Berry Corporation Reaffirms a Strong Liquidity Position, Balance Sheet Strength, and Ongoing Free Cash Flow Generation

Rhea-AI Summary

Berry (NASDAQ: BRY) has reaffirmed its strong liquidity position and ongoing free cash flow generation. As of August 23, 2024, the company had $94 million in available borrowing capacity under its RBL facility and $11 million in cash. Berry has reduced its RBL borrowings by 57% since Q1 2024, with outstanding borrowings at $22 million. The company maintains $125 million in available borrowing capacity until August 26, 2025.

Production remains on track with annual guidance, and Berry has secured necessary permits for its 2024 drilling program and into 2025. The company expects to maintain flat production and free cash flow into 2026. Berry is actively working to address its debt obligations, including discussions to extend or refinance its RBL facility and addressing senior unsecured notes due February 2026.

Positive

• Strong liquidity position with $94 million available borrowing capacity and $11 million cash
• 57% reduction in RBL borrowings since Q1 2024
• Production on track with annual guidance
• Secured permits for 2024 drilling program and into 2025
• Expectation of flat production and free cash flow into 2026
• Capital expenditures expected to be well under cash flow from operations in H2 2024

Negative

• Outstanding borrowings of $22 million under RBL facility
• RBL facility matures on August 26, 2025
• Senior unsecured notes due February 2026 need to be addressed

Insights

Financial Analyst

Berry 's reaffirmation of its strong liquidity position and ongoing free cash flow generation is moderately positive for investors. The company's ability to reduce its RBL facility borrowings by 57% since Q1 2024 demonstrates effective cash management. With $94 million in available borrowing capacity and $11 million in cash, Berry appears well-positioned to meet short-term obligations.

However, investors should note the upcoming maturities: the RBL facility in August 2025 and senior unsecured notes in February 2026. The company's proactive approach in addressing these obligations is crucial. The focus on debt reduction and maintaining production levels suggests a conservative financial strategy, which could provide stability but may limit aggressive growth opportunities.

Oil and Gas Industry Expert

Berry's operational outlook appears stable, with production on track to meet annual guidance. The company's ability to secure necessary permits for its 2024 drilling program and into 2025 is a positive sign in California's stringent regulatory environment. The projection of maintaining flat production and free cash flow into 2026 suggests operational resilience.

However, the statement "assuming permits continue to be issued at the rate and in the manner they are currently being issued" highlights regulatory risks. Any changes in permitting processes could impact future operations. Investors should monitor California's evolving energy policies, as they could significantly affect Berry's long-term prospects in the state.

Market Strategist

Berry's focus on balance sheet strength and sustainable free cash flow aligns with current market preferences for energy companies. The company's ability to reduce debt while maintaining production is likely to be viewed favorably by investors seeking stability in the volatile energy sector.

However, the lack of specific growth initiatives might concern investors looking for upside potential. The company's conservative approach, while prudent in the current environment, may limit its ability to capitalize on potential market upswings. The upcoming debt refinancing will be a critical juncture for Berry, potentially impacting its financial flexibility and future strategic options. Investors should closely monitor the terms of any new debt arrangements for insights into the company's financial health and growth prospects.

DALLAS, Aug. 30, 2024 (GLOBE NEWSWIRE) -- Berry Corporation (bry) (NASDAQ: BRY) (“Berry” or the “Company”) is reaffirming its strong liquidity position consisting of $94 million of available borrowing capacity under its reserve-based lending (“RBL”) facility and $11 million of cash as of August 23, 2024, as well as its expectation of significant free cash flow generation continuing during the second half of 2024.

As of August 23, 2024, the Company’s borrowings outstanding under its RBL facility were $22 million, reflecting a reduction of approximately 57%, or $29 million, since the first quarter of 2024. This reduction included the final payment of $20 million made in July on the 2023 Macpherson transaction. The Company maintains $125 million of available borrowing capacity until the RBL facility matures on August 26, 2025. The Company is actively working to address its debt obligations and is in discussions to extend or refinance its RBL facility.

The Company continues to maintain ample liquidity and generate the free cash flow necessary to further reduce debt and fund shareholder returns as appropriate. Production remains on track with the Company’s previously issued annual guidance, and the Company has in-hand the necessary permits to complete its planned drilling program for 2024, as well as to support activity into 2025. Based on its inventory of workovers, sidetracks, and new wells, and assuming permits continue to be issued at the rate and in the manner they are currently being issued, the Company has line of sight to keep production flat and maintain free cash flow into 2026.

“We remain focused on creating value by maintaining balance sheet strength and generating sustainable free cash flow. The second half of the year traditionally has significantly better free cash flow compared to the first half due to lower working capital usage. Our capital expenditures are expected to be well under cash flow from operations in the second half of 2024 and we are on track to meet our annual production goals,” said Mike Helm, Berry’s Chief Financial Officer.

He continued, “Supported by our strong operations, we have and will continue to take steps to strengthen our financial position. For example, we reduced our revolver balance by 57% from the end of the first quarter to date. This reflects our continued prioritization of debt reduction, prudently investing in the business and returning capital to our shareholders when appropriate. We are actively looking to further strengthen our balance street, including the extension or refinancing of our RBL facility, and addressing our senior unsecured notes due February 2026.”

About Berry Corporation (BRY)

Berry is a publicly traded (NASDAQ: BRY) western United States independent upstream energy company with a focus on onshore, low geologic risk, low decline, long-lived oil and gas reserves. We operate in two business segments: (i) exploration and production (“E&P”) and (ii) well servicing and abandonment. Our E&P assets are located in California and Utah, are characterized by high oil content and are predominantly located in rural areas with low population. Our California assets are in the San Joaquin basin (100% oil), while our Utah assets are in the Uinta basin (60% oil and 40% gas). We operate our well servicing and abandonment segment in California. More information can be found on the Company’s website at bry.com.

Forward Looking Statements

The information in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can typically identify forward-looking statements by words such as aim, anticipate, achievable, believe, budget, continue, could, effort, estimate, expect, forecast, goal, guidance, intend, likely, may, might, objective, outlook, plan, potential, predict, project, seek, should, target, will or would and other similar words that reflect the prospective nature of events or outcomes. All statements, other than statements of historical facts, included in this press release that address plans, activities, events, objectives, goals, strategies, or developments that the Company expects, believes or anticipates will or may occur in the future, such as those regarding our financial position; liquidity; our ability to refinance or pay, when due, our indebtedness; cash flows (including, but not limited to, Adjusted Free Cash Flow); financial and operating results; capital program and development and production plans; operations and business strategy; potential acquisition and other strategic opportunities; reserves; hedging activities; capital expenditures; return of capital; our shareholder return model and the payment of future dividends; future repurchases of stock or debt; capital investments; our ESG strategy and the initiation of new projects or business in connection therewith, recovery factors; and other guidance are forward-looking statements. Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. For any such forward-looking statement that includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that while we believe such assumptions or bases to be reasonable and make them in good faith, assumed facts or bases always vary from actual results, sometimes materially.

Berry cautions you that these forward-looking statements are subject to all of the risks and uncertainties incident to acquisition transactions and the exploration for and development, production, gathering and sale of natural gas, NGLs and oil most of which are difficult to predict and many of which are beyond Berry’s control. These risks include, but are not limited to, our ability to refinance our indebtedness on terms favorable to us; commodity price volatility; legislative and regulatory actions that may prevent, delay or otherwise restrict our ability to drill and develop our assets, including with respect to existing and/or new requirements in the regulatory approval and permitting process; legislative and regulatory initiatives in California or our other areas of operation addressing climate change or other environmental concerns; investment in and development of competing or alternative energy sources; drilling, production and other operating risks; effects of competition; uncertainties inherent in estimating natural gas and oil reserves and in projecting future rates of production; our ability to replace our reserves through exploration and development activities or strategic transactions; cash flow and access to capital; the timing and funding of development expenditures; environmental, health and safety risks; effects of hedging arrangements; potential shut-ins of production due to lack of downstream demand or storage capacity; disruptions to, capacity constraints in, or other limitations on the third-party transportation and market takeaway infrastructure (including pipeline systems) that deliver our oil and natural gas and other processing and transportation considerations; the ability to effectively deploy our ESG strategy and risks associated with initiating new projects or business in connection therewith; our ability to successfully integrate the Macpherson assets into our operations; we fail to identify risks or liabilities related to Macpherson, its operations or assets; our inability to achieve anticipated synergies; our ability to successfully execute other strategic bolt-on acquisitions; overall domestic and global political and economic conditions; inflation levels, including increased interest rates and volatility in financial markets and banking; changes in tax laws and the other risks described under the heading “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings with the SEC.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no responsibility to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise except as required by applicable law. Investors are urged to consider carefully the disclosure in our filings with the Securities and Exchange Commission, available from us via our website or via the Investor Relations contact below, or from the SEC’s website at www.sec.gov.

FAQ

What is Berry 's (BRY) current liquidity position as of August 23, 2024?

As of August 23, 2024, Berry (BRY) had $94 million of available borrowing capacity under its RBL facility and $11 million in cash.

How much has Berry (BRY) reduced its RBL borrowings since Q1 2024?

Berry (BRY) has reduced its RBL borrowings by approximately 57%, or $29 million, since the first quarter of 2024.

When does Berry 's (BRY) current RBL facility mature?

Berry 's (BRY) current RBL facility matures on August 26, 2025.

What are Berry 's (BRY) expectations for production and free cash flow?

Berry (BRY) expects to maintain flat production and generate free cash flow into 2026, based on its current inventory and permit issuance rates.