Berry Corporation today announced third quarter 2023 results, including net loss of $45 million or $0.60 per diluted share, Adjusted Net Income of $12 million or $0.15 per diluted share, cash flow from operating activities of $55 million and Adjusted EBITDA of $70 million.

Quarterly Highlights

• Produced 25,300 boe/d, higher than first half 2023, ~30% lower than planned annual capital expenditures
• Generated Adjusted EBITDA (1) of $70 million and Adjusted Free Cash Flow of $35 million, both higher than second quarter 2023
• Declared total fixed and variable dividends of $0.21 per share, a 50% increase over second quarter 2023
• Reduced G&A and Adjusted G&A by 7% and 12%, respectively, compared to second quarter 2023
• Closed on accretive, oil producing acquisition (Macpherson) at end of quarter, integrating assets and people

“In the third quarter, we generated meaningful free cash flow and returned it to our shareholders through dividends and closing an acquisition that we expect will enhance our financial results going forward,” said Fernando Araujo, Berry’s CEO. “We have successfully integrated the Macpherson business and have identified and already started implementing cost reduction initiatives which we expect will enhance our free cash flows even more than originally indicated. Moreover, we are aggressively pursuing scale through accretive M&A, especially outside of California, in all cases to enhance our ability to generate sustainable free cash flow.”

Third Quarter 2023 Results

Net loss was $45 million in the third quarter 2023 compared to net income of $26 million in the second quarter 2023, each including mark-to-market changes in derivative values. Adjusted Net Income was flat at $12 million in both quarters.

The Company's average daily production in the third quarter 2023 was 25,300 boe/d compared to 25,900 boe/d in the second quarter 2023 and 25,100 boe/d in the first half of 2023. Company-wide oil production in the third quarter 2023 was 23,200 bbl/d, accounting for 92% of total Company production, with California production contributing 20,500 boe/d or 81% of total production. Production decreased 2% quarter-over-quarter principally due to lower drilling and workover activities and accumulated inventory from first quarter production sold in the second quarter due to weather issues.

Company-wide realized oil price, including hedging effects, was $73.13 per bbl for the third quarter 2023 compared to $69.87 per bbl in the second quarter 2023. Excluding hedging effects, California's average realized oil prices were $79.98 per bbl in the third quarter 2023 and $72.10 per bbl in the second quarter 2023, each 93% of Brent.

Lease operating expenses, which includes fuel gas costs for California steam operations, increased in the third quarter 2023 from the second quarter 2023 mostly as a result of higher natural gas (fuel) costs for the California steam generation facilities due to an increase in fuel prices. Lease operating expenses and fuel costs were lower in the third quarter compared to the first half of 2023.  

Lease operating expenses excluding fuel increased $1 million due to higher power costs from the higher seasonal summer rates in the third quarter 2023.

Taxes, other than income taxes, increased 31%, in the third quarter 2023 compared to the second quarter 2023 due to higher non-cash mark-to-market prices for greenhouse gas (“GHG”) allowances in the third quarter compared to the second quarter.

General and administrative expenses (“G&A”) decreased 7% in the third quarter 2023 compared to the second quarter 2023. Adjusted General and Administrative Expenses, which excludes non-cash stock compensation costs and non-recurring costs, decreased 12% in the third quarter 2023 compared to the second quarter 2023, largely as a result of lower shareholder litigation expenses.

The income for the well servicing and abandonment business, C&J Well Services, was $3 million in the third quarter 2023, slightly lower than the second quarter 2023 as a result of a change in mix and volume of services.

For the third quarter 2023, capital expenditures were approximately $12 million, excluding acquisitions, asset retirement obligation spending and well servicing and abandonment capital of $2 million. This represented a 43% decrease in capital expenditures compared to the second quarter 2023, mainly due to a decrease in workover and drilling costs. This decreased development activity was generally due to capital expenditure reductions made in connection with the Macpherson Acquisition in September 2023. The Company expects to reallocate approximately $30 to $35 million of its initial 2023 capital expenditure budget to fund a portion of the acquisition purchase price, of which approximately $53 million was paid at closing. Additionally, the Company spent approximately $4 million for plugging and abandonment activities in the third quarter 2023.

At September 30, 2023, the Company had liquidity of $163 million, consisting of $17 million cash and $146 million available for borrowings under its revolving credit facilities.

“We delivered another quarter of strong financial and operational results and declared $0.21 per share in variable and fixed dividends combined for the quarter,” stated Mike Helm, Berry’s CFO. “We generated Adjusted EBITDA totaling $70 million and Adjusted Free Cash Flow of $35 million, each a slight increase quarter-over-quarter. With the enhanced cash flows from the Macpherson assets, we expect to concentrate on improving our leverage, including through debt reduction. It is important to recognize that our Shareholder Return Model is dynamic, and we are continually looking at ways to optimize it with the right balance of debt reduction, competitive dividends, share repurchases, and the ability to capitalize on accretive acquisitions.”

KeyFacts Energy Industry Directory: Berry Corporation