|
|
— |
|
Non-recurring costs |
316 |
|
|
1,862 |
|
|
1,513 |
|
Other changes in operating assets and liabilities |
14,530 |
|
|
10,574 |
|
|
(14,425 |
) |
Adjusted EBITDA |
$ |
57,433 |
|
|
$ |
71,800 |
|
|
$ |
62,756 |
|
Net cash (received) paid for
scheduled derivative settlements |
(51,874 |
) |
|
(19,625 |
) |
|
3,326 |
|
Adjusted EBITDA unhedged |
$ |
5,559 |
|
|
$ |
52,175 |
|
|
$ |
66,082 |
|
LEVERED FREE CASH FLOW
The following table presents a reconciliation of
Adjusted EBITDA to the non–GAAP measures of Levered free cash flow.
The reconciliation of Adjusted EBITDA is presented above.
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ thousands) |
Adjusted EBITDA |
$ |
57,433 |
|
|
$ |
71,800 |
|
|
$ |
62,756 |
|
Subtract: |
|
|
|
|
|
Capital expenditures - accrual basis |
(16,528 |
) |
|
(39,415 |
) |
|
(56,645 |
) |
Interest expense |
(8,676 |
) |
|
(8,920 |
) |
|
(8,961 |
) |
Cash dividends declared |
— |
|
|
(9,564 |
) |
|
(9,710 |
) |
Levered free cash flow |
$ |
32,229 |
|
|
$ |
13,901 |
|
|
$ |
(12,560 |
) |
Net cash (received) paid for
scheduled derivative settlements |
(51,874 |
) |
|
(19,625 |
) |
|
3,326 |
|
Levered free cash flow
unhedged |
$ |
(19,645 |
) |
|
$ |
(5,724 |
) |
|
$ |
(9,234 |
) |
ADJUSTED GENERAL AND ADMINISTRATIVE
EXPENSES
The following table presents a reconciliation of the GAAP
financial measure of general and administrative expenses to the
non-GAAP financial measures of Adjusted general and administrative
expenses.
|
Three Months Ended |
|
June 30, 2020 |
|
March 31, 2020 |
|
June 30, 2019 |
|
($ in thousands except per MBoe amounts) |
General and administrative expenses |
$ |
18,777 |
|
|
$ |
19,337 |
|
|
$ |
16,158 |
|
Subtract: |
|
|
|
|
|
Non-cash stock compensation expense (G&A portion) |
(4,380 |
) |
|
(2,919 |
) |
|
(2,368 |
) |
Non-recurring costs |
(316 |
) |
|
(1,862 |
) |
|
(1,513 |
) |
Adjusted general and
administrative expenses |
$ |
14,081 |
|
|
$ |
14,556 |
|
|
$ |
12,277 |
|
|
|
|
|
|
|
General and administrative
expenses ($/MBoe) |
$ |
7.09 |
|
|
$ |
6.91 |
|
|
$ |
6.47 |
|
Subtract: |
|
|
|
|
|
Non-cash stock compensation expense ($/MBoe) |
(1.65 |
) |
. |
(1.04 |
) |
. |
(0.95 |
) |
Non-recurring costs ($/MBoe) |
(0.12 |
) |
|
(0.67 |
) |
|
(0.61 |
) |
Adjusted general and
administrative expenses ($/MBoe) |
$ |
5.31 |
|
|
$ |
5.20 |
|
|
$ |
4.92 |
|
|
|
|
|
|
|
Total MBoe |
2,650 |
|
|
2,798 |
|
|
2,497 |
|
Contact
Contact: Berry Corporation
Todd Crabtree - Manager, Investor Relations
(661) 616-3811
ir@bry.com
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