Earnings call transcript: Berry Petroleum Q2 2025 misses EPS, stock dips

Berry Petroleum Corp (BRY) released its Q2 2025 earnings, revealing a significant earnings per share (EPS) miss but a notable revenue beat. The company reported an EPS of $0, falling short of the forecasted $0.034, marking a 100% negative surprise. Despite this, Berry’s revenue reached $210.08 million, surpassing expectations by 36.19%. Following the earnings announcement, Berry’s stock price decreased by 2.87% in regular trading and fell an additional 3.72% in pre-market trading, bringing the share price to $2.85. According to InvestingPro analysis, Berry currently trades below its Fair Value, with a "GOOD" overall financial health score of 2.58 out of 5.

Key Takeaways

• Berry Petroleum’s Q2 EPS was $0, missing the forecast of $0.034.
• Revenue for the quarter was $210.08 million, exceeding the forecast by 36.19%.
• The stock price fell by 2.87% in regular trading and further declined in pre-market trading.
• Berry maintains a strong hedge position, with 71% of expected oil production hedged at $75 per barrel.
• The company aims to reduce debt by at least $45 million in 2025.

Company Performance

Berry Petroleum’s Q2 performance highlighted a mixed financial landscape. While the company reported a drastic EPS miss, its revenue exceeded expectations significantly. This dual outcome reflects Berry’s operational efficiency in revenue generation but highlights challenges in maintaining profitability. The company’s strategic focus on operational efficiencies and strong hedge positions appears to be cushioning against market volatility.

Financial Highlights

• Revenue: $210.08 million, a 36.19% surprise over forecasts.
• Earnings per share: $0, falling short of the $0.034 forecast.
• Adjusted EBITDA for Q2 was $53 million.
• Operating cash flow stood at $29 million, with capital expenditures at $54 million.
• Dividend declared at $0.3 per share, yielding 4% annually.

Earnings vs. Forecast

Berry Petroleum’s Q2 EPS of $0 represents a significant miss compared to the forecast of $0.034, a 100% negative surprise. However, the revenue of $210.08 million surpassed expectations by 36.19%, indicating strong sales performance despite challenges in profitability.

Market Reaction

Following the earnings release, Berry’s stock price fell by 2.87% during regular trading hours and continued to decline by 3.72% in pre-market trading. The stock’s current price of $2.85 is near its 52-week low of $2.11, reflecting investor concerns over the EPS miss despite robust revenue figures.

Outlook & Guidance

Berry Petroleum is maintaining its 2025 guidance, with expectations of bringing full production online by Q3. The company aims to reduce its debt by at least $45 million in 2025 and continues to focus on generating free cash flow. Potential developments in Utah’s Castle Peak formation could provide future growth opportunities.

Executive Commentary

CEO Fernando Araujo emphasized the company’s strategy, stating, "Our strategy is focused on balance sheet strength, high return development projects, and delivering capital and operational efficiencies." President Danielle Hunter noted optimism about the regulatory environment in California, saying, "We are seeing the most constructive tone in California in at least five years."

Risks and Challenges

• The significant EPS miss could affect investor confidence and market valuation.
• High capital expenditures relative to operating cash flow might pressure financial flexibility.
• Regulatory changes in California, despite current optimism, could impact future operations.
• Fluctuations in oil prices could affect revenue and profitability despite hedging strategies.
• Increasing scarcity of Tier 1 inventory poses a long-term challenge for sustained growth.

Berry Petroleum’s Q2 2025 earnings report underscores a complex financial scenario, with strong revenue performance overshadowed by an EPS shortfall. While the company’s strategic initiatives and robust hedging provide some stability, investor sentiment remains cautious amid profitability concerns. For deeper insights into Berry’s valuation and future prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro, which offers exclusive access to detailed financial metrics, Fair Value calculations, and expert research reports covering over 1,400 US stocks.

Full transcript - Berry Petroleum Corp (BRY) Q2 2025:

Olivia, Conference Operator: Good day. Thank you for standing by. Welcome to the Baird Corporation’s Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session.

Please note that today’s conference may be recorded. I will now hand the conference over to your speaker host, Chris Finneson, Director of Investor Relations. Please go ahead.

Chris Finneson, Director of Investor Relations, Berry Corporation: Thank you, Olivia, and welcome, everyone. Thank you for joining us for Berry’s second quarter twenty twenty five earnings call. Yesterday afternoon, Berry issued an earnings release highlighting our quarterly results. Speaking this morning will be Fernando Araujo, our CEO Danielle Hunter, our President and Jeff Maggids, our CFO. Our website has a link to the earnings release and our updated investor 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 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 the replay link of this call on our website. With that, I will turn the call over to Fernando.

Fernando Araujo, CEO, Berry Corporation: 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 macro 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 one 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 locations with 200 sidetracks.

In Utah, our horizontal delineation program is progressing and we expect to unlock upside across our position. Turning to 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 per barrel of Brent. During the quarter, we paid down $11,000,000 of debt bringing our year end to date debt reduction to $23,000,000 In California, activity continued to ramp with 16 wells drilled in the second quarter, up from 12 in the first quarter and six 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 successfully fracked 64 stages per well on average. We delivered meaningful cost savings of approximately $500,000 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% produced water in our fracs, 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 six non operated horizontal wells. We began flow back on our first two wells in August and the remaining two 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 EUR of about 55 to 60 barrels of oil per lateral foot and 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 and 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 a multi bench cube development. In summary, our priorities remain unchanged to generate sustainable free cash flow, reduce debt while returning dividends and create long term value by investing in our deep inventory of high return portfolio. With that, I will turn the call over to Dani.

Danielle Hunter, President, Berry Corporation: 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 lost time incidents in our E and P operations. We are proud to live our commitment to HSE excellence.

We are finalizing our 2025 sustainability report, which we expect to publish this quarter. In addition to enhanced disclosures, including TCFD alignment, we’re 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 26, the Kern County Board of Supervisors approved the new oil and gas ordinance and certified a revised environmental impact review or EIR required under CEQA 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 year end.

Court approval is required before Kern County can resume issuance of neutral permits in areas without an existing CEQA 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 we’ll streamline future development projects. In parallel, we are also encouraged by the California Energy Commission’s response to governor Newsom’s directive, focused on ensuring that all Californians have access to safe, reliable, and affordable energy through responsible in state production. This includes permitting and regulatory reforms announced by the Newsom administration a few weeks ago, which aim to stabilize in state production.

Of particular importance is a proposal to codify the Kern County EIR into state law, which will improve the permitting process and derisk the impact of continued litigation. These policies designed to support in state production will also benefit our C and J Well Services business. As one of the largest and most reputable P and A providers across the state, C and J is well positioned to capitalize on the potentially significant increase in demand for P and A services in connection with the proposed plug to drill requirements in effect outside of Kern County. Coupled with the increased P and A requirements for all operators that went into effect January 1, If this new measure passes, it should lead to a healthy ramp up in activity and margin expansion for C and J 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 E and P 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, Berry 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 environment evidenced by a robust sidetrack program and having the permits in hand today to deliver over the next few years, irrespective of the current county EIR or other legislative measures. Additionally, having permanent certainty amongst other stabilizing factors from the proposed regulatory reforms should spur new investment 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 applied governor Newsom’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.

Jeff Maggids, CFO, Berry Corporation: Thanks, Danny. In 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 we expect to file shortly. Second quarter oil and gas sales were $126,000,000 excluding derivatives, with a realized oil price of 92% of Brent. Based on our hedge book as of July 31 and using the midpoint of our 2025 production guidance, we have 71% of our expected oil production hedged for the remainder of 2025 at an average price of $75 per barrel of Brent.

Assuming our production guidance is held flat for future periods, our 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 EBITDA was $53,000,000 and operating cash flow was $29,000,000 Capital expenditures on an accrual basis were $54,000,000 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 costs and expenses, total hedged LOE was $27.97 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 G and A for E and P and Corporate was $7.44 per BOE. Turning to our balance sheet. Our quarter end total debt was $428,000,000 We paid down $11,000,000 during the quarter and are on track to pay down at least $45,000,000 for the year. Our liquidity position was $101,000,000 at quarter end, and working capital changes during the quarter were $11,000,000 of cash outflow.

Additionally, the Board declared a dividend of $03 per share, or a 4% annualized dividend yield payable in the third quarter. Taken together, our annual debt reduction and dividend represents nearly 10% of our enterprise value, underscoring our commitment to generating shareholder value. At quarter end, 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.

Fernando Araujo, CEO, Berry Corporation: Thank you, Jeff. Berry continues to execute on its stated objectives. Our focus remains consistent, execute on our deep inventory of high return development projects, generate sustainable free cash flow, reduce 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.

Olivia, Conference Operator: Thank you. Our first question coming from the line of Charles Meade with Johnson Rice, Hill and Melvin.

Charles Meade, Analyst, Johnson Rice, Hill and Melvin: Yes. Good morning, Fernando, Danny, and Jeff. Good morning. I wanna ask yes. Thank you.

I wanna ask the first question about the the the changes, the positive changes, I guess, in in the California regulatory situation. You guys you guys talked about this hearing on the current county EIR and then ruling it in 4Q. Timeline seems positive, but I want to ask, how are you guys thinking about I the, guess, the probability of a favorable outcome there? I know certainly the recent trends have been positive, but, and I suppose we should be cautious, but how hopeful are you about that hearing in that ruling?

Danielle Hunter, President, Berry Corporation: We feel very optimistic about it. I think there was a chance for objections to be filed when the County Board of Supervisors approved, recertified the EIR, and no new objections were filed. There has been an objection filed related to the court process, but it’s not bringing in new issues. It’s a repeat of the same. We feel confident due to the great and very thoughtful and meticulous work done by the county that the revised EIR addresses all of the deficiencies that were previously identified.

And so feel strong confidence that we’re at the last step and the court will have its hearing and issue its ruling shortly thereafter.

Charles Meade, Analyst, Johnson Rice, Hill and Melvin: Got it. Thanks for that, Dandy. I appreciate that. And then, Fernando, perhaps this is for you. The well that you farmed into to Tesla Castle Peak just north of your acreage, I’m imagining that you’ve looked at some other Castle Peak tests perhaps nearby, you know, as part of your decision to farm into that well.

Can you kind of set some expectations or maybe just some guidelines on what, you know, what we should expect there and what what made you think that was a, you know, a good well to farm into?

Fernando Araujo, CEO, Berry Corporation: Yeah. Good question, Charles. And as know, industry is generally targeting where we are, the lower cube, what they call the lower cube, which includes the Castle Peak, includes the Euclid Butte, 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, initial estimates of 40 to 50 barrels per foot EUR. We are really excited about the Castle Peak in our acreage because of the geology that we have.

And as we’ve discussed before, the geology is a combination of limestone and sandstone, but the sandstones get thicker as you go South. So there’s the potential that we have thicker Castle Peak in our acreage. So it’s be very interesting. It could really open up development potential not only in the Castle Peak but we have obviously potential in the Udland Butte. And then you could start developing these fields with cube drilling, right?

Drilling multiple layers at the same time from the same pad.

Charles Meade, Analyst, Johnson Rice, Hill and Melvin: Got it. Just to clarify, your four well pad that you’re just starting to flow back, that’s a Utham Butte pad?

Fernando Araujo, CEO, Berry Corporation: That’s correct. The four wells are Utham Butte.

Charles Meade, Analyst, Johnson Rice, Hill and Melvin: Great. Thanks, Fernando.

Fernando Araujo, CEO, Berry Corporation: Thanks, Charles.

Olivia, Conference Operator: Thank you. Our next question coming from the line of Nate Pendleton with Texas Capital. Your line is now open.

Nate Pendleton, Analyst, Texas Capital: Morning. With my first question, With my first question, I wanted to start off on the Uinta costs that you laid out on slide sixteen and seventeen. When we think about this development as Berry’s first operation or operated horizontal pad in the basin, your achievement of the 20% cost reduction is really encouraging. Based on your experience, can you speak to your ability to meet the targeted well costs in the $6.50 to $6.70 per foot range over time?

Fernando Araujo, CEO, Berry Corporation: Yeah, very good question, Nate. And obviously, as you mentioned for a first time operator drilling three mile laterals, we’re really encouraged with achievement of being 20% below the cost compared to the six non operated wells that we have announced actually compared to some of the other operators in the basin as well. In terms of improvements, I think there’s still room to improve on that. One area of improvement is we could have slightly better performance from our gas engines in drilling and flack fleets. They suffered a little bit during the summer months and 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 improvements potential there with the dual fuel fleets. Also remember that we’re cleaning out three mile lateral wells and these take some time and we’re trying to be extra careful on that. So we’re taking a bit longer than what we initially expected. So that’s another area of improvement as well.

And another area of improvement that I can point to is water usage. Utilizing 50% produced water, which is really good. But if we can find a way to utilize more produced water and reduce water cost, that would be even better. So it’s really a few things added together where we can improve. We can definitely improve another 5% or a little bit more as we drill in the future.

But the more we drill, the better we’ll get and we’re encouraged with initial results.

Nate Pendleton, Analyst, Texas Capital: Absolutely. Thanks for that detail. And then maybe shifting over to California. On slide nine, you highlight your fields within the San Joaquin Basin. Well, I knew the near term focus is understandably on the high return side scratch program.

Can you speak to some of the other opportunities within your California portfolio and and how those fit into your strategy longer term?

Fernando Araujo, CEO, Berry Corporation: Yeah, we have a huge portfolio in California. We’ve been focusing here this year on the thermal diatomite sidetracks. Those tend to be our highest rate of return projects, but we also have significant potential in the Monarch in South Midway Sunset drilling those horizontal wells in the Monarch. They’re short horizontals. They’re not three milers in Utah.

They’re a thousand foot, 1,500 foot horizontals, but there’s a lot of potential there and we have significant potential also in the Hill property up in Bellridge 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 waterflood. So really significant potential rates of return even at current strip pricing for thermal diatomite. They’re at 80 to 100% rate of return projects. So they’re really good projects.

Nate Pendleton, Analyst, Texas Capital: Got it. Thanks for taking my questions.

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

Olivia, Conference Operator: Thank you. And I’m showing no further questions in the queue at this time. I will now turn the call back over to Fernando Arajo for any closing remarks.

Fernando Araujo, CEO, Berry Corporation: Yes, thank you so much for your interest in Berry. We’ll keep you updated as to the progress in Utah and in California. Again, once again, thank you for joining the call.

Olivia, Conference Operator: This concludes today’s conference. Thank you for your participation and you may now disconnect.

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