Q2 2025 Berry Corp Earnings Call

Good day, thank you for standing by, welcome to the Bear Corporation, second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After this week's presentation, there will be a question and answer session to ask a question during the session. You will need to restore 1 1 on your telephone. You will. Then hear an automated message, advising. Your hand is raised

Please note that today's callers may be recorded. I will now hand the conference over to speaker host. Chris Dennison, director of Investigation. Please go ahead.

Thank you, Olivia, and welcome everyone. Thank you for joining us for Barry's second quarter 2025 earnings call yesterday afternoon. Barry issued an earnings release. We're highlighting our quarterly results.

Speaking this morning will be Fernando araujo our CEO, Danielle Hunter, our president and Jeff maggots our CFO.

The release the presentation. And 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 that are disclosed in our filings with the SEC, including our quarterly report on form. 10 Q, which will be filed shortly.

We have no plans or duty to update our forward-looking statements except as required by law.

Please refer to the tables in our earnings release and on our website. For a Reconciliation between all adjusted measures mentioned in today's call and the related Gap measures. We will also post the replay link of this call on our website with that. I will turn the call over to Fernando

Thank you, Chris and good morning everyone. Welcome to our second quarter earnings call.

We continue to successfully execute our 2025 plan.

Our strategy is focused on balance sheet strength, High return, development projects, and delivering capital and operational efficiencies

Despite ongoing micro volatility our 2025, guidance remains unchanged.

Our business strategy is anchored by our high return assets stable. Production base, low Capital, intensity projects and inventory depths

We believe this unique combination of attributes provides a competitive advantage.

Our ability to execute our strategy is supported by the fact that we have the permits in hand to fully support development projects into 2027.

As Tier 1, inventory, becomes increasingly scarce across the industry. I want to highlight the various inventory, rich in California. We have thousands of locations across this High, return low Capital, intensity, conventional Basin, including approximately, 500, Pot locations, with 200 site tracks.

In Utah, our horizontal delineation program is progressing and we expect to unlock upside across our precision.

Turning into our results. We are on track to generate. Meaningful free cash flow for the year.

Our strong hedge position provides visibility and protects. Our production Outlook.

For the remainder of the year. We have 71% of our expected oil production hedged at approximately 75 dollars per barrel of Brent.

during the quarter, we pay down 11 million of debt bringing bringing our year end to today debt reduction to 23 million

In California, activity continued to ramp with 16 wells drilled in the second quarter, up from 12 in the first quarter and 6 in the fourth quarter of last year.

We expect full production to be brought online within the third quarter, which will increase California's production through the second half of the year.

In Utah, we finished a significant portion of the completion activity earlier than expected for our horizontal pad in the second quarter.

We flagged 64 stages per well on average.

We delivered meaningful cost Savings of approximately 500,000 dollars per well.

Supported by our fuel cost advantage and the use of a dual fuel Fleet in drilling and fracking activities.

We also utilize approximately 50% produce water in our fracks, which contributed to the savings.

Our current cost Outlook is approximately 680 per lateral foot, which is approximately 20% lower than the average of our 6. Non horizontal Wells,

We began floor back on our first 2, wells, in August, and the remaining 2. Wells are expected to be online later this month.

For our non-operated wells, we continue to see strong results with production, exceeding. Our pre-drilled estimates pointing to an average e of about 55.

To 60 barrels of oil per lateral foot, supporting further delineation of our acreage.

We believe our 100,000 acre position with high working interest has significant upside and provides long-term optionality in capital, allocation and growth.

In the fourth quarter we'll be participating in an additional non-operated. Well, just north of our acreage to test the Castle Peak formation.

This well is expected to be on production in November and assuming success we see longer term potential for multi bench Cube development.

In summary, our priorities remain unchanged.

With that, I will turn the call over to Danny.

Thanks, Fernando. Good morning everyone. Thank you for joining us and for your interest in our company.

First, I want to recognize the berry team for delivering another quarter of zero recordable incidents and zero loss. Time incidents in our EMP operations, we are proud to live our commitment to HSC excellence.

We are finalizing our 2025 sustainability report, which we expect to publish this quarter.

In addition to enhanced disclosure, including tcfd alignment, where excited to share, highlights of how we demonstrate our commitment to responsible operations, environmental stewardship, stakeholder engagement, and Community investment.

On the regulatory front, we're seeing the most constructive tone in California in at least five years, and we're excited about what's on the horizon.

On June 26th, the Kern County Board of Supervisors approved the new oil and gas ordinance. And certified a revised environmental impact review, for eir required, under Squaw, for oil and gas activities.

In terms of next steps. The County's request to resume permitting is now under review by the court and we expect a decision prior to your end.

Court approval is required before. Kern County can resume issuance of neutral permits in areas without an existing SQL compliant. Eir

As Fernando mentioned, we already have the permits in hand to support development activity into 2027.

So having the Kern County eir back in effect provides additional upside and optionality and we will and will streamline future development projects.

In parallel, we are also encouraged by the California energy. Commission's response to Governor Newsome's directives focused on ensuring that all Californians have access to Safe, reliable and affordable energy through responsible instate production.

This includes permitting and Regulatory reforms announced by the Newsome Administration a few weeks ago which aimed to stabilize in-state production.

A particular importance is a proposal to codify the Kern County, eir into the state law, which will improve the permitting process and de-risk impact of continued litigation.

These policies designed to support. In-state production will also benefit our cnj wall Services business.

As 1 of the largest and most reputable PNA providers across the state cnj is well, positioned to capitalize on the potentially significant increase in demand for PNA services in connection with the proposed plug to drill requirements in effect outside of Kurt County.

Coupled with increased PNA requirements for all operators that went into effect January 1 of this year. If this new measure passes, it should lead to a healthy ramp up in activity and margin expansion for cnj in the near future.

And of course, having access and price control over an increasingly part. Important part of our supply chain is a competitive advantage to our en operations.

The legislature reconvenes in mid August to consider these proposals and we are optimistic that these important policies will be adopted in the coming weeks.

Regardless of timing, these efforts reinforce the growing consensus that in-state oil production is vital to California's energy security.

As you've heard Barry stands to benefit on multiple fronts from these reforms including even greater ability to unlock value, in our extensive inventory across our world-class asset base.

But we are not dependent on them. We have a proven ability to navigate California's complex environments. Evidenced by a robust Sidetrack program and having the permits in hand today to deliver over the next few years irrespective of the Kern County, eir or other legislative measures.

Additionally, having permanent certainty, amongst our state or amongst other stabilizing factors, from the proposed regulatory reforms should Spur new investments in California's High return reservoirs, and the timing couldn't be better. As inventory is becoming increasingly scarce in areas outside of California.

We applaud Governor Newsome's leadership to Champion, thoughtful solutions, that support, local businesses, protect local jobs reduce foreign oil dependence and ensure the critical energy needs of our communities.

Jeff over to you.

Thanks Danny and my comments this morning, I will highlight our second quarter Financial results as well as our hedging program operating costs capital structure and guidance.

For more in-depth information, please refer to our earnings release issued yesterday afternoon and our form 10 Q which should be expected to file shortly.

Second quarter, oil and gas sales, or 126 million excluding derivatives with their realized oil price of 92% of Britain.

For the remainder of 2025, at an average price of $5 per barrel of bread.

Assuming our production guidance is held flat for the future, periods are expected. Oil production is 63% hedged for 2026 at an average price of $70 per barrel of Brent.

Altogether, our hedge program protects returns and shields against price volatility.

Second quarter adjusted. Eva was 53. Million and operating cash. Flow was 29 million.

Capital expenditures on an acral basis were 54 million for the quarter and elevated compared to the prior quarter, given the accelerated Drilling and completion activity in Utah.

The timing of lower capital and higher production over the second half of the Year sets us up for strong, free cash flow generation for the full year.

As a reminder, our free cash flow calculation factors in working capital changes during the quarter.

Looking at Q2 cost and expenses. Total hedged looe was $77.97 per Boe and lower than our annual guidance rate as we optimize steam injection volumes, while sustaining production.

Taxes, other than income taxes, were $5.95 per Boe and adjusted GNA for EMP and corporate with 744 per Boe.

Turning to our balance sheet, our quarter in total debt was 428 million. We paid down 11 million, during the quarter, and are on track to pay down at least 45 million for the year.

Our liquidity position was 101 million at quarter in and working capital changes during the quarter were 11 million of cash outflow.

Additionally, the board declared a dividend of 3 cents per share or a 4% annualized dividend, yield payable in the third quarter.

Taken together, our annual debt reduction in dividend represents nearly 10% of our enterprise value, underscoring our commitment to generating shareholder value.

Our order in, we were in full compliance with our financial covenants and we have sufficient Headroom to execute our strategy.

With that, I will now turn the call over to Fernando to wrap up our prepared remarks.

Thank you, Jeff. I'm very continues to execute on that stated objectives.

Our Focus remains consistent.

Executing our deep inventory of high return development projects.

Generates sustainable free cash flow reduced debt, and evaluate strategic opportunities.

We are well positioned to advance our goals and generate long-term value for our shareholders.

We look forward to sharing our progress and with that, I'll turn the call over to the operator for questions.

Thank you. Ladies and gentlemen, to ask a question at this time, you will need to press star 1, 1 on your telephone and wait for your name to be announced.

Please stand by while we compile the Canna roster.

The first question coming from the line of Charles meets with Johnson rice, you want it now.

It's a good morning, Fernando Danny and Jeff.

Uh, good morning. I want to ask. Yes, thank you. I want to ask the first question about the, uh, the, the, the changes, uh, the positive changes I guess in in the California regulatory situation. Uh, you guys, uh, you guys talk about this, uh, a hearing on the, uh, on the current County eir and then a ruling in in 4 q. Um, that looks, uh, that that timeline seems positive. But I want to ask, how are you guys thinking about the, I guess the probability of a favorable outcome there. I, I know certainly the recent Trends have been positive but but uh, and you I suppose we should be cautious but but

What, how hopeful are you about that hearing in that ruling?

No, we still we feel very optimistic about it. Um, you know, I think there was a chance for objections to be filed when the, uh, County Board of Supervisors, um, approved reified, the eir and no new objections were filed. Um, you know, there has been, uh, an objection filed related to the court process, but it's, um, you know, it's not bringing in new issues. It's a repeat of the same, we feel confident, um, due to the great and very thoughtful and meticulous work done by the county that the revised the addresses all of the deficiencies that were previously identified. And so feel feel strong confidence that, you know, we're at the last step and the, the county will, or the court will have its hearing and issue its ruling shortly thereafter.

looked at, um, some other Castle Peak tests, perhaps nearby, you know, as as part of your decision to, uh,

To, uh, Farm into that. Well, can can you, can you kind of set some expectations or or maybe just some, some, some guidelines on what, um, you know,

What? We should expect there, and what made you think that was a, uh, you know, a good, well, to farm into?

Yeah, good. Good question, Charles. And as you know, uh, you know, Industries generally targeting where we are, uh, the the, uh, the lower Cube. What they call the lower Cube, which includes the Castle Peak includes the Ulan view, which is the main reservoir Target so far for most operators and then also the Wasatch. Now, there has been some Castle Peak Wells, drilled, um,

You know, initial estimates of 40 to 50, barrels per foot EUR. Uh, we are really excited about the Castle Peak in our acreage, uh, because of the geology, that, that we have. And, and, uh, you know, as as as we've discussed before the geology is a combination of limestone and Sandstone, but the sandstones get thicker as we go as, as you go south. So so there's the potential that we have thicker, uh, Castle Peak in our acreage.

So uh so it's it's it's going to be uh it's going to be very interesting. It could really open up development potential uh not only in the Castle Peak but we have the we have a obviously potentially in the uhland but

Then you could start developing these fields with uh with Cube drilling, right? The drilling multiple layers at the same time from the

from the same pad.

Got it, just to clarify your your your 4 well pad that you just started to pull back. That's a

That's correct. The 4 Wells are using, but

Great, thank you for that.

Thanks Charles.

Thank you.

Again, so many to ask a question. Please press star 1 1. Our next question, coming from the line of need pedleton with Texas Capitol. A line is now open.

good morning with my first question,

Good morning my first question. I want to start off on the UN to cost that you laid out on slide 16 and 17. When we think about this development as Barry's first operation or operated horizontal pad in the Basin, you're achievement of the 20% cost reduction is really encouraging based on your experience. Can you speak to your ability to meet the target? Well, costs in the 650 to 670 per foot range over time.

Yeah, very good question, Nate. And obviously, as you mentioned for a first-time, operator, drilling 3 Mile laterals.

Uh, we're really encouraged with the, uh, with with the achievement of being 20% below, uh, the cost compared to the 6, non operator, Wells that we have, and also, actually compared to some of the other operators in the Basin, as well.

Now in terms of of improvements, I think there's there's still room uh to improve on that. Uh you know, and 1 area of improvement is we could have a slightly better performance from our

From our gas engines in drilling and Fleck fleets, they suffered a little bit during the summer months. Instead of operating about 75% of the time during the operation, which is what we initially expected.

They operated for about 50% of the time. So there's some, uh,

Some, some improvements and potential, uh, there with the uh, with the duel with the Dual fleets, the dual fuel fleets. Uh also uh remember that we're cleaning out 3, Mile lateral Wells and these take some time and it's and we're trying to be extra careful on that. So we're taking a bit longer than what we initially expected. So there's that's another area of improvement as well. And another area of improvement that I can point to is water usage, uh, you know, we're using utilizing 50% produce water, which is really good.

But if we can find a way to utilize more produce water and reduce water cost, that would be even better. So it's it's really a few things uh added together where we can improve. Uh we can definitely improve another 5% or a little bit more uh, as we as we drill in the future, but the more we drill, the better we'll get. And we're encouraged with the uh, with the initial with initial results.

Absolutely, thanks for that detail. And then uh maybe shifting over to uh California on slide 9, you highlight your Fields within the same walking basin.

Well, I know the near-term. Focus is understandably on the high return Side Track program. Can you speak to some of the other opportunities within your California portfolio and and how this fit into your strategy longer term?

Yeah, we have a we have a huge portfolio in California. Uh we've been focusing uh but here this year on the thermal data of my sidetracks,

Was in the Monarch. They're short horizontals, aren't they? Not three miles like in...

In Utah. They're they're a thousand foot 1500 foot uh horizontals but there's a lot of potential there and we have significant potential also in um in the hill property up in belridge field.

And outside of that, we have significant work over potential as well on the east side of our acreage base in round mountain with our water flood. So, uh, so a really significant potential, you know, rate to return.

Uh for even at current strip pricing for thermodynamic, they're at 80 to 100% rate of return uh project. So they're they're really really, really good projects.

Got it. Thanks for taking my questions.

Thank you, Nate.

Thank you.

Again, just a quick reminder, if you'd like to ask a question, please press star 1, 1 1.

And I'm showing off for the questions in the queue. At this time, I will now turn the call back over to Fernando for any closing remarks.

Thank you so much for your interest in Mary. Uh, we'll keep you updated as to the progress uh in Utah and in California. And uh and again once again, thank you for joining the call.

yes, ma'am cities conference, thank you for your participation and you may now disconnect