Q2 2024 Berry Corp Earnings Call

Thank you for standing by and welcome to Berry Corporation's second quarter 2024 earnings call. At this time all participants are in listen-only mode. After the speaker's presentation there will be a question and answer session.

Operator: for the earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Todd Crabtree, Investor Relations. Please go ahead, sir.

To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Todd Crabtree, Investor Relations. Please go ahead, sir.

Todd Crabtree: Thank you, Jonathan, and welcome everyone. Thank you for joining us for Berry's second quarter 2024 earnings teleconference. Earlier today, Berry issued an earnings release highlighting its 2024 second quarter results. Speaking this morning will be Fernando Araujo, our Chief Executive Officer, Danielle Hunter, our President, and Mike Helm, our Chief Financial Officer. Before we begin, I would like to call your attention to the Safe Harbor language found in our earnings release that was issued this morning.

Todd Crabtree: Thank you Jonathan and welcome everyone. Thank you for joining us for Berry's second quarter 2024 earnings teleconference. Earlier today Berry issued an earnings release highlighting 2024 second quarter results.

Speaker Change: Speaking this morning will be Fernando Araujo, our Chief Executive Officer, Danielle Hunter, our President, and Mike Helm, our Chief Financial Officer.

Speaker Change: Before we begin, I would like to call your attention to the Safe Harbor language found in our earnings release that was issued this morning. The release of today's discussion contains certain projections and other forward-looking statements within the meaning of federal securities laws.

Todd Crabtree: The release of today's discussion contains certain projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. These include risks and other factors outlined in our filings with the SEC, including our 10-Q, which will be filed later today. Our investor relations website, ir.bry.com, has a link to the earnings release and investor deck aligned with this call, SEC filings, and our most recent investor presentation.

Speaker Change: These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.

Speaker Change: These include risks and other factors outlined in our filings with the SEC, including our 10-Q, which will be filed later today.

Speaker Change: Our investor relations website, ir.bry.com, has a link to the earnings release, an investor deck aligned with this call, SEC filings, and our most recent investor presentation.

Todd Crabtree: Any information, including forward-looking statements made on this call or contained in the earnings release and those presentations, reflect our analysis as of the date made and we have no plans or duty to update them except as required by law.

Speaker Change: Any information, including forward-looking statements, made on this call or contained in the earnings release and those presentations, reflect our analysis as of the date made. We have no plans or duty to update them except as required by law.

Todd Crabtree: Please refer to the tables in our earnings release and on our website for a reconciliation between all adjusted measures mentioned in today's calls and the related gap measures. We will also post the replay link of this call and the transcript on our website. I will now turn the call over to Fernando.

Speaker Change: Please refer to the tables in our earnings release and on our website for reconciliation between all adjusted measures mentioned in today's calls and the related GAAP measures . We will also post the replay link of this call and the transcript on our website. I will now turn the call over to Fernando.

Fernando Araujo: Thanks Todd. Welcome everyone, and thank you for joining us.

Fernando Araujo: Thanks Todd. Welcome everyone and thank you for joining us. In the second quarter we delivered strong financial and operational results generating adjusted EBITDA of 74 million dollars and producing 25,300 barrels of oil equivalent a day.

Fernando Araujo: In the second quarter, we delivered strong financial and operational results, generating adjusted EBITDA of $74 million and producing 25,300 barrels of oil equivalent daily. Our teams continue to perform reliably and with excellence, and we remain on track to deliver results in line with the guidance provided earlier this year. We are focused on our strategy of creating value by generating sustainable free cash flow with high rates of return on low capital intensity projects, optimizing our cost structure, and maintaining balance sheet strength while meeting the highest compliance standards. Production quarter over quarter was sustained by a combination of strong results from our development activities and protecting base production. The Thermal Dynamite Reservoir is an example of protecting the Bay.

Fernando Araujo: Our teams continue to perform reliably and with excellence, and we remain on track to deliver results in line with the guidance provided earlier this year.

Fernando Araujo: We are focused on our strategy of creating value by 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: Production quarter-over-quarter was sustained by a combination of strong results from our development activity and protecting base production.

Fernando Araujo: Since 2019, exclusive of drilling activity in 2024, we have increased production in this reservoir by 19% through superior reservoir management and work. This is a testament to the ingenuity of our technical teams, who continue to find capital-efficient ways to increase production. In the second quarter, we drilled 19 wells, with 15 in California and four vertical wells in Utah, with production from our drilling activity outperforming the expected results. We have the necessary drilling permits in hand that will allow us to complete our planned drilling program for 2024. And in the second quarter, we received new drill permits that will support our development plans in 2025. According to Utah, the Uinta Basin has seen increased activity and consolidation, and this is exciting.

Fernando Araujo: Our thermal diatomite reservoir is an example of protecting the base. Since 2019, exclusive of drilling activity in 2024, we have increased production in this reservoir by 19% through superior reservoir management and work orders.

Fernando Araujo: This is a testament to the ingenuity of our technical teams who continue to find capital efficient ways to increase production.

Operator: At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered, any like to move yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded.

Fernando Araujo: In the second quarter, we drilled 19 wells, with 15 in California and four vertical wells in Utah, with production from our drilling activity outperforming the expected results.

Fernando Araujo: We have the necessary drilling permits in hand that will allow us to complete our planned drilling program for 2024. And in the second quarter, we received new drill permits that will support our development plans in 2025.

Todd Crabtree: And now I'd like to introduce your host for today's program, Todd Crabtree, investor relations.

Operator: Please go ahead, sir.

Todd Crabtree: Thank you, Jonathan, and welcome everyone. Thank you for joining us for a very second quarter of 2024 earnings teleconference. Earlier today, Berry issues in earnings release highlighting 2024 second quarter results. Speaking this morning, we'll be Fernando Araujo, our chief executive officer, Danielle Hunter, our president, and Mike Helm, our chief financial officer. Before we begin, I would like to call your attention to the state harbor language found in our earnings release that was issued this morning.

Speaker Change: According to Utah, the Uinta Basin has seen increased activity and consolidation, and this is exciting.

Fernando Araujo: The four horizontal wells we farmed into earlier this year were put into production in the second quarter and are performing better than our Breedville estuaries. These four wells are adjacent to our existing acreage and operations. We believe the resource on Berry's nearly 100,000 net operated acres, which is almost entirely held by production, has the potential to be significant. Berry has a cost-advantage position in this area.

Speaker Change: The four horizontal wells we farmed into earlier this year were put on production in the second quarter and are performing better than our Breedville estimates.

Todd Crabtree: The release, today's discussion, contains certain projections and other four-looking statements within the meaning of federal security laws. These statements are subject to risks and uncertainties that may cause actual results, different materially from those expressed or implied in these statements. These include risks and other factors outlined in our filings with the SEC, including our 10Q, which will be filed later today. Our investor relations website, ir.bry.com, has a link to the earnings release, an investor deck aligned with this call, SEC filings, and our most recent and investor presentation.

Speaker Change: These four wells are adjacent to our existing acreage and operations. We believe the resource on Berry's nearly 100,000 net operated acres, which is almost entirely held by production, has the potential to be significant.

Todd Crabtree: Any information, including four-looking statements made on this call or contained in the earnings release and those presentations reflect our analysis as of the date made. We have no plans to do you to update them, except as required by law. Please refer to the tables in our earnings release and on our website for reconciliation between all adjusted measures mentioned in today's calls and related gap measures.

Fernando Araujo: We are in the shallow end of the basin, we have no entry cost, and we have significant infrastructure in place which will drive our long-term capital efficiency. An example of this is our gas production and related infrastructure, which will help us reduce fuel costs in our drilling and completion operations. Based on what we know today, these assets are highly economical and would compete for capital with the rest of our portfolio. Our strategy with this play is consistent with our capital discipline and proven financial policy of living within free cash flow while increasing enterprise value.

Speaker Change: Berry has a cost advantage position in this play. We are in the shallow end of the basin, we have no entry cost, and have significant infrastructure in place which will drive our long-term capital efficiency.

Speaker Change: An example of this is our gas production and related infrastructure, which will help us reduce fuel costs in our drilling and completion operations.

Speaker Change: Based on what we know today, these wells are highly economical and will compete for capital with the rest of our portfolio.

Speaker Change: Our strategy with this play is consistent with our capital discipline and proven financial policy of living within free cash flow while increasing enterprise value.

Fernando Araujo: We've kicked off a process to farm out a portion of our 2025 and 2026 programs, which we believe will allow us to better manage capital and potentially bring additional technical insights. We are very excited about the resource potential we have in Utah and look forward to sharing our future development plans later this year.

Speaker Change: We've kicked off a process to farm out a portion of our 2025 and 2026 program, which we believe will allow us to better manage capital and could potentially bring additional technical insight.

Operator: We will also post the replay link of this call and the transcript on our website.

Todd Crabtree: I will now turn the call over to Fernando. Thank you. Thanks, Todd.

Speaker Change: We are very excited about the resource potential we have in Utah and look forward to sharing our future development plans later this year.

Fernando Araujo: Welcome, everyone, and thank you for joining us. In the second quarter, we delivered strong financial and operational results, generating a adjusted EBITDA of $74 million and producing 25,300 barrels of oil equivalent a day. Our teams continue to perform reliably and with excellence, and we remain on track to deliver results in line with the guidance provided earlier this year. We are focused on our strategy of creating value by generating sustainable free cash flow with high rates of return in low capital intensity projects, optimizing our cost structure and maintaining and maintaining balance sheet strength while meeting the highest compliance standards.

Mike Helm: Thank you, Fernando. I will highlight a few financial takeaways for the second quarter. For more in-depth information, please refer to our earnings release issued earlier this morning and our 10-Q to be filed later today. In the second quarter, adjusted EBITDA of $74 million was $5 million higher than the first quarter. As Fernando mentioned, second quarter production was consistent with the prior quarter, and realized crude prices were $78.18 per BOE and 92% of Brent for the quarter, contributing to total commodity revenue of $169 million.

Speaker Change: I will now turn the call over to Mike.

Mike Helm: Thank you, Fernando. I will highlight a few financial takeaways for the second quarter. For more in-depth information, please refer to our earnings release issued earlier this morning and our 10-Q to be filed later today.

Mike Helm: In the second quarter, adjusted EBITDA of $74 million was $5 million higher than the first quarter.

Mike Helm: As Fernando mentioned, second quarter production was consistent with the prior quarter and realized crude prices were $78.18 per BOE and 92% of Brent for the quarter, contributing to total commodity revenue of $169 million.

Mike Helm: Compared to Q1, lease operating expenses in Q2 were down 11% to $23.47 per VOE, due primarily to lower energy costs. Adjusted G&A expenses were down 10% to $7.41 per BOE compared to $8.20 per BOE in Q1. We continue to implement optimization initiatives to manage our expenses. A great example of this is our Utah Water Disposal Project, which will lower our trucking costs and has begun achieving projected annual operating cost savings of approximately $2 million.

Speaker Change: Compared to Q1, lease operating expenses in Q2 were down 11%, $23.47 for VOE, due primarily to lower energy costs.

Fernando Araujo: Production quarter over quarter was sustained by a combination of strong results from our development activity and protecting based production. Our thermal dynamite reservoir is an example of protecting the base. Since 2019, exclusive of drilling activity in 2024, we have increased production in this reservoir by 19% through superior reservoir management and workovers. This is a testament to the ingenuity of our technical teams who continue to find capital decision ways to increase production. In the second quarter, we drilled 19 wells with 15 in California and four vertical wells in Utah with production from our drilling activity outperforming expected results.

Speaker Change: Adjusted G&A expenses were down 10% due to $7.41 per BOE compared to $8.20 per BOE in Q1.

Speaker Change: We continue to implement optimization initiatives to manage our expenses. A great example of this is our Utah Water Disposal Project, which will lower our trucking costs and has begun achieving projected annual operating cost savings of approximately $2 million.

Mike Helm: As we mentioned in Q1, we expected that our capital cadence would peak in the middle of the year, and CapEx for Q2, at $42 million, was in line with our expectations and higher than in the first quarter. This is due primarily to development in California and facilities projects, as well as the second quarter Utah Farmed In development program, which has already begun to add production.

Speaker Change: As we mentioned in Q1, we expected that our capital cadence would peak in the middle of the year, and CapEx for Q2 at $42 million was in line with our expectations and higher than in the first quarter.

Fernando Araujo: House. We have the necessary drilling permits in hand that will allow us to complete our plan drilling program for 2024. And in the second quarter, we received new drill permits that will support our development plans in 2025. Turning to Utah, the UN's have seen increased activity and consolidation, and this is exciting. The four horse on the well we found into earlier this year were put on production in the second quarter and are performing better than our prequel estimates.

Speaker Change: This is due primarily to development in California and facilities projects, as well as the second quarter Utah Farmed In development program, which has already begun to add production. We expect to remain within our annual CAPEX guidance of $95 to $110 million for the year.

Mike Helm: We expect to remain within our annual CapEx guidance of $95 to $110 million for the year. However, adjusted free cash flow year-to-date is tracking higher than in 2023. In the second quarter, our adjusted free cash flow was $19 million, and that included the impact of the higher capex. Accordingly, the board approved a total dividend of $0.17 per share for the quarter. This includes our planned $0.12 per share fixed dividend, and based on the adjusted free cash flow generated in Q2, the board also declared a variable dividend of $0.05 per share, which is higher than the second quarter variable dividend in 2023.

Speaker Change: Adjusted free cash flow year-to-date is tracking higher than in 2023.

Speaker Change: In the second quarter, our adjusted free cash flow was $19 million, and that included the impact of the higher CapEx.

Speaker Change: accordingly.

Fernando Araujo: These four wells are adjacent to our existing acreage and operations. We believe the resource on Berry's nearly 100,000 net operated acres, which is almost entirely held by production has the potential to be significant. Berry has a cost advantage position in display. We are in the shallow end of the basin. We have no entry cost and have significant infrastructure in place, which will drive our long-term capital efficiency. An example of this is our gas production and related infrastructure, which will help us reduce field costs in drilling and completion operations.

Speaker Change: The board approved a total dividend of $0.17 per share for the quarter.

Speaker Change: This includes our planned $0.12 per share fixed dividend, and based on the adjusted free cash flow generated in Q2, the board also declared a variable dividend of $0.05 per share, which is higher than the second quarter variable dividend in 2023.

Mike Helm: On the strength of our free cash flow, we continued to prioritize debt reduction in Q2, driving our revolver balance down to $36 million at the end of the quarter, and we further reduced the revolver to $28 million at the end of July. This included the final payment of $20 million we made on the 2023 McPherson transact. Reducing our debt balances speaks to Berry's proactive nature to maintain a strong balance sheet, along with our goal of a debt to EBITDA ratio of less than 1.5 times. And now, I'll turn the call over to Berry's president, Danielle Hunter.

Speaker Change: On the strength of our free cash flow, we continue to prioritize debt reduction in Q2, driving our revolver balance down to $36 million at the end of the quarter.

Speaker Change: and we further reduced the revolver to $28 million at the end of July , and this included the final payment of $20 million we made on the 2023 McPherson transaction.

Fernando Araujo: Based on what we know today, these wells are highly economical and will compete for capital with the rest of our portfolio. Our strategy with this place consists in what our capital discipline and proven financial policy of living within free cash flow while increasing enterprise value. We've kicked off a process to farm out a portion of our 2025 and 2026 program, which we believe will allow us to better manage capital and could potentially bring additional technical insight.

Speaker Change: Reducing our debt balances speaks to Berry's proactive nature to maintain a strong balance sheet, along with our goal of debt to EBITDA ratio lower than one and a half times.

Danielle Hunter: Thanks, Mike. For the third quarter in a row, Berry had zero recordable incidents and zero lost time and space.

Speaker Change: And now I'll turn the call over to Berry's president, Danielle Hunter.

Danielle Hunter: Thanks, Mike. For the third quarter in a row, Berry had zero recordable incidents and zero lost time incidents. I want to acknowledge our employees for another quarter of a truly outstanding safety performance.

Danielle Hunter: I want to acknowledge our employees for another quarter of truly outstanding safety performance. At Berry, producing oil and gas safely is one of our top priorities and a core component of our ability to deliver sustainable and reliable energy. Another core focus is environmental stewardship. Last quarter, in conjunction with the release of our sustainability report, we announced that we had set a goal to eliminate at least 80 percent of methane emissions associated with our existing operations from a 2022 baseline by the end of 2025. We estimate that this achievement will reduce Berry's total Scope 1 GHG emissions by approximately 10%.

Speaker Change: At Berry, producing oil and gas safely is one of our top priorities and a core component of our ability to deliver sustainable and reliable energy.

Fernando Araujo: We are very excited about the resource potential we have in Utah and look forward to sharing our future development plans later this year.

Speaker Change: Another core focus is environmental stewardship. Last quarter, in conjunction with the release of our sustainability report, we announced that we had set a goal to eliminate at least 80% of methane emissions associated with our existing operations from a 2022 baseline by the end of 2025.

Mike Helm: I will now turn the call over to Mike. Thank you, Fernando. I will highlight a few financial takeaways for the second quarter.

Mike Helm: For more in-depth information, please refer to our earnings release issued earlier this morning and our 10Q to be followed later today. In the second quarter, just a debit of $74 million was $5 million higher than the first quarter. As Fernando mentioned, second quarter production was consistent with the prior quarter and realized crude prices were $78 and 18 cents per BoE and 92 percent of Brent for the quarter contributing to total commodity revenue of $169 million.

Speaker Change: We estimate that this achievement will reduce Berry's total scope one GHG emissions by approximately 10%.

Danielle Hunter: We're pleased to report that we have already completed 60% of this initiative, beginning with the replacement of all regulated natural gas pneumatic devices with zero emission devices. We will continue to strive to operate with the highest safety and compliance standards that our stakeholders expect, and we are always exploring additional ways to make improvements. We look forward to providing future updates on our progress. Bye, Fernando.

Speaker Change: We're pleased to report that we have already completed 60% of this initiative, beginning with the replacement of all regulated natural gas pneumatic devices with zero-emission devices.

Speaker Change: We will continue to strive to operate with the highest safety and compliance standards that our stakeholders expect, and we are always exploring additional ways to make improvements.

Mike Helm: Compared to Q1, lease operating expenses in Q2 were down 11 percent, $23.47 for BoE due primarily to lower energy costs. Adjusted G&A expenses were down 10 percent for Q2 to $7.41 per BoE compared to $8.20 per BoE and Q1. We continue to implement optimization initiatives to manage our expenses. A great example of this is our Utah Water Disposal Project, which will lower our trucking costs and has begun achieving projected annual operating cost savings of approximately $2 million.

Speaker Change: We look forward to providing future updates on our progress. Back to you, Fernando. Thanks, Annie. In closing, our second quarter results have delivered on our commitment to create value and generate sustainable free cash flow.

Fernando Araujo: Thanks, Annie. In closing, our second quarter results have delivered on our commitment to create value and generate sustainable free cash flow. We are on track to meet our annual production goals and continue to effectively manage our costs while maintaining an outstanding record of safety and compliance. We have world-class assets, an exceptional team that is always driving operational improvements, and has a proven track record of delivering results. Halfway through 2024, we are well on the way to achieving another solid year of operational and financial performance.

Speaker Change: We are on track to meet our annual production goals and continue to effectively manage our cost while maintaining an outstanding record of safety and compliance.

Speaker Change: We have world-class assets, an exceptional team that is always driving operational improvements, and has a proven track record of delivering results.

Mike Helm: As we mentioned in Q1, we expected that our capital cadence would peak in the middle of the year. And CAPEX for Q2 at $42 million was in line with our expectations and higher than in the first quarter. This would do primarily to development in California and facilities projects as well as the second quarter Utah Farmed in Development Program, which has already begun to add production. We expect to remain within our annual CAPEX guidance of $95 to $110 million for the year.

Speaker Change: Halfway through 2024, we are well on the way to achieving another solid year of operational and financial performance.

Fernando Araujo: We remain very excited about the potential Utah Horizontal Well-Development Opportunity and the outstanding performance from our four wells to date. The significant running room across our acreage and the built-in competitive advantages will enhance the economics of our future drilling activities. Arguenta Basin Development has the potential to be complementary to a world-class California portfolio of highly profitable locations. I will now turn the call over to the operator for questions.

Speaker Change: We remain very excited about the potential Utah Horizontal Well Development opportunity.

Speaker Change: The outstanding performance from our four wells to date, the significant running room across our acreage, and the built-in competitive advantages will enhance the economics of our future drilling activity.

Speaker Change: Arguenta Basin Development has the potential to be complementary to a world-class California portfolio of highly economic locations.

Mike Helm: A Jussifree cashflow year-to-date is tracking higher than in 2023. In the second quarter, our Jussifree cashflow was $19 million, and that included the impact of the higher cap-backs. Accordingly, the board approved a total dividend of $0.17 per share for the quarter. This includes our planned $0.12 per share of fixed dividend, and based on the Jussifree cashflow generated in Q2, the board also declared a variable dividend of $0.5 per share, which is higher than the second quarter variable dividend in 2023.

Mike Helm: On the strength of our free cashflow, we continued to prioritize debt reduction in Q2, driving our revolver balance down to $36 million at the end of the quarter, and we further reduced the revolver to $28 million at the end of July, and this included the final payment of $20 million we made on the 2023 McPherson transaction. Reducing our debt balances speaks to Barry's proactive nature to maintain a strong balance sheet, along with our goal of debt to evade a ratio lower than one and a half times.

Operator: Certainly, and as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 1 1, and our first question comes from the line of Charles Meade from Johnson Rice. Your question, please.

Speaker Change: I will now turn the call over to the operator for questions.

Speaker Change: Certainly, and as a reminder ladies and gentlemen if you do have a question at this time please press star 1 1 and our first question comes from the line of Charles Meade from Johnson Rice. Your question please.

Charles Meade: Yes, good morning, Fernando, Mike, and Danielle, and the rest of the Berry team. Fernando, I'm laughing a little bit because I appreciate what you've said about the Uinta wells, that they're better than expectations, but I think there's probably some reason why you haven't told us the rate or told us what your expectations were. So, to whatever extent you can, can you give us some guideposts or some benchmarks that would help us, if not specifically, quantify, at least get an understanding of where these wells have come in, and maybe what you expect to see over the next 36 or 90 days there?

Charles Meade: Yes, good morning, Fernando, Mike, and Danielle, and the rest of the Berry team. Fernando, I'm laughing a little bit because I appreciate what you've said on the Uintah wells, that they're better than expectations.

Speaker Change: but I think there's probably some reason why you you haven't told us the rate or told us what what your expectations were so to whatever extent you can can you can you give us some some guideposts or some brackets for

Speaker Change: That would help us, you know, if not, you know, specifically quantify, at least get an understanding of where these wells have come in and

Danielle Hunter: And now I'll turn the call over to Barry's president, Daniel Hunter. Thanks, Mike. For the third quarter in a row, Barry had zero recordable incidents and zero lost time incidents. I want to acknowledge our employees for another quarter of a truly outstanding safety performance. At Barry, producing oil and gas safely is one of our top priorities and a core component of our ability to deliver sustainable and reliable energy. Another core focus is environmental stewardship.

Speaker Change: and maybe what you expect to see over the next 30, 60, or 90 days there.

Fernando Araujo: Very good, Charles. That's a very good question, and let me provide a little more color around the horizontal wells in Utah. As you know, we've farmed into the four wells on acreage in Utah. Thank you, that's adjacent to our acreage on the northeast side of our acreage. And as I mentioned, the well results initially are better than expected, better than pre-drill. And we'll get to those details here in a minute.

Speaker Change: Very good, Charles. That's a very good question, and let me provide a little more color around the horizontal wells in Utah. As you know, we've farmed into the four wells in acreage area. Thank you.

Speaker Change: that's adjacent to our acreage to the northeast side of our acreage.

Speaker Change: And, as I mentioned, the well results initially are better than expected, better than pre-drill, and we'll get to those details here in a minute. But just to provide a little more color, we targeted the Udland Butte Reservoir.

Fernando Araujo: But just to provide a little more color, we targeted the Yulin Butte Reservoir, which is one of three or four reservoirs being targeted in the basin for horizontal well activity. And I do want to emphasize that we have nearly 100,000 acres operated by Berry, most of that held by production with really good geology, uniform geology, especially in the Udumbu Reservoir, which has the potential for horizontal well development. So we're very, very excited about that.

Danielle Hunter: Last quarter in conjunction with the release of our sustainability report, we announced that we had set a goal to eliminate at least 80 percent of methane emissions associated with our existing operations from a 2022 baseline by the end of 2025. We estimate that this achievement will reduce Barry's total scope on GHG emissions by approximately 10 percent. We're pleased to report that we have already completed 60 percent of this initiative, beginning with the replacement of all regulated natural gas pneumatic devices with zero emission devices. We will continue to strive to operate with the highest safety and compliance standards that our stakeholders expect, and we're always exploring additional ways to make improvements. We look forward to providing future updates on our progress.

Speaker Change: which is one of three or four reservoirs being targeted in the basin for horizontal well activity.

Speaker Change: And I do want to emphasize that we have nearly 100,000 acres operated by Berry, most of that held by production, with really good geology, uniform geology, especially in the Ulaanbaatar Reservoir.

Speaker Change: that have the potential for horizontal well development. So we're very, very excited about that. In addition to the fact that we do have a cost advantage position, as I mentioned, in the play.

Fernando Araujo: In addition to the fact that we do have a cost advantage position, as I mentioned, in the play, we are in the shallow end of the basin, we have no entry cost, and we have significant infrastructure in place to help us put those wells on production. So that's going to drive our capital efficiency. As far as the production itself goes, the wells IPed at a rate of about 1,100 barrels a day, barrels of oil equivalent a day, 90% oil, which is very good, and 10% gas.

Speaker Change: We are in the shallow end of the basin, we have no entry cost, and we have significant infrastructure in place to help us put those wells on production. So that's going to drive our capital efficiency.

Fernando Araujo: Back to you, Fernando.

Fernando Araujo: Thanks, Danny. In closing, our second quarter results have delivered on our commitment to create value and generate sustainable free cash flow. We are on track to meet our annual production goals and continue to effectively manage our costs while maintaining an outstanding record of safety and compliance.

Speaker Change: As far as the production itself, the wells IPed at a rate of about 1,100 barrels of oil equivalent a day, 90% oil, which is very good, 10% gas. But also remember that we are at the shallow end of the basin with lower reservoir pressures.

Fernando Araujo: But also remember that we are at the shallow end of the basin with lower reservoir pressures. So our IPs are slightly lower compared to some of the IPs in the northern end of the basin, in the deep basin, so we have to be mindful of that, but we do have that cost advantage position that I mentioned before, and that's what's really going to drive some significant improvements in the economics of those wells. So, hopefully, that that helps. Charles.

Fernando Araujo: We have world-class assets, an exceptional team that is always driving operational improvements and has a proven truck record of delivering results. Halfway to 2024, we are well on the way to achieving another solid year of operational and financial performance. We remain very excited about the potential Utah horizontal well development opportunity. The outstanding performance from our four wells to date, the significant running room across our acreage and the built-in competitive advantages will enhance the economics of our future drilling activity.

Speaker Change: So our IPs are slightly lower compared to some of the IPs in the northern end of the basin, in the deep basin, so we have to be mindful of that. But we do have that cost advantage position that I mentioned before, and that's what's really going to drive some significant improvement in the economics of those wells.

Charles Meade: No, look, that does help a lot. That may not be as high as some of the other two-mile laterals to the north, but those are really stout rates, so thank you for quantifying that, Fernando. One other piece of it that I'd like to ask you is... Previously, you had said 22,000 acres were prospective, and it was clear, way back then, that you were only, that only reflected a piece of your total position.

Speaker Change: So hopefully that that helps Charles. No don't look that it

Charles Meade: That does help a lot. It's, you know, that may not be as high as some of the other, you know, two-mile laterals to the north, but those are really stout rates. So thank you for quantifying that, Fernando. One other piece of it that I'd like to ask is,

Fernando Araujo: Are you going to base in development to have the potential to be complementary to a world-class California portfolio of highly economic location?

Speaker Change: Previously, you had said 22,000 acres were prospective and it was clear.

Operator: I will not turn it all over to the operator for questions.

Speaker Change: The way back then, that only reflected a piece of your total position. Now you're at 100, and can you give some context as to that?

Charles Meade: Now you're at 100, and can you give some context, is that? Does that just reflect your success with these four wells, or is there more that plays into that, like perhaps other industry results in the West? Another good question, Charles, and we

Charles Meade: from Charles Meade from Johnson Rice, your question, please. Yes.

Fernando Araujo: Good morning, Fernando. Mike, in Danielle, and the rest of the Berry team, Fernando, I'm laughing a little bit because I appreciate what you've said on the UNTWELS that there are better than expectations, but I think there's probably some reason why you haven't told us the rate or told us what your expectations were. So, to whatever extent you can, can you give us some guideposts or some brackets for that would help us, you know, if not, you know, specifically quantify, at least get an understanding of where these wells have come in and what you expect to see over the next 36 or 90 days there.

Speaker Change: Does that just reflect your success with these four wells, or is there more that plays into that, like perhaps other industry results to the West?

Fernando Araujo: Another good question, Charles, and we should have been more specific when we talked about the 22,000 acres. The 22,000 acres that we referred to before is the acreage that we're currently applying well permits for. So we're focusing on those 22,000 acres, which is on the northern side of our acreage base, but that's just the area where we're focusing to get permits ready and submitted here in the next few weeks. But the entire 100,000 acres is what's our perspective with Horazón-Wallach.

Speaker Change: Another good question, Charles, and we should have been more specific when we talked about the 22,000 acres. The 22,000 acres that we referred to before are, is the acreage that we're currently applying well permits for.

Speaker Change: So we're focusing on those 22,000 acres, which is on the northern side of our acreage base, but that's just the area where we're focusing to get permits ready and submitted here in the next few weeks.

Speaker Change: But the entire 100,000 acres is what's prospective with horizontal well activity.

Fernando Araujo: Very good, Charles. That's a very good question, and then we provide a little more color around the horizontal wells in Utah. As you know, we've farmed into the four wells in acreage that's adjacent to our acreage to the northeast side of our acreage. And as I mentioned, the well results initially are better than expected, better than pre-drill, and we'll get to those details here in a minute. But just to provide a little more color, we target it, the UNTWELS Reservoir, which is one of three or four reservoirs being targeted in the basin for horizontal well activity.

Operator: Thank you. And as a reminder, if you have a question at this time, please press star 11 on your telephone. And this does conclude the question and answer session of today's program. Now, we have a follow-up from Charles Meade on Johnson Rice. Just one moment.

Charles Meade: Got it. Thank you.

Speaker Change: Thank you. And as a reminder, if you have a question at this time, please press star one one on your telephone.

Speaker Change: And this does conclude the question and answer session of today's program. We have a follow-up from Charles Meade from Johnson and Rice. Just one moment.

Charles Meade: Yeah, okay, so two other questions then. One on Utah and then one on California.

Speaker Change: And your follow-up, please.

Charles Mead: Okay, so two other questions then. One on Utah and then one on California.

Fernando Araujo: And I do want to emphasize that we have nearly 100,000 acres operated by Berry, most of that help by production with really good geology, uniform geology, especially in the UNTWELS Reservoir, that they have the potential for horizontal well development. So we're very, very excited about that. In addition to the fact that we do have a cost of managed position, as I mentioned in the play, we are in the shallow end of the basin.

Charles Meade: Fernando, you mentioned twice that you're at the shallow end of the basin. And so, you know, presumably you've got a northward dip here. And, you know, all other things being equal, usually shallower means slightly lower well costs because you've got a little less in the vertical section. But my understanding is that a lot of this is all, you know, overpressure drilling. And so that might not have as big of a... you might not see this big of a reduction in well cost.

Speaker Change: Senator, you mentioned twice.

Speaker Change: that you're at the shallow end of the basin. And so, you know, presumably you've got a northward dip here. And, you know, all other things being equal, usually shallower means slightly lower well costs because you've got a little less on the vertical section.

Fernando Araujo: We have no entry cost and we have significant infrastructure in place to help us put those wells on production. So that's going to drive our capital efficiency. As far as the production itself, the well IP at a rate of about 1,100 barrels a day, barrels of oil equivalent in a day, 90% oil, which is very good, 10% gas. But also remember that we are at the shallow end of the basin with lower reservoir pressures.

Speaker Change: But my understanding is a lot of this is all overpressure drilling, so that might not have as big a impact.

Charles Meade: To what, when you look at it, what's the significance of being in the shallow end of the basin beyond well cost, and does that perhaps mean that some of the deeper horizons, below the Utenbue, because some of the other operators are talking about, you know, a number of horizons that have been historically productive in vertical wells, does that mean maybe some of the deeper horizons are gonna be the most prospective for you in the shallow part of the basin?

Speaker Change: You might not see this big of a reduction in well cost. When you look at it, what's the significance of being in the shallow end of the basin?

Speaker Change: beyond well costs, and does that perhaps mean that some of the deeper horizons below the Utenbue, Utenbue, because

Fernando Araujo: So our IPs are slightly lower compared to some of the IPs in the northern end of the basin and the deep basin. So we have to be mindful of that, but we do have that cost of managed position that I mentioned before. And that's what's really going to drive some significant improvement in the economics of those wells. So hopefully that helps Charles. No, that does help a lot. It may not be as high as some of the other two mile ladders to the north, but those are really stout rates.

Speaker Change: Some of the other operators are talking about a number of horizons that have been historically productive in vertical wells. Does that mean maybe some of the deeper horizons are going to be the most prospective for you in this shallower part of the basin?

Fernando Araujo: Another very good question, Charles. You know, we are shallower, a couple thousand feet shallower than the deep end of the basin. So our drilling costs are expected to be lower. That's one of the advantages that we have outside of the infrastructure that we have in place. As you know, we've got twelve hundred wells, something like that in Utah with a lot of infrastructure. So, because we are shallower, our reservoir pressures are a little bit lower, and that's just a fact.

Speaker Change: Another very good question, Charles.

Speaker Change: You know, we are shallower, a couple thousand feet shallower than the deep end of the basin. So our drilling costs are expected to be lower. So that's one of the advantages that we have outside of the infrastructure that we have in place. As you know, we've got 1,200 wells, something like that, in Utah with a lot of infrastructure. So...

Fernando Araujo: So thank you for quantifying that Fernando. One of the piece of it that I'd like to ask is previously you had said 22,000 acres were perspective. And it was clear. Back then that you were only that only reflected a piece of your total position. Now you're at 100 and can you can you give some context is that? Just, does that just reflect your success with these four wells or is there more that plays into that like perhaps other industry results to the West?

Speaker Change: Because we are shallower, our reservoir pressures are a little bit lower, and that's just a fact. But with a lower...

Fernando Araujo: But, but with lower capital costs associated with drilling and completing the wells. And the type curves we're seeing from these horizontal wells, our economics are going to be very robust. So we're happy about that. Now, do we have opportunities deeper than that? Yes.

Speaker Change: Capital costs associated to drilling and

Speaker Change: And the type curves we're seeing from these from these horizontal wells, our economics are going to be very robust. So we're happy about that. Now, do we have opportunities? Deeper than that, yes. You know, we've got the Uinta that we're targeting, below that we've got the Douglas Creek as well, and below that we've got the Wasatch.

Fernando Araujo: You know, we've got the UN that we're targeting. Below that, we've got Douglas Creek as well, and below that, we've got the Wasatch.

Fernando Araujo: Another good question, Charles, and we should have been more specific when we talked about the 22,000 acres, the 22,000 acres that we referred to before are, is the acreage that we're currently applying well permits for. So, we're focusing on those 22,000 acres, which is on the northern side of our acreage base, but that's just the area where we're focusing to get permits ready and submitted here in the next few weeks. But the entire 100, 100,000 acres is what's perspective with horizontal activity. Got it. Thank you. And as a reminder, if you have a question at this time, please press star 11 on your telephone.

Fernando Araujo: And there are a few operators targeting, with success, those reservoirs. The geology is good. It's just that additional upside that we have with those additional reservoirs that happen to be deeper than the UN. I'll do that, and then I'll provide a little more color.

Speaker Change: and there's and there's a few operators targeting with success those reservoirs. The geology is good, it's just an additional upside that we have with with those additional reservoirs that happen to be deeper than the Uinta.

Charles Meade: Yeah, no, it's, it's, it's really interesting. You know, it's been, it's been a few years since we've had a kind of, you know, kind of rapidly unfolding play like this in the industry. And so it's, it's kind of, you know, fun.

Speaker Change: So hopefully that helps them provide a little more color.

Speaker Change: Yeah, it's really interesting. It's been a few years since we've had a kind of a rapidly unfolding play like this in the industry.

Speaker Change: It's going to, you know, fun to turn those cranks again. Transition California, can you give any any update there on the

Charles Meade: Yeah, right, yeah, transition California. Can you give us any update there on the outlook for additional acquisitions, what the marketplace may look like now? You had that successful McPherson deal not long ago, but if there's more opportunities like that, that might be waiting in the wings.

Operator: And this does conclude the question and answer session of today's program.

Speaker Change: On the outlook for additional acquisitions, what the marketplace may look like now, I mean, you had that successful McPherson deal not long ago, but if there's more opportunities like that, that might be...

Charles Meade: We have a follow-up from Charles Meade from Johnson Rice just one moment. And your follow-up please. Yeah.

Charles Meade: Okay, so two other questions then. One on Utah and then one on California. You mentioned twice that you're at the shallow end of the basin. And so, presumably, you've got a northward dip here. And all other things being equal, usually, shallower means slightly lower well costs because you've got a little less on the vertical section. But my understanding a lot of this is all over pressured drilling. So that might not have as big a, you might not see this bigger production in well cost.

Speaker Change: might be waiting in the wings.

Speaker Change: No, very good. Yeah, we had that successful McPherson acquisition, as you know, great results. We've been able to lower our operating expenses by 40% with operational synergy, so that's been a great success.

Fernando Araujo: No, very good. Yeah, we had that successful acquisition, as you know, great results. We've been able to lower operating expenses by 40% with operational synergy, so that's been a great success.

Fernando Araujo: In terms of additional opportunities, you know, as we've mentioned before, we've got a handful of opportunities. We're talking to different parties, mostly small private. And these would be considered bolt-on opportunities, and this is really part of our base business. Obviously, we're focusing on Kern County because that's when we can realize operational synergies and apply our technical expertise. And we are, like I said, having conversations with a few parties, but it takes time.

Speaker Change: Now in terms of additional opportunities, as we've mentioned before, we've got a handful of opportunities. We're talking to different parties, mostly small privates.

Speaker Change: and these would be considered bolt-on opportunities and this is really part of our base business.

Speaker Change: Obviously, we're focusing in Kern County, that's when we can realize operational synergies and apply our technical expertise. And we are, like I said, having conversations with a few parties, but it takes time. A lot of these companies, they've been around for many, many years.

Charles Meade: What, when you look at it, what's the significance of being in the shallow end of the basin beyond well cost? And does that perhaps mean that some of the deeper horizons, below the youth and blue youth and blue because some of the other operators are talking about, you know, a number of horizons that have been historically productive and vertical wells. Does that mean maybe some of the deeper horizons are going to be the most perspective for you in your in your in the shallow part of the basin.

Fernando Araujo: A lot of these companies have been around for many, many years, but at least they're willing to talk, they're willing to have the conversations, and we just have to come up with creative ways to close the deal and come up with a good deal structure that makes sense for everybody. But we are looking at a handful of opportunities in California.

Speaker Change: But at least they're willing to talk, they're willing to have the conversations, and we just have to come up with creative ways to close the deal and come up with a good deal structure that makes sense for everybody. But we are looking at a handful of opportunities in California.

Fernando Araujo: Thank you. This does conclude the question and answer session for today's program. I'd like to hand the program back to Fernando Araujo for any further remarks.

Speaker Change: Great, thank you.

Speaker Change: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Fernando Araujo for any further remarks.

Fernando Araujo: Another, another very good question, Charles. And, you know, we are shallower couple thousand feet shallower than the deep end of the basin. So our drilling costs are expected to be lower. So that's one of the advantages that we have outside of the infrastructure that we have in place. As you know, we've got, you know, 1200 wells, something like that in Utah with a lot of infrastructure. So, because we are shallower, the reservoir pressures are a little bit lower and that's just a fact.

Fernando Araujo: Thank you everyone for joining the call. Thank you for your interest in Berry. We look forward to talking to you in Q3, and we are excited about our company, excited about what we have in Utah, excited about the potential activity that we have in California, and we look forward to staying in touch.

Fernando Araujo: Thank you, everyone, for joining the call. Thank you for your interest in Berry. We look forward to talking to you in Q3, and we are excited about our company, excited about what we have in Utah, excited about the potential activity that we have in California.

Fernando Araujo: and we look forward to staying in touch. Thank you so much.

Operator: Thank you so much. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. [music]

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. Thank you.

Speaker Change: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Fernando Araujo: But, but with the lower capital costs associated to drilling and computing the wells and the top curves we're seeing from these from these horizontal wells are economics are going to be very robust. So we're happy about that. Now do we have opportunities deeper than that? Yes. You know, we've got the ones that we're targeting below that we've got the Douglas Creek as well and below that we've got the wash, and there's a few operators targeting what success those reservoirs. The geology is good. It's just an additional upside that we have with those additional reservoirs that happen to be deeper than you want.

Charles Meade: Yeah, it's really interesting. It's been a few years since we had a kind of rapidly unfolding play like this in the industry. It's kind of fun to turn those crates again. Yeah, right.

Fernando Araujo: Yeah, transition California. Can you give any any update there on the on the outlook for additional acquisitions with the, you know, with the marketplace may look like now. I mean, you had that successful McPherson deal not long ago, but if there's there's more opportunities like that that might be might be waiting in the wings. No, no, very good. Yeah, we had that successful McPherson acquisition. As you know, great results. We've been able to allow operating expenses by 40% with operational synergies.

Speaker Change: www.berrypetroleum.com www.berrypetroleum.com www.berrypetroleum.com

Fernando Araujo: So that's been a great success. In terms of additional opportunities, you know, as we've mentioned before, we've got a handful of opportunities. We're talking to different parties, mostly small privates. And these would be considered both on opportunities. And this is really part of our base business. Obviously, we're focusing in current county. That's that's when we can realize operational synergies and apply our technical expertise. And, and, and we are, like I said, having conversations with with a few parties, but it takes time.

Speaker Change: www.berrypetroleum.com www.berrypetroleum.com www.berrypetroleum.com

Fernando Araujo: A lot of these companies they've been around for many, many years. But, but at least they're willing to talk, they're willing to have the conversations and, and we just have to come up with with creative ways to to close the deal and come up with a good deal structure that makes sense for everybody. But we are, we are looking at that a handful of opportunities in California.

Charles Meade: Great. Thank you.

Operator: This does conclude the question and answer session of today's program.

Fernando Araujo: I'd like to hand the program back to Fernando Arajo for any further remarks. Thank you, everyone for joining the call. Thank you for your interest in Barry. We look forward to talking to you in Q3. And we are excited about our company, excited about what we have in Utah, excited about the potential activities that we have in California. And we look forward to stay in touch. Thank you so much.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference.

Operator: This does conclude the program. You may now disconnect today. [inaudible] Thank you very much. Thank you very much. John Williams, Charles Meade, Nicholas Pope, Michael Helm, Charles Meade, Nicholas Pope, Michael Helm, Charles Meade, Nicholas Pope John Williams, Charles Meade, Nicholas Pope, Michael Helm, Charles Meade, Nicholas Pope, Michael Helm, Charles Meade, Nicholas Pope, Charles Meade, Nicholas Pope, Michael Helm, Charles Meade, Nicholas Pope, Michael Helm, Charles Meade Charles Meade, Nicholas Pope, Michael Helm, Charles Meade Charles Meade, Nicholas Pope, Michael Helm, Charles Meade Charles Meade, Nicholas Pope, Michael Helm, Charles Meade Charles Meade, Nicholas Pope, Michael Helm, Charles Meade Charles Meade, Nicholas Pope, Michael Helm, Charles Meade . .

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