Earnings call transcript: Berry Petroleum Q1 2025 earnings beat forecasts, stock surges

Berry Petroleum Corp delivered an impressive performance in the first quarter of 2025, surpassing earnings and revenue forecasts. The company reported earnings per share (EPS) of $0.12, exceeding the forecasted $0.105. Revenue reached $182.65 million, beating expectations of $174.25 million. Following these results, Berry Petroleum’s stock surged by 13.54%, reflecting investor confidence in the company’s financial health and strategic direction. According to InvestingPro analysis, the company appears undervalued based on its Fair Value assessment, trading at a notably low Price/Book multiple of 0.25x.

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Key Takeaways

• Berry Petroleum’s Q1 2025 EPS of $0.12 beat the forecast of $0.105.
• Revenue in Q1 2025 was $182.65 million, surpassing expectations.
• The stock price increased by 13.54% following the earnings announcement.
• The company maintained a strong hedge position, protecting cash flow.
• Berry reaffirmed its full-year 2025 guidance.

Company Performance

Berry Petroleum showcased robust performance in Q1 2025, driven by strategic drilling initiatives and effective cost management. The company focused on expanding its operations in California and the Uinta Basin, drilling twice as many wells compared to the previous quarter. This expansion contributed to a production average of 24,700 barrels per day. The company also reported zero recordable incidents, demonstrating its commitment to safety and operational efficiency.

Financial Highlights

• Revenue: $182.65 million, exceeding the forecast of $174.25 million.
• Earnings per share (EPS): $0.12, compared to the forecast of $0.105.
• Adjusted EBITDA: $68 million.
• Operating cash flow: $46 million.
• Free cash flow: $17 million.
• Dividend: $0.30 per share.

Earnings vs. Forecast

Berry Petroleum’s EPS of $0.12 surpassed the forecasted $0.105, marking a positive surprise of approximately 14.3%. The revenue of $182.65 million also exceeded the expected $174.25 million by 4.8%. These results indicate strong operational performance and effective cost management.

Market Reaction

Following the earnings announcement, Berry Petroleum’s stock witnessed a significant increase of 13.54%, closing at $2.73. This surge reflects investor optimism and confidence in the company’s strategic initiatives and financial health. The stock’s performance is notable, especially considering its 52-week range, with a low of $2.11 and a high of $7.805. InvestingPro data reveals the stock has experienced a significant 67% decline over the past year, suggesting potential recovery opportunities for value investors.

Outlook & Guidance

Berry Petroleum reaffirmed its full-year 2025 guidance, emphasizing its focus on high-return, low-capital-intensity projects. The company expects most of its capital expenditures (CapEx) to be completed by the end of Q3 2025. Additionally, thermal diatomite drilling is anticipated to finish by mid-summer, with the first production from the Uinta Basin expected in Q3.

Executive Commentary

CEO Fernando Arajo highlighted Berry’s strategic position, stating, "Berry sits at an advantage position, thanks to our strong hedge book and high quality assets." President Daniel Hunter emphasized the company’s commitment to safety and environmental standards, while Arajo reiterated the focus on executing high-return projects and generating sustainable free cash flow.

Risks and Challenges

• Regulatory changes in California could impact operations.
• Fluctuations in oil prices may affect revenue.
• Potential delays in project timelines could impact production targets.
• Economic uncertainties could influence market conditions.
• Environmental regulations may increase operational costs.

Q&A

During the earnings call, analysts inquired about the scalability of the thermal diatomite project and the progress of drilling in the Uinta Basin. Discussions also covered California production growth and the timeline for Uinta Basin development, reflecting investor interest in Berry’s strategic initiatives and future growth prospects.

Full transcript - Berry Petroleum Corp (BRY) Q1 2025:

Conference Operator: Hello, and welcome to the Berry Corporation Q1 twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Thank you. I would like to turn the conference over to Chris Dennison, Director of Investor Relations.

You may begin.

Chris Dennison, Director of Investor Relations, Berry Corporation: Thank you, Tricia, and welcome, everyone. Thank you for joining us for Berry’s first quarter twenty twenty five earnings call. This morning, Berry issued an earnings release highlighting our quarterly results. Speaking this morning will be Fernando Arajo, our CEO Daniel Hunter, our President and Jeff Maggids, our CFO. Our website has a link to the earnings release and our updated presentation.

I would like to call your attention to the Safe Harbor language found in the earnings release. The release, the presentation, and today’s discussion contain certain projections and other forward looking statements within the meaning of the 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 GAAP measures. We will also post a replay link of this call on our website. With that, I will now turn the call over to Fernando.

Fernando Arajo, CEO, Berry Corporation: Thank you, Chris, and good morning, everyone. Welcome to our first quarter earnings call. Berry is off to a strong start in 2025, and we are reaffirming our full year guidance. Our solid first quarter results are underpinned by our balance sheet strength, high return development projects and the capital efficiencies we are delivering. We are confident in our ability to navigate current market volatility our 2025 outlook remains unchanged.

Our cash flow is protected by our strong hedge position. For the remainder of the year, we have approximately 73% of our oil production hedged at $75 per barrel. Our business plan is anchored by our high return assets, stable production base and low capital intensity projects. This is a competitive advantage for Berry. We have the permits in hand to execute our 2025 development projects and continue to add inventory for 2026.

Turning to our first quarter results, we strengthened our balance sheet by paying down 11,000,000 of debt and returned $2,000,000 in cash to shareholders. Liquidity increased to $120,000,000 and we improved our leverage ratio to 1.37 times. Highlighting our commitment to shareholder value, we are on track to deliver approximately 10% of our enterprise value annually through our dividend and debt reduction. We generated $17,000,000 of free cash flow in the first quarter due to cost improvements and stable production. We achieved a 9% reduction in hedge energy LOE when compared to the midpoint of our full year guidance.

In California, we drilled twice as many wells during Q1 compared to Q4 last year. Production for the quarter averaged 24,700 barrels per day slightly below the prior quarter due to planned downtime. Our 2025 California development program is primarily focused on the thermal diatomite reservoir and our drilling program is front loaded towards the first half of the year. Therefore, we expect most of our CapEx will be incurred by the end of the third quarter. As referenced on Slide 12 in our presentation, the economics of the thermal diatomite remain highly attractive at current oil prices.

Most of these projects generate a rate of return in excess of 100%. We expect to complete our thermal diatomite drilling by mid summer, which sets up production and cash flow growth through the second half of the year. With highly competitive economics and a deep inventory of sidetracks, this will be a core area of capital allocation for years to come. Horizontal development of our Uinta asset is also progressing successfully. We recently finished drilling our four well horizontal pad ahead of schedule and on budget.

By utilizing produced gas and leveraging our existing facilities, we lowered fuel costs in our drilling operations by roughly 25%. Also, we expect to reduce completion cost by approximately $500,000 per well by utilizing produced gas to drive our pumps. Geologic results are in line with expectations as the Udland Butte Reservoir is fairly uniform across our acreage space. We are planning to commence frac operations in June with first production expected in the third quarter. We continue to see strong results from our six non operated horizontal wells where production is exceeding our pretrial estimates and supports further delineation of our acreage.

Industry’s recognition and excitement over the Uinta Basin is accelerating. We believe our 100,000 acre position with high working interest and majority held by production has significant upside and provides long term optionality in capital allocation and growth. In summary, our priorities remain unchanged to generate sustainable free cash flow, reduce debt while returning dividends and create value by investing in our high return development portfolio. Now, I will turn the call over to Dan.

Daniel Hunter, President, Berry Corporation: Thanks, Fernando. Good morning, everyone. Thank you for joining us and for your interest in our company. Supporting our first quarter accomplishments is our commitment to HSD excellence and regulatory compliance. We believe that protecting the environment, investing in the talented people we employ, and enriching the communities in which we live and operate is critical to our success.

We execute on that commitment. And in our E and P operations we had zero recordable incidents, zero lost time incidents and no reportable spills during the first quarter. Continuing with sustainability, last month we published updated and expanded performance metrics. And we will be publishing a fulsome report this summer once our 2024 emissions data is finalized. These efforts reflect our commitment to enhancing our voluntary reporting and providing greater transparency to our stakeholders.

On the regulatory front, we are seeing a notable constructive shift in messaging from California’s decision makers. Last month Governor Newsom directed the California Energy Commission to engage with the oil and gas industry to reinforce the state’s openness to a collaborative relationship. We are hopeful that this will allow for a meaningful and productive discussion on the many benefits from increasing in state production. This not only helps improve the affordability, security and environmental impact of the energy supply chain required to meet the daily needs of Californians, local production also creates jobs to further fuel the economy and generates critical funding for schools, roads, public safety and other vital services. We are proud to safely and responsibly produce oil under world leading labor, human rights and health, safety and environmental standards.

Berry stands ready. We’re committed to working with the state to meet its goals and ensure all Californians have access to clean, affordable, and reliable energy now and in the future. Moving to permitting, as Fernando stated, we have all of the permits we need to execute our 2025 plan and we’re now building permit inventory for our 2026 drilling program. Berry’s proven ability to successfully navigate the regulatory environment is a competitive advantage. We are returns focused and will leverage the flexibility provided by our ample development inventory to allocate capital to our highest return projects while efficiently managing our stable base production.

Berry has a solid runway and multiple avenues to drive sustainable and profitable value creation for years to come. I will now turn the call over to Jeff.

Jeff Maggids, CFO, Berry Corporation: Thanks Danny. In my comments this morning, I will highlight our first 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 this morning and our Form 10 Q, which we expect to file shortly. First quarter oil and gas sales were $148,000,000 excluding derivatives, with a realized oil price of 93% of Brent. Risk management is a key aspect to our strategy, and we judiciously hedge our production to protect cash flows, enhance visibility, and mitigate the impact of price fluctuations.

In early April, we strategically converted several Brent collars and purchased puts into swaps to provide additional protection in the current volatile pricing environment. The net effect of these transactions raised the average floor price by $6 per barrel on 2,300 barrels per day of production in 2026 and 2027. Based on our hedge book as of May 2 and using the midpoint of our 2025 guidance, we have 73% of our oil production hedged for 2025 at an average price of $74.69 per barrel of Brent. Assuming our production guidance is held flat for future periods, our oil production is 63% hedged for 2026 at an average price of $69.42 First quarter adjusted EBITDA was $68,000,000 and operating cash flow was 46,000,000 We generated $7,000,000 in free cash flow after working capital changes. Looking at costs and expenses, first quarter non energy LOE was $13.91 per BOE and hedge energy LOE was $12.49 per BOE.

Total LOE per BOE was lower than our annual guidance as we optimized steam injection volumes while sustaining production. Taxes other than income taxes were $4.15 per BOE and adjusted G and A for E and P and Corporate was $7.19 per BOE. Turning to our balance sheet, our quarter end total debt was $439,000,000 and we paid down $11,000,000 during the first quarter. Liquidity increased to $120,000,000 and we reduced our leverage ratio to 1.37 times from year end. Lastly, as detailed in our earnings release, the Board declared a dividend of $03 per share payable on the second quarter.

At quarter end, we were in full compliance with our financial covenants and we have sufficient headroom to execute our strategy. And with that, I will now turn the call over to Fernando to wrap up our prepared remarks.

Fernando Arajo, CEO, Berry Corporation: Thank you, Jeff. In summary, we delivered a strong start to 2025 and we remain confident in our ability to navigate the current volatility. Berry sits at an advantage position, thanks to our strong hedge book and high quality assets. We recognize the challenges presented in today’s markets, but we are confident in our plan. Our focus remains consistent, execute our high rate of return development projects, generate sustainable free cash flow, reduce debt and evaluate accretive growth opportunities.

We are well positioned to advance our goals and generate value for our shareholders and we look forward to sharing our progress. With that, I’ll turn the call over to the operator for questions.

Conference Operator: Thank you. We will now begin the question and answer session. And your first question comes from the line of Nate Pendleton with Texas Capital. Congrats

Nate Pendleton, Analyst, Texas Capital: on the strong quarter.

Fernando Arajo, CEO, Berry Corporation: Thank you, Nate.

Nate Pendleton, Analyst, Texas Capital: Looking at the strong returns from your thermal diatomite program on Slide 12, can you elaborate on the scalability of that program? And what operational or permitting bottlenecks if any do you foresee in ramping that development across over 1,000 locations you highlighted assuming a supportive commodity environment?

Fernando Arajo, CEO, Berry Corporation: That’s a very good question Nate. And we have a lot of running room in the thermoseidomite. If you look at our year end reserve report, you’ll see that we have about a 25 thermal diatomite Citrax officially categorized as PUDs and that’s significant running room. That’s a couple of years at least worth of drilling activity. On top of that, in our PUDs, official PUDs, we have another significant number of new wells in the thermal diatomite.

And then outside of that, we see about a thousand locations or future locations to be able to drill in the thermal diatomite. So significant, significant running room. In terms of the permits to be able to execute this program, as you know, we are getting sidetrack permits. We have been getting sidetrack permits for the last several months. In fact, this year we’ve received on the order of 45 sidetrack permits mostly in the thermal diatomite.

So, that’s going well. And then for new wells, once we have a decision on the current county EIR, we should be able to drill the additional opportunities that we have in this great world class asset.

Nate Pendleton, Analyst, Texas Capital: That’s great. And as my follow-up, I wanted to shift over to the Uinta, if I may. With your first operated four well pad drilled ahead of time and on budget, can you share any specific learnings or design changes from that project? And maybe how should we think about the initial production potential in 3Q?

Fernando Arajo, CEO, Berry Corporation: Another good question, Nate. As you mentioned, completed the drilling phase of our four well pad in the Diatomite. We completed in the Uinta Basin and we completed that a couple of weeks ago. These are three mile laterals and we’re targeting as you know the Eutlyn Butte Reservoir which is very uniform in our acreage and we didn’t have any surprises on geology side of the results. In fact, in our drilling operations we’re able to stay within zone 91% of the time which is really, really excellent as well.

The last of the wells that we drilled in Uinta, the last of the horizontals, we drilled the well in thirteen days from spud to rig release which is as good as what we’ve seen from our nearby operators as well. So a lot of good things from our drilling activity. And the one thing that I do want to highlight is the fact that we’re able to prove the use of gas as a fuel source for the rig and that’s saving us on the order of $90,000 per well. So that said, that’s really, really good. In terms of what’s next, we’ll be fracking the well come here in June.

So the frac operations is going to take a few weeks. We expect to put the wells on production later in Q3, most likely in the month of August. So we’ll have some numbers at that time. In terms of expectations, going back to that question, the six wells, the non operated wells that we’ve drilled, they’re producing well. They’re producing above expectations and close to that 60 barrels a foot EOR range which is really, really good.

So, we’re really excited about what’s going on in the Uinta Basin.

Nate Pendleton, Analyst, Texas Capital: That’s really exciting. And congrats again on strong quarter.

Fernando Arajo, CEO, Berry Corporation: Thank you,

Conference Operator: And your next question comes from the line of Charles Nguyen with Johnson Rice.

Charles Nguyen, Analyst, Johnson Rice: Yes, good morning Fernando, Danielle, Jeff and the whole Berry team there. Have questions kind of on the same topics. But first, I wanted to ask about this slide seven, the graph on the bottom half of this. Daniel, I think you touched on some of this in your prepared remarks about that you guys are successfully navigating the regulatory environment in California. But this chart shows that you’ve been able to grow California production in the twenty three to twenty four timeframe while everyone else or at least everyone else on the slide declined.

So is that just because you’re better at navigating the regulatory environment or are there other aspects like perhaps that you guys are more reliant or more proficient with sidetracks and diatomite that other operators don’t have that option? What do you view as the drivers behind this relative success here?

Fernando Arajo, CEO, Berry Corporation: Yeah, good question, Charles. And one of the strengths that we have is the quality of our teams, especially in California. As you know, we’ve been operating in California for well over one hundred years and we know the basin as good as anybody. And we have great teams. They’re very innovative.

And if you remember years ago, we started with significant workover activity as part of our plan. And then a couple of years ago because of the limitations with the regulatory environment, we started looking at sidetracks. And I think we’re the first really to start implementing that strategy of going after sidetracks. And because of that we’ve been able to grow our sidetrack inventory. Just a minute ago, mentioned our year end reserves for 2024.

And if you look at our pods year end 2024, about two twenty five of those pods of the 500 and change pods, two twenty five are sidetracks. So that gives us an advantage and obviously the other clear advantage that we have is that in California, California is a low capital intensity development basin. So, we see rates of return exceeding 100% in most of the projects that we drill.

Charles Nguyen, Analyst, Johnson Rice: Got it. Thank you for that color. And then going back to the Uinta and I want to ask a question around timing. I don’t intend to and I don’t want to try to box you in on any kind of timeline, but I want to just understand how you guys are thinking about news flow or the workflow and then the news flow. So, you said that you’re going to start fracking these four wells in early June.

And then, so you’ll probably be done with that that frac job before the June. How long do these wells take to flow back before you hit your initial peak rate? And are you guys, do you want to see two weeks or or thirty days of production data before you you you make an announcement or just, you know, kinda give us the timeline and and what your preference is for how you wanna talk about it?

Fernando Arajo, CEO, Berry Corporation: Yeah. No. Perfect. And as I mentioned before, we’ll be starting our frac operations in June. We were fracking four wells.

So, it’s going to take us most of June to frac those wells. After that, obviously, we need to clean out the wellbore and run the completion. And then once that we have to connect the wells to our facilities to put them on production. So we expect to have production initially probably late July but once the wells clean up and it should take a few days to do that, we should have some significant production numbers in August, hopefully in time for the next earning cycle.

Charles Nguyen, Analyst, Johnson Rice: Got it. That’s helpful, Fernando. Thank you.

Conference Operator: And there are no further questions at this time. I will now turn the call back over to Fernando Arajo for closing remarks.

Fernando Arajo, CEO, Berry Corporation: Yes. Thank you, everyone. Thank you for your interest in Berry. As I’ve said before, we are in a good place and we’re really excited about where we are and the opportunity sets that we have. And with that, I look forward giving you more updates as we get results.

Thank you so much.

Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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