Berry Corporation announced first quarter 2022 results, including a net loss of $57 million or $0.71 per diluted share, Adjusted Net Income of $43 million or $0.51 per diluted share, and Adjusted EBITDA of $96 million. The Board of Directors declared dividends on common stock totaling $0.19 per share.

Quarterly Highlights

• Reported Adjusted EBITDA of $96 million, up 58% from Q4 2021
• Produced 26,700 boe/d, which was 91% oil
• Generated Discretionary Free Cash Flow of $17 million including working capital use of $37 million
• Board declared total dividends of $0.19 per share, a record quarterly dividend for Berry
• FY 2022 cash returns expected at $1.60 - $1.90 per share, based on current plan and commodity strip prices
• Board increased share repurchase authorization to an aggregate $150 million

“Our first quarter performance positions us for a very good year for our shareholders. We are excited to report that we are on track to deliver top tier returns just as we promised when we announced our new Shareholder Return Model which went into effect for the first quarter of 2022. Based on the current commodity strip prices and current plan, we expect to deliver cash returns that would represent a cash yield in the mid-to-high teens for 2022,” said Trem Smith, Berry Board Chair and CEO.

"We are making good progress on our ESG-focused projects for 2022 and beyond, and continue to actively explore new opportunities to lower our carbon footprint. We are uniquely positioned to capture a portion of the recently announced state and federal funds to plug and abandon California’s thousands of orphan wells with our new C&J Well Services business. Our most recent ESG report (updated periodically) can be found on the ‘Sustainability’ page of our website. We will continue to drive ESG progress and demonstrate our commitment to being a good corporate citizen while providing equitable and affordable energy for all Californians,” continued Smith.

First Quarter 2022 Results

Adjusted EBITDA, on a hedged basis, was $96 million in the first quarter 2022. This represented a 58% increase compared to $60 million in the fourth quarter 2021. The increase was largely the result of higher oil prices and lower greenhouse gas costs, partially offset by higher hedged fuel costs and lower production due to property divestitures.

The Company reported daily production of 26,700 boe/d for the first quarter 2022. When adjusted for divestitures and acquisitions, this was essentially flat compared to the fourth quarter 2021. The Company's oil production for the first quarter 2022 was 24,400 bbl/d, or 91% of total production, up from 89% in the prior quarter with California production contributing 22,200 boe/d.

The Company-wide hedged realized oil price for the first quarter 2022 was $76.87 per bbl, a 41% increase from the prior quarter due to higher prices and substantially improved hedge positions. The California average oil price before hedges for the first quarter 2022 was $93.16 per bbl, reflecting approximately 95% of Brent, which was 23% higher than the $75.90 per bbl in the fourth quarter 2021, also approximately 95% of Brent.

Operating expenses, or OpEx, consists of lease operating expenses (“LOE”), third-party expenses and revenues from electricity generation, transportation and marketing activities, as well as the effect of derivative settlements (received or paid) for gas purchases. On a hedged basis, operating expenses increased by 14% or $3.18 per boe to $25.64 for the first quarter 2022, compared to $22.46 for the fourth quarter 2021. During the first quarter 2022, energy operating expenses increased due to higher hedged purchased gas costs as our previous below market hedge book closed in the fourth quarter of 2021 and new hedged prices were more closely aligned to current market. Following the end of the first quarter 2022, the Company entered into new gas purchase hedges that reduce the cost exposure from June to December 2022. As expected, non-energy operating expenses increased slightly on a per boe basis due to increased labor costs, compared to the fourth quarter 2021.

Total general and administrative expenses increased by almost $1 million, or 3%, to approximately $23 million for the first quarter 2022, compared to the fourth quarter 2021, largely due to legal and other professional service expenses related to acquisition and divestment activity. Adjusted General and Administrative Expenses, which exclude non-cash stock compensation costs and nonrecurring costs, were approximately 13% higher at $19 million for the first quarter of 2022, due to higher legal and expected inflation of employee costs.

Taxes, other than income taxes were $2.74 per boe for the first quarter compared to $4.65 per boe in the fourth quarter 2021 largely due to decreased greenhouse gas prices.

For the first quarter 2022, capital expenditures were approximately $28 million on an accrual basis including capitalized overhead and interest and excluding acquisitions and asset retirement obligation spending. Approximately 53% of this capital was directed to California oil operations, and 35% to Utah operations. Additionally, the Company spent approximately $5 million for plugging and abandonment activities in the first quarter 2022. The execution of the Company's 2022 development program included drilling 26 new wells in the first quarter 2022, 22 of which were in California and four of which were in Utah, along with 76 well workovers.

The first quarter 2022 operations results for C&J Well Services, Berry's well servicing and abandonment segment acquired in the fourth quarter 2021, included services revenues of $40 million, costs of services of $33 million, and general and administrative expenses of $3 million. These results were negatively impacted by higher than planned labor and fuel costs.

At March 31, 2022, the Company had liquidity of $213 million consisting of $20 million cash on hand and $193 million available for borrowings under its RBL Facility.

“We are excited to announce our first variable dividend under our Shareholder Return Model based on Discretionary Free Cash Flow generated in the first quarter 2022, which will be paid June 15. We currently expect our variable dividend for the second quarter to be substantially better as the first quarter is historically our largest working capital consuming quarter, which affects our Discretionary Free Cash Flow. Based on our current oil hedges, the oil market outlook, and our previously disclosed 2022 guidance, we are well positioned to drive strong and sustainable shareholder returns for the next few years,” stated Cary Baetz, Executive Vice President and Chief Financial Officer. “On the energy cost side, we have recently enhanced our natural gas purchases hedge position for 2022 and now have roughly two-thirds of our daily consumption hedged at $4 per mmbtu from June through December 2022. We also gained the remainder of our additional volume allotment on the Kern River gas line on May 1, 2022. The access allows us to be more opportunistic with pricing and provides certainty around volumes during tight supply times.”

KeyFacts Energy Industry Directory: Berry Corporation