BRY - Earnings call transcript Q3 2019

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Berry Corporation Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

And without further delay, I would like to hand over the conference to your host, Mr. Relations. Investor of Crabtree Todd

Todd Crabtree

Thank you, to and welcome everyone. Ian,

Financial Trem Chair, Operating CEO this Baetz, and afternoon President; Board be will Chief Cary and Chief Speaking and Vice Smith, Gary Vice President; and Officer Executive Executive President. Officer Grove,

activities a review the from few will concluding highlights then financial results. quarter, operational our remarks. key and and and Trem Cary will Trem Gary discuss will have

These of differ statements actual and reminder, subject other certain forward-looking federal today’s securities in the within results expressed a and laws. As risks implied projections meaning are cause to statements. uncertainties from call statements may these or contains that those to

These public our include outlined in filings. risks

Our the website Investor to bry.com Presentation. November a has link

the we will Our financial XX-Q the from includes website the call also of site will non-GAAP and also we file for GAAP to statements. related our reconciliations Later, use the on the and financial this the replay post transcript link today. measures we later measures

now over will the call Smith. to turn I Trem

Trem Smith

Thank you, call. thanks today us quarter joining our for third for earnings Todd, everyone and

according quarter delivered for will second production fourth And XX%, the extremely plan, growing by productive and Berry. by since We Company continue California this confident into was growth we’re quarter. X% total the This production quarter. to

continues cycles focus our through be and for to capital. market Our on a across growth shareholders value creating returning combination of

to production and of growth double-digit about expect providing see X% have repurchased yield, year, attractive of companywide, we dividend Specifically, our this XX% stock.

that dividend $X.XX of also the has quarter fourth per pleased Board We’re to approved announce a share.

less define production. free our as we capital to cash we maintain which within dividends on executing the and levered delivering are promises, and We free cash flow, flow, are

Company’s see of day. of quarter, at quarter equivalent program Towards third XX,XXX plan we XXXX second The barrels production growth production began the capital the continues in-line was our the today. end with fruits to and that oil our of per

our guidance. in-line year to are full year projected end the production with We

spent of we grew we in quarter. XX% where the our year-to-date, XX% In California, third capital

and Importantly, that production can we maximize demonstrating toggle our are our up investment, conditions. spend shareholder to returns therefore market respond capital or down best to if we capital all through assets and

We’ve recognized starts production. the portion to ramps which companies period production at significant our up a E&P Unlike production most in months in reaching market. from sometimes plays rates, is each four IPs, other a the resource California model performance, peak after off of business distinct well over initial of time, maximum Berry’s six a

November this included on have our significant We that Presentation and of curves difference. illustrate type XX Investor Slides XX

moving linear help In with provide quarter-to-quarter. your as addition CapEx advance, projections to quarter from is modeling, you CapEx not forward, a we will in

For of expect which to the million, guidance. slightly fourth put below we CapEx our $XX $XX XXXX million total the will invest midpoint quarter, to

in expect to on to we by XXXX, capital the In returns outlined total deliver XX. utilizing as mid-teens to shareholder shareholders our through and the tools production growth continue to us, of available Slide all return

and will to California shareholder XX, again January year. session The a begin regulatory California continues of be landscape our closed to next base. topic on X The legislative interest September in

continue. our However, First efforts Berry

committed to We’re assets. protecting our

to programs. we Our are California focus legislative regulatory Affairs the various well and regulatory in respond process activities. regulatory our actively all and potential teams strategies participating outreach this area, Corporate and in to I, government are department, and with our and now With positioned investments

has to effective impact So in our far, minimize these been approach the on actions our of business. helping

to of company, a as consulting Street’s well a third-party newly to firm whole. quarter, as understand we conduct the the a performance study the as gauge engaged a to better perception community perception views past how as investment this Last, Berry’s industry public

healthy a community on investment from points. the Berry profile. key cash of and of believe capital all conservative return a this values delivers strategy, study was the one that strong these takeaways And flow, Overall, leverage free we

flow levered through conditions, X.X lived to maintains EBITDA. free consistently times has within and has leverage all its Berry since paid market debt low at cash going the public, dividends

grown base, has from asset inventory production future has production from oil and the a attractive based least management resulting towards Additionally, drilling Berry in heavily pricing has at on existing estimates margins, low-risk benefits weighted of Brent-based locations. XX-year

create we is of remainder for XXXX. in that, Berry of a the continue top top On strong value Accordingly, to in tier and the are to throughout hedged and XXXX deliver position space. well

turn who to for give Gary, over the our into I’ll performance third now it insight quarter. operational will you greater

Gary Grove

thanks and everyone afternoon. Trem, you, us joining this for Thank

speak I’ll to First, production.

to began that production we of quarter are full-year and our end are the with second line results momentum continued Third pleased growth at build the in on guidance. quarter, the

BOE exit the Our monthly companywide X% production in production average day September resulting this in that to rate per quarter of was quarter. further to rate XX% BOE was quarter. third XX,XXX was XX,XXX a a a last rate up day, XX,XXX growth, exit compared prior illustrate higher average September’s compared June’s day to of compared in To June’s BOE

the quarter X% XX% making California oil, total mix up in XX% with production of was third production. NGLs, Our and XX% gas

The XXX% from was For monthly quarter oil quarter XX% of rate. California quarter compared the XXXX. exit third a second rate the BOE production XX% the was production third XX% In XX,XXX XX% for and month exit of consisting the the to compared quarter of specifically, was quarter’s production September, the second day, XXXX of to to up for Brent-based quarter oil. up

deployment first to me As growth our the brings strategic of the attributed Trem That directly year. expenditures. improved is capital this noted, California in half capital production our to in

third one quarter. wells we one in quarter, third expectations. plan, $XX XXXX to with injector, an total spending quarter well thermal drilled well of million, in-line and and the Rockies. sandstone thermal in $XX second of producers, a also XX which Consistent of wells were compared as in Diatomite XX our California, XX the our wells was CapEx was with as XX in our drilled for million the Overall, is the We

XXX area. wells and stimulated We work This hydraulically field plans completed XX during also in the hydraulically the the our compares which Belridge quarter, in second stimulated wells XX drilled total that year quarter. our to stimulation for in

We rigs continue rigs plan California, of running in the to to remainder and running three XXXX. are for three up currently

capital as quarter-over-quarter result in quarter. costs is and hydraulic the We expect online The of of equipping proportional not in increasing in same associated a do drilled year, half increase bringing equipping the fourth well wells stimulations. with first the as were that the costs

year-to-date, quarter requirements. have million we third $X Additionally, million plugging spent and which for abandonment in the $XX was of

new know, all to require idle this the may you regulations, state oil gas abandonment companies essentially and earlier As year, which on accelerate older activities implemented the wells.

Oil Gas We address the approval. for and plan final wells, to idle its and have submitted working with Department these of California our are

Last, on touch want I expenses. to

Our quarter, the volumes. while in unhedged was quarter per a in stable, costs driven hedge purchase per versus $XX.XX reduction third This quarter the of quarter, quarter by holding BOE OpEx a $XX.XX second OpEx X%. growing fuel Including contributions, of per X%. BOE primarily third was $XX.XX the BOE second reduction in $XX.XX OpEx the reduction versus was during

third our we flat to natural the fuel day. quarter quarter from and MMBtu As per remained planned, expected at usage the rate XX,XXX approximately gas second

to $X.XX quarter the for quarter. MMBtu price third compared purchase unhedged average MMBtu per was per $X.XX in Our previous the

it financial performance. to our now Cary I’ll turn And over with that, for

Cary Baetz

and in-line third our spending start, quarter Thanks, full and year year-to-date expectations with production our Gary. and are capital guidance. To

prices. California drop EBITDA $XX.X increased to adjusted in our X% largely this, assets. oil XX% to production increased accomplished million, We Brent due quarter-over-quarter Our oil from the Brent-based despite

to third quarter our prior of in our highlighted, third our costs quarter ability notably to versus OpEx in primarily flat, Gary As quarter, the operating per the improved compared per OpEx $XX.XX $XX.XX production. while non-energy absolute increasing hold non-energy second due was The the quarter. to BOE BOE portion

energy fuel on quarter. quarter $X our was of be per to OpEx The XXXX, fuel second the of BOE, we year costs first guidance. expect the the high unusually than side up our Due of including more portion in original high full OpEx costs to our million about

volatility fuel cold year been years. hedging heavily at despite levels that began weather prices of this much prices caused they unseasonably least from four and April resulted to than in had We purchases higher gas to – mitigate in gas

Investor vulnerable of per layering in the volatility, Presentation. the needs fuel have Given gas the this we majority our approximately have of hedged remains see for and MMBtu. XXXX to increased at our $X.XX end Slides roughly of that quarter begun disruptions and at and system hedges $X November through of the XX first XX MMBtu, per XXXX Please

oil cash Oil second the to lower the million hedges our Brent prices a $X third quarter. effective price during had pricing in impact. flow from protecting were Compared quarter, negative lower

the in in basis. quarter basis, $XX.X positive third our $XX $XX.X However, result production. to adjusted unhedged EBITDA compared the settlements On an the million quarter-over-quarter of was million hedge a a quarter increased second as contributed million on

of Brent per sales. per Presentation. hedges XX hedged continued now $XX.XX to Brent We X,XXX manage XXXX continue hedged have expected than to another more November Slide swaps production our oil and barrels day of day Please our $XX.XX at per hedge at XXXX at XX,XXX oil and in Investor barrel quarter layer $XX.XX of XXXX April have We’ve fourth barrels XX% our and the on through portfolio, WTI. see

BOE stock BOE certain costs dropped which BOE quarter $X.XX non-recurring G&A per $X.XX and per in third the for quarter. the expenses, second per second to equaling administrative third and quarter. per expenses the to compared General quarter, BOE the in X% $X.XX were non-cash $X.XX Adjusted to exclude compensation compared

higher was increase ups. renewals insurance This partially due and true to

the department and intended political activities primarily the continues the development Affairs the driver our regulatory, However, and and growth our California. be primary and process, in to of to participation Corporate in support was in legislative efforts

has with We citizens building reliant area its the to affordable becoming our state foreign team’s provided expertise capabilities and sources. on energy results the investment in energy ongoing this to to efforts have partner due and positive and our to been bring already less

as internal on will of high-side efforts result company our continuing requirements, initiative As G&A our systems adjusted year well improve full of as comply a and public our guidance. be the with to this

costs basis. a adjusted XXXX, For per G&A down should BOE on come

taxes taxes. Our our requirements quarter. largely ad total, for In and greenhouse rates third to gas costs lower decreased the due the taxes allowance to other second quarter, the severance comprised in of third are in valorem, taxes, quarter were property market million than $X income compared

low-end the will Additionally, on of than our in come taxes taxes guidance. full-year income XXXX other

the the mid-point portion a bring third in were drilled significant in expenditures wells, large equip to quarter of of which $XX of number million, used were which Capital were half and first online a our Per expected slightly XXXX such below to guidance. in fourth capital total year year. come our the plan, significantly the spending off that, quarter to drop expect of capital we is

to in total be range $XX We of to the expect fourth capital quarter million. million $XX

the million, and free $XX At our generated quarter, Our $XX Year-to-date, adjusted exceeded RBL no borrowings the availability end includes and for current million of and the of had which million capital expect in borrowings million positive flow by included $XX pricing, quarter levered which we by Based credit Facility, stock $X we letters our $XXX million. $XXX interest spent we than of million EBITDA of third million repurchases. on $XX have year-end. expenditures more of upon dividends. of on we revolver September, cash

cycle, over on We the quarterly not manage basis. our a business

the positive current included plan prices, interest, a and of is the cash cash end flow million capital we for free at is full set had of to of free of million we operate which levered free of $XXX and year levered capital break-even a within the third trailing XXXX. each On realized declared. expenditures, XX-month dividends flow. Our million $XX designed basis, expect $XX At levered year the flow, cash quarter,

back Trem. to turn you, it over I’ll Now,

Trem Smith

Thanks Cary.

our to about turning make a like quick over Before comment it XXXX questions, for I’d budget.

look the currently see and are more process down, our we down disclosing the will plan in In continue strong next do budget. year’s forward and be of we we growth. the preparing We year-over-year heads keep excellence. with execute meantime, spending know February. to will to We in to But will our

up open for now it will questions. I

Operator

from is KeyBanc. from Instructions] question Leo first [Operator Your Mariani

Leo Mariani

Hey question flow. guys, cash just on a free Yes. here

in Are the about you paying talked fourth you flow about cash the How be sort So the that? it. more getting quarter. You think expecting Obviously, with balance. in How do the with flow or do boosting cash what about significant will small deploying of revolver thinking more obviously, forward? there about going fourth of you’re do want aggressive cash down free as about thinking buyback kind think quarter dividend? you free you well,

Cary Baetz

Yes.

talking about but we’ll not beyond. actually the excess only cash flow, Cary in free way is fourth quarter, I think, – the only in – the talk and in XXXX this not by

to us bond to various the include dividend, and cash dividends, repurchases, for our grow with I special excess will think the do opportunities assets. continuing flow that levered increasing free things,

the what going and creates investors. gives based it’s the value our return for on be to the return all And best and greatest

what a to the probably it’s one point in But more Leo. us get to is box it’s the So, hard generic to think to of I put you and to greatest investors. going actually answer back until give which the our understand value than ourselves to want, amount we

Leo Mariani

Okay, know I didn’t on buybacks that on understood. you guess, mention shares list. pause of for that’s Is I something now? that

Cary Baetz

and Yes, that, yes, would will we of option one I out us like also in but have to toolbox. an be, say, our that still that. as the missed still And there that’s for Trem tools

Leo Mariani

over permits do frac regulatory trading about perhaps Head I little of there DOGGR guess in California. environment has as some I how the these helpful. levered And And talked more bit fines that’s head that there on think a some than How spring? some feels about DOGGR’s set-backs a and been I fracking you some what the like guess, previous new do the the past new you from head. about aggressive kind think bit of he little know days talk administration you the feels that out has companies, And well. seems It perspective about some of this were in could Okay, issued California? were proposed the about were more

Trem Smith

start, I’m some bring Gary and Trem. is can in this Leo, detail. to more Hi, going then

new the just seat, taken is his maybe DOGGR all, First or of yet Head hasn’t of okay.

There front different the in are against in wasn’t fracking, way, have about necessarily are related example. which understanding. be there. for to no to of fracking say intent Chevron And calls activities the is and permits, in of active Petroleum as fines levied to directly that’s that. been much in are Association And Governor’s States Western and all unusual. that under Department Conservation DOGGR are stimulation those California the Permian offices. than works been There about a and that were what the lots them. were – a activities, has Governor we going the So the very and the with very my and and going the stop you our the of and which very And to That well the meetings are the center part the with call I’m is

So, we’re pleased very way the that’s going. with

as The other permitting is DOGGR’s business usual.

the now, from and Head So oil experience right we’re waiting and seeing, DOGGR But new is coming LA. obviously. actually he industry has

California And so, Gary? well as meeting I need as familiar to look he forward in environment is for him. energy California. the very political with and the

Gary Grove

has reiterate Trem a just things I’ll mentioned. that couple of

WSTs. So been as little hydraulic called as for permits has a far or as bit stimulation, fracking they’re delayed, mentioned. you That

been for the that no just request or permitting in Corporate participation going which I that teams add share, has led very in has Affairs in and Trem sure would is communication by And we someone WST However, of for them, into it outstanding do impact not part this – year time. fact the result of have But with for in them, is us been we’re putting Group is direct has that done. this in forward. XXXX active regulations with a our making that that are we us any on at our

for you drill. are easiest It impact us, lastly, permits there. expect. So we But moving not with Trem don’t mentioned, our to just it’s is probably forward, associated permitting And might as right And any thing those say. other to as now see this.

Cary Baetz

is this Leo, Cary. Hi,

current and go our also the impact Berry, November there the Berry, on out Legislation in a little is can transparency. us the wanted just this we expected and to get impact XX, a on to what see people so least Slide You’re I out California one. to Presentation, view and more on of the at triple start point now status on going of list legislation Investor to on give

Leo Mariani

for there I that on out dips. changed this And guess, anything tighter of oil Utah I maybe Is certainly of or quarter, sales that That’s sure. just prices whatever? kind or were was noticed much timing sort helpful better your

Gary Grove

Gary. This No. is

of moves current it market, it’s So bit as area. in little a a that of the particular reflection

one in not market I And may drilled drilled or noticed quarter position, we a we but in the that. think those like we Rockies. one conditions have favorable have to that paying We we rise see it. we’re we well advantage take like what you to the always noticed, when well And there. of attention to

Leo Mariani

All right. you. Thank

Cary Baetz

Thanks, Leo.

Operator

from question Meade next Charles The from you. Thank Johnson Rice. is

Charles Meade

given thanks out this But I the a for and of you these just to Yes. as which and you XX. but which wondered, type just oil say, to could Page of other team increased also – want the costs see I of refresh of Good pricing, pricing quick all right there. now, afternoon if give three whole most you time attractive curves on with ahead update capital things? course us the not referenced fuel

Gary Grove

is Excellent. Well, again. Gary this

I’d So our sandstones. how and also us, resource would advantage the been capital we’ve which right then a in spending thermal concentrate this of tell plays. Berry for at one during the that, looking a in this this the page to to thermal now of Diatomite, quarter we’ve essentially you that – Diatomite But in a if on and this be is has comparison been taking lot bulk the opportunity these the of been of period,

to you time. curves the that in at to most those are I the two this So, attention point you, type pay tell would want

plus of in XX them the of As drilled – minus were the XX Diatomite. of in drilled mention, we thermal the we XX are quarter, sandstones the and I or in did them wells

Charles Meade

to be I that’s should interject we on – I’m see your but away right activity, but returns what your that just I taking focusing are sorry on Am you best that? where you’re Right. Slide understanding XX. now. is those

Gary Grove

Yes. correct. That is

try and list. capital that – always do best was quarter, definitely employed. on returns we and where that that for this the the we’re the So But opportunity obviously we have concentrate in is

Trem Smith

are And type I’d okay. are like curves not of or just to two one define just if Those is – that one thousands hundreds, that point. type Those based wells, on this curve. Trem, wells more not

Okay.

And lot suggests data of curves. good those a that so, are there is that type

Charles Meade

scale a in also, question. scale like – could you of operational for guess footprint, some California? scale the And of right can right I your This And then the a big – it. got guys Uinta of pace? – the E&P in it perhaps for other scale. at broadly And of scale E&P space right the bigger whether Is total the right you you and Thank Rockies themes think one are apply in it, maybe to not Got the to, you asset your more I getting the the one But you. question picture unconventional is more question. big the your is of relevant call but And your that at curious, question you I’m space. are Piceance? assets,

Trem Smith

is that is I we the in get can have that scale is answer important to This we sense several Berry. feedback ways. But Trem. the

execute how our scale to and looking at is are scale. in teams a fully Our to will in or deal forward. improve say, grow the place the ability we’re I continually scale however, place going big and are

And bolt-ons we’ve in past. we do small the about talked

well we as as Utah. in that areas would the very, the west in, particular, very well that do good Midway be in we’re We the San in Joaquin, side field are of Sunset focused

on for we’re stage, that Now transactions. this those. any the at transactions, comment looking And always we at don’t status of but otherwise we’re said, looking further value-adding

Gary Grove

policy. needs fit add as I’ll our financial Charles, it to well within on

good We have base. a very asset

operation. we’re balance We very don’t And a from and we have already need that providing what good growth screws of sheet capital. to a have up return

says, transaction. Trem that So be a as value-added needs to

Charles Meade

point Thank That’s an add. important you. to

Trem Smith

Charles. Thanks,

Gary Grove

welcome. You’re

Operator

is from Harrison from Kashy Thank Energy. you. The Simmons question next

Kashy Harrison

the And guess Hey, evening. maybe you big questions. one, good first my thank for morning. Good taking picture. I

but lower You to So X% over of think want have, flow you you cash growth details medium don��t the maybe you sense five not years? on you the have of over to much Do sense like but I grower? capital a think the on longer-term XXXX, look want about or should we rate be and free want and through did know to of highlight that yield the growth years. we a how Berry’s XXXX, you be amount to basis of you about Do term? do to a next necessarily a moving how trying highlighted next a amount you give as want that the want you three be should grow XX% have? five to Just share

Cary Baetz

don’t pinned neither or is I Kashy, Yes, a it’s, want into to be corner Gary. Trem

looking us it for is at what idea particular and year. most the total the during makes think I at any sense return

us both pointed two-year Trem and up a toggle past, out you As unique we base move to at the asset a and have have we in quickly. allows keep plus we out, ball-pin that can fairly things in heard of And as down.

to think back maximizes back I investors. value it to gets the all So our what

is be it years, more back be it to it capital may returning may Some growth? us. and years, growth, some So

idea type as return dividends, of trying of repurchases, to point and/or would even of I well. form very a XX%-plus return markets in tough dividend, the a capital special share the a on at and from what be So in of of focus think either least growth return, which view, bond our is repurchases, total combination total

have than much do as like, but it’s not market on want five-year worth that we based you I to – have mean, more know again the conditions, it good a is I right. we is But paper a written act upon plan, as,

visibility the good pretty years. have next couple we for of think I So

it’s strip on speculation of pricing. kind Beyond that, just

Trem Smith

And barrel like context from in you’ll produce And that California. is of it’s And oil, rest focusing we we which California, California of is business guess, model United used what is. isolated energy, States. Kashy. in to every I the of I Trem, is the the based, would this are add the remember our is Brent to

their of And very market now, as important end, energy at the grow. on this captive say needs is this I have so, we all so our the here, And based which piece It the value is most the the when we a through have keeping of actually that head our the opportunity value. ability discuss gives to market back – to execute executing shareholders, is we want down of our us to and probably cycles. to and distribution maximize

So being have at the growth, And to able shareholders of way we look it plus luxury as go return either to together. we or both.

Kashy Harrison

Okay. That makes just my sense. follow-up. maybe And I quick guess, for

You guys highlighted really September. strong volumes in

that think, November, XX,XXX oil XX% was October about and the barrels of cut. December for at holding I September you maybe expectation expectation equivalent in guys that that little per Is bit as be Or you’re with wells QX, the the of flat? production rate a oil in an with higher came that online entering all XQ? sort it will day that look to rate inch

Gary Grove

Gary. is this Kashy,

projection going on where rate are we so, like be. we’re about happy is where where we that excited and are we to and with And we’re

Let me to answer all. just it number, the a this straight available that’s way, us if information can, using you without giving I

rate. on going you what look see would an fourth can quarter line months and you guiding annual to like you the And roughly of average of can I that you take be first the what kind I And guidance, if our figure then think September around we’re that from – to in rate. the is midpoint out you think figure guidance. change nine with

Kashy Harrison

Thank Okay. you.

Gary Grove

the that’s think available your to us question with information I answers all. think I

Kashy Harrison

to I am now confirmation. doing further want the look math at and

Okay.

Trem Smith

and as And remember money spend we’ve we’re we we money spend first in seeing said. half, the now the And results.

are rest that’s the on in part year for been capital results spent. already the So, the large of based

Kashy Harrison

you. Got it. Thank

Gary Grove

bet. You

Operator

at Instructions] to [Operator you. Thank would conference questions turn like I Smith this back time. the Trem to further closing. for no Mr. showing I’m CEO,

Trem Smith

you very be joining, participants next quarter. you appreciate and We look forward to and for will thank all the we to talking very much brief. This

Operator

and Ladies day. this conference wonderful have today’s your and for Thank call. you participation gentlemen, a concludes

Berry (BRY) 8 Nov 192019 Q3 Earnings call transcript