Berry Corporation (NASDAQ:BRY) Q4 2023 Results Conference Call March 6, 2024 11:00 AM ET Company Participants Todd Crabtree - Manager of Investor Relations Fernando Araujo - CEO & Director Michael Helm - VP, Chief Accounting Officer & CFO Danielle Hunter - President Conference Call Participants Charles Meade - Johnson Rice Operator Good day, and thank you for standing by. Welcome to Berry Corporation Q4 and Full Year 2023 Earnings Call. [Operator Instructions] Please note that today's conference is being re ...

Berry Petroleum (BRY) reported $300.33 million in revenue for the quarter ended December 2023, representing a year-over-year increase of 54.3%. EPS of $0.13 for the same period compares to $0.95 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $167.05 million, representing a surprise of +79.78%. The company delivered an EPS surprise of -40.91%, with the consensus EPS estimate being $0.22.While investors closely watch year-over-year changes in headline numbers -- revenue and earnin ...

Berry Petroleum (BRY) came out with quarterly earnings of $0.13 per share, missing the Zacks Consensus Estimate of $0.22 per share. This compares to earnings of $0.95 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -40.91%. A quarter ago, it was expected that this independent upstream energy company would post earnings of $0.33 per share when it actually produced earnings of $0.15, delivering a surprise of -54.55%.Over the las ...

DALLAS, March 06, 2024 (GLOBE NEWSWIRE) -- Berry Corporation (bry) (NASDAQ:BRY) ("Berry" or the "Company") announced fourth quarter and full-year 2023 results. For the fourth quarter 2023, Berry's net income was $63 million, or $0.81 per diluted share, Adjusted Net Income(1) was $10 million, or $0.13 per diluted share, and cash flows from operating activities were $79 million. For the full year 2023, Berry's net income was $37 million, or $0.48 per diluted share, Adjusted Net Income(1) was $39 million, or $ ...

DALLAS, Jan. 18, 2024 (GLOBE NEWSWIRE) -- Berry Corporation (NASDAQ:BRY) ("Berry", or the "Company") today announced select preliminary full year 2023 production and year-end proved reserves data. The Company also reported that it completed a small scale, all cash bolt-on acquisition at year-end 2023 in line with corporate strategy, while reducing revolver debt in the fourth quarter 2023. The Company also scheduled its fourth quarter and full year 2023 financial results release and call; details are include ...

6 Ultra-Yield Dividend Oil Stocks To Buy As Middle East War Explodes David McNew / Getty Images News via Getty Images Since topping out at $120 in the summer of 2022, the major oil benchmarks had traded down every month until bottoming at the beginning of December. The decline from the top in June of 2022 was a staggering 40%, and while the oil majors can still make money at that level, with a declining price, many opted to slow or halt production. By March of last year, West Texas Intermediate had droppe ...

Berry Corporation (NASDAQ:BRY) Q3 2023 Earnings Conference Call November 1, 2023 11:00 AM ET Company Participants Todd Crabtree - Head, IR Fernando Araujo - CEO Mike Helm - VP, CFO & CAO Conference Call Participants Charles Meade - Johnson Rice Nicholas Pope - Seaport Research Steven Busch - Everglades Resources, Inc Operator Good day, and thank you for standing by. Welcome to the Berry Corporation Q3 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentat ...

[Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) The company's unaudited statements show a net loss of $25.2 million for the nine months ended Sep 30, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $157,691 | $218,055 | | Total assets | $1,613,925 | $1,631,030 | | Total current liabilities | $220,062 | $234,207 | | Long-term debt | $453,667 | $395,735 | | Total stockholders' equity | $708,119 | $800,485 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total revenues and other | $603,133 | $723,658 | | Net (loss) income | $(25,151) | $178,204 | | Diluted (loss) income per share | $(0.33) | $2.13 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $119,639 | $255,534 | | Net cash used in investing activities | $(126,450) | $(109,664) | | Net cash used in financing activities | $(22,239) | $(119,680) | | Net (decrease) increase in cash | $(29,050) | $26,190 | [Note 2—Debt](index=9&type=section&id=Note%202%E2%80%94Debt) The company's total long-term debt principal was $457 million as of September 30, 2023 Outstanding Debt as of September 30, 2023 (in thousands) | Facility | Principal Amount | Interest Rate | Maturity | | :--- | :--- | :--- | :--- | | 2021 RBL Facility | $57,000 | Variable (10.75%) | Aug 2025 | | 2026 Notes | $400,000 | 7.0% | Feb 2026 | | **Total Principal** | **$457,000** | | | - On May 10, 2023, the 2021 RBL Facility's borrowing base was decreased from $250 million to **$200 million**, and the maximum consolidated leverage ratio covenant was tightened to **2.75x**[156](index=156&type=chunk) - As of September 30, 2023, the company had **$133 million** of available borrowing capacity under the 2021 RBL Facility and **$13 million** under the 2022 ABL Facility[158](index=158&type=chunk)[161](index=161&type=chunk) [Note 3—Derivatives](index=12&type=section&id=Note%203%E2%80%94Derivatives) The company uses derivative instruments for hedging, resulting in a net liability fair value of $72.1 million - The company's hedging strategy targets covering operating expenses and a majority of fixed charges for up to **three years** out[165](index=165&type=chunk) Net Fair Value of Derivative Instruments (in thousands) | Date | Classification | Net Fair Value | | :--- | :--- | :--- | | Sep 30, 2023 | Net Liability | $(72,127) | | Dec 31, 2022 | Net Liability | $(8,305) | [Note 4—Lawsuits, Claims, Commitments and Contingencies](index=15&type=section&id=Note%204%E2%80%94Lawsuits%2C%20Claims%2C%20Commitments%20and%20Contingencies) The company reached an agreement-in-principle to settle a Securities Class Action lawsuit for $2.5 million - An agreement-in-principle was reached to settle the Securities Class Action for **$2.5 million**, with a final settlement approval hearing scheduled for February 6, 2024[27](index=27&type=chunk)[205](index=205&type=chunk) - Two shareholder derivative lawsuits, which piggy-back on the claims in the class action, have been filed and are currently stayed[178](index=178&type=chunk)[206](index=206&type=chunk) [Note 7—Acquisition and Divestiture](index=19&type=section&id=Note%207%E2%80%94Acquisition%20and%20Divestiture) The company acquired Macpherson Energy Corporation for approximately $70 million to add low-decline oil properties - The total purchase price for Macpherson Energy is approximately **$70 million**, with a deferred payment of about **$20 million** due in July 2024[216](index=216&type=chunk) - The acquisition is expected to provide near-term production enhancement and development opportunities[220](index=220&type=chunk) Preliminary Purchase Price Allocation (in thousands) | Category | Fair Value | | :--- | :--- | | Total assets acquired | $96,417 | | Total liabilities assumed | $(23,358) | | **Net assets acquired** | **$73,059** | [Note 10—Segment Information](index=23&type=section&id=Note%2010%E2%80%94Segment%20Information) The company operates in two segments, with the E&P segment generating the majority of Adjusted EBITDA Segment Adjusted EBITDA (Nine Months Ended Sep 30, 2023, in thousands) | Segment | Adjusted EBITDA | | :--- | :--- | | E&P | $233,562 | | Well Servicing and Abandonment | $19,981 | | Corporate/Eliminations | $(55,322) | | **Consolidated Company** | **$198,221** | - Adjusted EBITDA is the measure reported to the chief operating decision maker (CODM) for allocating resources and assessing performance[255](index=255&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses declining performance due to lower commodity prices and regulatory challenges in California [Business Environment and Recent Developments](index=27&type=section&id=Business%20Environment%20and%20Recent%20Developments) The company faces volatile commodity prices, permitting delays, and new legislation impacting operations - The shareholder return model for 2023 allocates **80% of Adjusted Free Cash Flow** to debt/stock repurchases and strategic growth, and **20% to variable dividends**[1](index=1&type=chunk)[263](index=263&type=chunk) - The Macpherson Acquisition was closed in September 2023, with a portion of the purchase price funded by reallocating **$30-$35 million** of the 2023 capital budget[1](index=1&type=chunk)[296](index=296&type=chunk) - Significant delays in obtaining new drill permits in Kern County persist, and the company is assessing the impact of new legislation like **AB 1167**[319](index=319&type=chunk)[345](index=345&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Total revenues decreased 17% year-over-year, leading to a net loss of $25.2 million for the nine-month period Production and Realized Prices (Nine Months Ended) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | Total Production (mboe) | 6,874 | 7,160 | | Avg. Daily Production (mboe/d) | 25.2 | 26.2 | | Realized Oil Price w/o hedges ($/bbl) | $74.72 | $95.83 | - Oil, natural gas, and NGL sales **decreased by $157 million (24%)** for the nine months ended Sep 30, 2023, compared to 2022, driven by lower prices and volumes[437](index=437&type=chunk) - Lease operating expenses for the nine months ended Sep 30, 2023, **increased by $35 million (16%)** compared to 2022, with 68% of the increase due to higher natural gas fuel prices[111](index=111&type=chunk) [Non-GAAP Financial Measures](index=53&type=section&id=Non-GAAP%20Financial%20Measures) Key non-GAAP metrics like Adjusted EBITDA, Adjusted Free Cash Flow, and Adjusted Net Income all declined significantly Key Non-GAAP Financial Measures (Nine Months Ended, in thousands) | Metric | Sep 30, 2023 | Sep 30, 2022 | | :--- | :--- | :--- | | Adjusted EBITDA | $198,221 | $302,440 | | Adjusted Free Cash Flow | $42,500 | $143,963 | | Adjusted Net Income | $28,804 | $150,015 | - Adjusted Free Cash Flow is defined as cash flow from operations less regular fixed dividends and maintenance capital, and is the basis for the shareholder return model[299](index=299&type=chunk)[482](index=482&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained total liquidity of $163 million and executed its shareholder return model - Total liquidity was **$163 million** as of September 30, 2023, consisting of $17 million cash and available credit[494](index=494&type=chunk) - In February 2023, the quarterly fixed dividend was **doubled to $0.12 per share**, and the company also paid variable dividends during the year[1](index=1&type=chunk)[502](index=502&type=chunk) - The company has a stock repurchase program with **$190 million** of remaining authority as of September 30, 2023[504](index=504&type=chunk) - The company maintains an extensive commodity hedging program to protect cash flows from price volatility, with positions extending into 2026[8](index=8&type=chunk)[118](index=118&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=74&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is commodity price volatility, which it mitigates through a derivative hedging program - The most significant market risk is from commodity prices, which management expects to remain unpredictable and volatile[558](index=558&type=chunk) Derivative Fair Value Sensitivity Analysis (as of Sep 30, 2023) | Price Scenario | Net Fair Value of Hedges | | :--- | :--- | | 10% Price Increase | $(167) million | | Base Case | $(72) million | | 10% Price Decrease | $9 million | [Controls and Procedures](index=75&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of the end of the reporting period - Management concluded that disclosure controls and procedures were **effective** as of September 30, 2023[590](index=590&type=chunk) - No changes materially affected, or were reasonably likely to materially affect, the Company's internal control over financial reporting during Q3 2023[25](index=25&type=chunk) [Part II – Other Information](index=76&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Legal Proceedings](index=76&type=section&id=Item%201.%20Legal%20Proceedings) The company has an agreement-in-principle to settle its primary Securities Class Action lawsuit for $2.5 million - The parties in the Securities Class Action executed a Memorandum of Understanding for an agreement-in-principle to settle all claims for **$2.5 million**[27](index=27&type=chunk) - The court granted preliminary approval of the settlement on October 18, 2023, with a final approval hearing scheduled for **February 6, 2024**[27](index=27&type=chunk) [Risk Factors](index=77&type=section&id=Item%201A.%20Risk%20Factors) The company faces new risks from California legislation regarding well bonding and climate-related disclosures - New California law **AB 1167** imposes stricter bonding requirements on well acquisitions, which could delay or add costs to future transactions[568](index=568&type=chunk)[596](index=596&type=chunk) - New California laws (**SB 253 and SB 261**) will require extensive public disclosure of GHG emissions and climate-related financial risks starting in 2026, which may increase compliance costs and litigation risk[31](index=31&type=chunk)[569](index=569&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) No shares were repurchased during Q3 2023, with $190 million remaining under the repurchase authorization - The company did not repurchase any shares during the three months ended September 30, 2023[570](index=570&type=chunk) - In February 2023, the Board increased the stock repurchase authorization, leaving a remaining authority of **$190 million** as of September 30, 2023[632](index=632&type=chunk) [Other Information](index=79&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the third quarter - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended September 30, 2023[33](index=33&type=chunk) [Exhibits](index=80&type=section&id=Item%206.%20Exhibits) The report includes standard exhibits such as corporate governance documents and required officer certifications - The report includes standard exhibits such as corporate governance documents and officer certifications (302 and 906)[572](index=572&type=chunk) [Glossary of Terms](index=81&type=section&id=Glossary%20of%20Terms) This section defines key abbreviations and technical terms used in the oil and gas industry and financial reporting - Defines **'Adjusted EBITDA'** as earnings before interest, taxes, DD&A, certain derivative impacts, impairments, stock compensation, and unusual items[35](index=35&type=chunk) - Defines **'Adjusted Free Cash Flow'** as cash flow from operations less regular fixed dividends and maintenance capital[602](index=602&type=chunk) - Defines **'boe'** (barrel of oil equivalent) as a ratio of one barrel of oil to six mcf of natural gas[636](index=636&type=chunk)

Call Start: 11:00 January 1, 0000 11:18 AM ET Berry Corporation (NASDAQ:BRY) Q2 2023 Earnings Conference Call August 2, 2023 11:00 am ET Company Participants Todd Crabtree - Head, IR Fernando Araujo - CEO Mike Helm - VP, CFO & CAO Conference Call Participants Charles Meade - Johnson Rice Tim Chatard - Meros Investment Management Operator Good day and thank you for joining us. Welcome to the Berry Corporation Q2 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' p ...

Part I [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section contains the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes covering accounting basis, debt, derivatives, legal proceedings, equity, supplemental disclosures, earnings per share, revenue recognition, and segment information, also disclosing subsequent events of the Macpherson Energy acquisition [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets decreased to **$1,521,703 thousand** from **$1,631,030 thousand** on December 31, 2022, primarily due to reductions in cash, accounts receivable, and derivative assets, with corresponding changes in liabilities and equity Condensed Consolidated Balance Sheets Key Data (As of June 30, 2023 vs December 31, 2022) | Indicator | June 30, 2023 (thousand dollars) | December 31, 2022 (thousand dollars) | | :--- | :--- | :--- | | **Assets:** | | | | Cash and cash equivalents | 8,566 | 46,250 | | Accounts receivable, net | 84,556 | 101,713 | | Derivative assets | 14,150 | 36,443 | | Total assets | 1,521,703 | 1,631,030 | | **Liabilities:** | | | | Accounts payable and accrued expenses | 137,745 | 203,101 | | Derivative liabilities | 11,456 | 44,748 | | Long-term debt | 421,347 | 395,735 | | **Stockholders' Equity:** | | | | Total stockholders' equity | 760,575 | 800,485 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2023, net income was **$25,770 thousand**, a decrease from the prior year, while for the six-month period, the company achieved **$19,911 thousand** net income, reversing a prior-year loss Condensed Consolidated Statements of Operations Key Data (As of June 30, 2023) | Indicator | Three Months (thousand dollars) | Six Months (thousand dollars) | | :--- | :--- | :--- | | **Revenue and Other:** | | | | Oil, natural gas, and NGL sales | 157,703 | 324,060 | | Service revenue | 47,674 | 92,297 | | Derivative gains (losses) on sales | 20,871 | 59,370 | | Total revenue and other | 229,362 | 484,331 | | **Expenses and Other:** | | | | Lease operating expenses | 54,707 | 189,542 | | Service costs | 37,083 | 73,182 | | Depreciation, depletion, and amortization | 39,755 | 79,876 | | Derivative losses (gains) on natural gas purchases | 14,024 | 13,414 | | Total expenses and other | 184,072 | 439,901 | | **Net Income (Loss):** | | | | Net income (loss) | 25,770 | 19,911 | | Basic earnings per share | 0.34 | 0.26 | | Diluted earnings per share | 0.33 | 0.25 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased to **$760,575 thousand** as of June 30, 2023, from **$800,485 thousand** on December 31, 2022, mainly due to dividends, stock repurchases, and shares withheld for equity award taxes, partially offset by net income and equity awards Stockholders' Equity Changes (As of June 30, 2023 vs December 31, 2022) | Indicator | June 30, 2023 (thousand dollars) | December 31, 2022 (thousand dollars) | | :--- | :--- | :--- | | Common stock | 88 | 86 | | Additional paid-in capital | 823,330 | 821,443 | | Treasury stock | (113,768) | (103,739) | | Retained earnings | 50,925 | 82,695 | | **Total Stockholders' Equity** | **760,575** | **800,485** | Key Change Factors (Six Months Ended June 30, 2023) * Common stock dividends: **($52,000) thousand** * Treasury stock purchases: **($10,000) thousand** * Shares withheld for equity award taxes: **($7,000) thousand** * Net income: **$20,000 thousand** * Equity awards (net of taxes): **$9,000 thousand** [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash provided by operating activities was **$64,319 thousand**, with net cash used in investing of **$58,421 thousand** and financing of **$43,582 thousand**, resulting in a net decrease of **$37,684 thousand** in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Key Data (Six Months Ended June 30) | Cash Flow Type | 2023 (thousand dollars) | 2022 (thousand dollars) | | :--- | :--- | :--- | | Net cash from operating activities | 64,319 | 159,772 | | Net cash from investing activities | (58,421) | (75,423) | | Net cash from financing activities | (43,582) | (47,137) | | **Net (decrease) increase in cash and cash equivalents** | **(37,684)** | **37,212** | | Cash and cash equivalents at period end | 8,566 | 52,495 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the condensed consolidated financial statements, covering accounting basis, debt, derivatives, legal proceedings, equity, supplemental disclosures, EPS, revenue recognition, and segment performance, including subsequent events of the Macpherson Energy acquisition [Note 1—Basis of Presentation](index=8&type=section&id=Note%201%E2%80%94Basis%20of%20Presentation) The company's condensed consolidated financial statements are prepared in accordance with GAAP and SEC interim financial reporting rules, with all significant intercompany transactions and balances eliminated - Company condensed consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and SEC interim financial information rules, with all significant intercompany transactions and balances eliminated[461](index=461&type=chunk)[485](index=485&type=chunk) [Note 2—Debt](index=9&type=section&id=Note%202%E2%80%94Debt) Company debt primarily includes the 2021 RBL and 2022 ABL credit facilities and 2026 Senior Unsecured Notes, with total long-term debt of **$425,000 thousand** as of June 30, 2023, and compliance with all debt covenants Debt Composition (As of June 30, 2023 vs December 31, 2022) | Debt Type | June 30, 2023 (thousand dollars) | December 31, 2022 (thousand dollars) | Interest Rate | Maturity Date | Collateral | | :--- | :--- | :--- | :--- | :--- | :--- | | 2021 RBL Facility | 25,000 | — | 10.25% (2023) | August 26, 2025 | Mortgage on 90% of proved oil and gas reserves | | 2022 ABL Facility | — | — | 9.5% (2023) | June 5, 2025 | CJWS property and other assets | | 2026 Notes | 400,000 | 400,000 | 7.0% | February 15, 2026 | Unsecured | | **Long-term debt - Total principal** | **425,000** | **400,000** | | | | | Less: Debt issuance costs | (3,653) | (4,265) | | | | | **Long-term debt, net** | **421,347** | **395,735** | | | | - The borrowing base for the 2021 RBL credit facility was reduced from **$250 million** to **$200 million**, the maximum consolidated leverage ratio was adjusted to **2.75x**, and minimum hedging covenants were revised[175](index=175&type=chunk)[489](index=489&type=chunk) - As of June 30, 2023, the company had **$25 million** in outstanding borrowings, **$10 million** in outstanding letters of credit, and approximately **$165 million** in available borrowing capacity under the 2021 RBL credit facility[147](index=147&type=chunk)[518](index=518&type=chunk) - As of June 30, 2023, CJWS had no outstanding borrowings, **$2 million** in outstanding letters of credit, and **$12 million** in available borrowing capacity under the 2022 ABL credit facility[201](index=201&type=chunk)[521](index=521&type=chunk) [Note 3—Derivatives](index=12&type=section&id=Note%203%E2%80%94Derivatives) The company uses derivatives like swaps, puts, calls, and collars to hedge anticipated oil and gas production and natural gas purchases, mitigating commodity price volatility without speculative trading, resulting in net derivative assets of **$2,694 thousand** as of June 30, 2023 - The company uses derivative instruments such as swaps, put options, call options, and collar options to hedge a portion of its anticipated oil and natural gas production and natural gas purchases, aiming to reduce commodity price volatility and not for speculative trading[184](index=184&type=chunk)[496](index=496&type=chunk)[500](index=500&type=chunk) Derivative Fair Value (As of June 30, 2023 vs December 31, 2022) | Derivative Type | June 30, 2023 (thousand dollars) | December 31, 2022 (thousand dollars) | | :--- | :--- | :--- | | **Assets:** | | | | Commodity contracts (current assets) | 8,718 | 36,367 | | Commodity contracts (non-current assets) | 5,432 | 76 | | **Liabilities:** | | | | Commodity contracts (current liabilities) | (10,382) | (31,106) | | Commodity contracts (non-current liabilities) | (1,074) | (13,642) | | **Total Derivatives** | **2,694** | **(8,305)** | - As of July 31, 2023, the company has added additional Brent crude oil sales swaps and call options to further manage future production price risk[502](index=502&type=chunk)[531](index=531&type=chunk)[666](index=666&type=chunk) [Note 4—Lawsuits, Claims, Commitments and Contingencies](index=15&type=section&id=Note%204%E2%80%94Lawsuits,%20Claims,%20Commitments%20and%20Contingencies) The company faces multiple legal proceedings, including a securities class action settled for **$2.5 million** and two shareholder derivative lawsuits, with an assessment that reasonably possible losses beyond accrued amounts will not materially impact financial condition or operations - The securities class action lawsuit was settled for **$2.5 million** on July 31, 2023[224](index=224&type=chunk)[285](index=285&type=chunk)[537](index=537&type=chunk) - The company faces two shareholder derivative lawsuits (Assad and Karp lawsuits) alleging breaches of fiduciary duty by directors and officers, both currently stayed pending resolution of the securities class action[248](index=248&type=chunk)[265](index=265&type=chunk)[272](index=272&type=chunk)[509](index=509&type=chunk)[563](index=563&type=chunk) - The company has received a shareholder litigation demand requesting the Board of Directors to investigate and pursue legal action against certain current and former officers and directors, based on claims similar to those asserted in the derivative lawsuits[225](index=225&type=chunk)[315](index=315&type=chunk)[539](index=539&type=chunk) [Note 5—Equity](index=16&type=section&id=Note%205%E2%80%94Equity) The board declared fixed and variable cash dividends in 2023 and plans to continue quarterly payments, also approving a **$102 million** increase in stock repurchase authorization, bringing the total remaining to **$200 million**, alongside granting RSUs and PSUs in February 2023 - The Board of Directors declared fixed and variable cash dividends in February, April, and July 2023, and expects to continue paying quarterly cash dividends in the future[207](index=207&type=chunk)[231](index=231&type=chunk)[540](index=540&type=chunk) - The Board of Directors approved a **$102 million** increase in stock repurchase authorization in February 2023, bringing the company's total remaining stock repurchase authorization to **$200 million**; as of June 30, 2023, the company had repurchased **11,949,247 shares** totaling approximately **$114 million**[209](index=209&type=chunk)[233](index=233&type=chunk)[542](index=542&type=chunk)[566](index=566&type=chunk) - In February 2023, the company granted approximately **1,031,000** Restricted Stock Units (RSUs) and approximately **437,000** Performance Stock Units (PSUs) with a total fair value of approximately **$14 million**, with PSUs vesting based on performance metrics such as Total Shareholder Return (TSR) and Cash Return on Invested Capital (CROIC/ROIC)[543](index=543&type=chunk)[567](index=567&type=chunk) [Note 6—Supplemental Disclosures to the Financial Statements](index=18&type=section&id=Note%206%E2%80%94Supplemental%20Disclosures%20to%20the%20Financial%20Statements) This section details the composition of other current assets, accounts payable and accrued expenses, other non-current liabilities, and asset retirement obligations, with other current assets at **$32,591 thousand** and accounts payable and accrued expenses at **$137,745 thousand** as of June 30, 2023 Other Current Assets (As of June 30, 2023 vs December 31, 2022) | Item | June 30, 2023 (thousand dollars) | December 31, 2022 (thousand dollars) | | :--- | :--- | :--- | | Prepaid expenses | 7,081 | 12,330 | | Materials and supplies | 13,295 | 8,976 | | Deposits | 7,323 | 7,266 | | Oil inventory | 3,884 | 4,036 | | Other | 1,008 | 1,117 | | **Total Other Current Assets** | **32,591** | **33,725** | Accounts Payable and Accrued Expenses (As of June 30, 2023 vs December 31, 2022) | Item | June 30, 2023 (thousand dollars) | December 31, 2022 (thousand dollars) | | :--- | :--- | :--- | | Trade accounts payable | 31,146 | 40,286 | | Accrued expenses | 46,327 | 85,360 | | Royalties payable | 20,218 | 38,264 | | Other non-income tax liabilities | 6,788 | 6,640 | | Accrued interest | 11,565 | 10,885 | | Asset retirement obligations - current portion | 20,000 | 20,000 | | Operating lease liabilities | 1,701 | 1,666 | | **Total Accounts Payable and Accrued Expenses** | **137,745** | **203,101** | - As of June 30, 2023, other non-current liabilities included approximately **$31 million** in greenhouse gas liabilities (due Q4 2024) and **$6 million** in operating lease non-current liabilities[569](index=569&type=chunk) - The long-term portion of asset retirement obligations decreased from **$158 million** as of December 31, 2022, to **$154 million** as of June 30, 2023, primarily due to **$10 million** of liabilities settled during the period, partially offset by **$6 million** in accrued expenses[546](index=546&type=chunk) [Note 7—Earnings Per Share](index=19&type=section&id=Note%207%E2%80%94Earnings%20Per%20Share) Basic EPS is calculated by dividing net income by weighted-average common shares outstanding, while diluted EPS includes the impact of dilutive potential common shares such as RSUs and PSUs Earnings Per Share Calculation (As of June 30, 2023) | Indicator | Three Months (2023) | Three Months (2022) | Six Months (2023) | Six Months (2022) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) (thousand dollars) | 25,770 | 43,354 | 19,911 | (13,456) | | Weighted-average common shares outstanding (thousand shares) | 76,721 | 79,596 | 76,419 | 79,945 | | **Basic Earnings Per Share** | **0.34** | **0.54** | **0.26** | **(0.17)** | | Dilutive potential common shares (thousand shares) | 2,564 | 3,419 | 3,156 | — | | Weighted-average diluted common shares outstanding (thousand shares) | 79,285 | 83,015 | 79,575 | 79,945 | | **Diluted Earnings Per Share** | **0.33** | **0.52** | **0.25** | **(0.17)** | - RSUs and PSUs are not participating securities as dividends are forfeitable; incremental RSU and PSU shares of **2,564,000** and **3,419,000** were included in diluted EPS calculations for the three months ended June 30, 2023, and June 30, 2022, respectively, and **3,156,000** incremental RSU and PSU shares for the six months ended June 30, 2023[548](index=548&type=chunk) [Note 8—Revenue Recognition](index=20&type=section&id=Note%208%E2%80%94Revenue%20Recognition) Company revenue primarily stems from sales of oil, natural gas, and NGLs, along with power sales and marketing, and well servicing from CJWS, totaling **$229,362 thousand** and **$484,331 thousand** for the three and six months ended June 30, 2023, respectively Segment Revenue (As of June 30, 2023) | Revenue Source | Three Months (thousand dollars) | Six Months (thousand dollars) | | :--- | :--- | :--- | | Oil sales | 154,513 | 306,647 | | Natural gas sales | 2,410 | 15,953 | | NGL sales | 780 | 1,460 | | Service revenue | 47,674 | 92,297 | | Power sales | 3,078 | 8,523 | | Marketing revenue | — | — | | Other revenue | 36 | 81 | | **Revenue from contracts with customers** | **208,491** | **424,961** | | Derivative gains (losses) on oil and natural gas sales | 20,871 | 59,370 | | **Total Revenue and Other** | **229,362** | **484,331** | - The Well Servicing and Abandonment business (CJWS) occasionally provides services to the E&P segment, resulting in intercompany revenue and expense eliminations upon consolidation[550](index=550&type=chunk) [Note 9—Segment Information](index=20&type=section&id=Note%209%E2%80%94Segment%20Information) The company operates in two segments: Exploration & Production (E&P) and Well Servicing & Abandonment, with E&P focusing on onshore oil reserves in California and Utah, and CJWS providing well services in California, using Adjusted EBITDA as a key performance metric - The company operates in two business segments: Exploration & Production (E&P) and Well Servicing and Abandonment, with the E&P segment focused on onshore conventional oil reserves in California and Utah, and the Well Servicing and Abandonment segment (operated by CJWS) providing well servicing, abandonment, and water logistics in California[8](index=8&type=chunk)[575](index=575&type=chunk) Segment Financial Information (Three Months Ended June 30, 2023) | Indicator | E&P (thousand dollars) | Well Servicing and Abandonment (thousand dollars) | Corporate/Eliminations (thousand dollars) | Consolidated Company (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 160,817 | 49,299 | (1,625) | 208,491 | | Net income (loss) before income taxes | 62,012 | 4,836 | (30,462) | 36,386 | | Adjusted EBITDA | 78,274 | 7,689 | (16,908) | 69,055 | | Capital expenditures | 19,625 | 1,334 | 936 | 21,895 | | Total assets | 1,457,694 | 72,653 | (8,644) | 1,521,703 | Segment Financial Information (Six Months Ended June 30, 2023) | Indicator | E&P (thousand dollars) | Well Servicing and Abandonment (thousand dollars) | Corporate/Eliminations (thousand dollars) | Consolidated Company (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 332,664 | 95,662 | (3,365) | 424,961 | | Net income (loss) before income taxes | 86,182 | 6,950 | (65,518) | 27,614 | | Adjusted EBITDA | 154,071 | 13,127 | (38,806) | 128,392 | | Capital expenditures | 38,897 | 2,316 | 1,315 | 42,528 | | Total assets | 1,457,694 | 72,653 | (8,644) | 1,521,703 | - Adjusted EBITDA is the measure reported to the Chief Operating Decision Maker (CODM) for resource allocation and evaluating segment performance[580](index=580&type=chunk) [Note 10—Subsequent Events](index=24&type=section&id=Note%2010%E2%80%94Subsequent%20Events) In July 2023, the company announced the acquisition of Macpherson Energy Corporation for approximately **$70 million**, expected to close in Q3 2023, with **$35 million** of 2023 capital expenditures reallocated to partially fund the purchase - In July 2023, the company announced it had signed an agreement to acquire Macpherson Energy Corporation for approximately **$70 million**, with the transaction expected to close in the third quarter of 2023, with **$50 million** paid at closing and the remaining **$20 million** in July 2024[6](index=6&type=chunk)[620](index=620&type=chunk) - The company plans to reallocate **$35 million** of its 2023 capital expenditures to fund a portion of the Macpherson acquisition price, which will be deducted from 2023 Adjusted Free Cash Flow maintenance capital[54](index=54&type=chunk)[258](index=258&type=chunk)[558](index=558&type=chunk)[589](index=589&type=chunk) - Macpherson assets are considered high-quality, low-decline oil-producing assets, contiguous with Berry's existing assets in Kern County, California, aligning with Berry's strategy of acquiring accretive producing assets[12](index=12&type=chunk)[13](index=13&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating performance, covering company overview, recent developments, operational metrics, business environment, market conditions, regulatory matters, capital expenditures, production, prices, operating results, E&P field efficiency, non-GAAP measures, liquidity, capital resources, legal proceedings, and contractual obligations [Our Company](index=25&type=section&id=Our%20Company) Berry Corporation is an independent upstream energy company focused on onshore low-risk, long-life conventional reserves in the Western U.S., primarily in California and Utah, also providing well servicing and abandonment capabilities, aiming to create long-term shareholder value and support energy transition - The company is an independent upstream energy company focused on onshore low-geologic risk, long-life conventional reserves in the Western U.S., primarily operating in the San Joaquin Basin of California (**100%** oil) and the Uinta Basin of Utah (oil and natural gas)[8](index=8&type=chunk)[228](index=228&type=chunk)[560](index=560&type=chunk) - The company has operated in two business segments since October 1, 2021: Exploration & Production (E&P) and Well Servicing and Abandonment[8](index=8&type=chunk)[228](index=228&type=chunk) - The company is committed to creating long-term shareholder value through optimized capital allocation and maximized shareholder returns, while actively addressing industry challenges and supporting the energy transition by providing safe, reliable, and affordable energy[26](index=26&type=chunk)[588](index=588&type=chunk) [Recent Developments](index=26&type=section&id=Recent%20Developments) In July 2023, the company announced the acquisition of Macpherson Energy Corporation for approximately **$70 million**, expected to close in Q3 2023, with **$35 million** of 2023 capital expenditures reallocated to partially fund the purchase, seen as a way to maintain base production - The company announced in July 2023 that it had signed an agreement to acquire Macpherson Energy Corporation for approximately **$70 million**, with the transaction expected to close in the third quarter of 2023[6](index=6&type=chunk)[620](index=620&type=chunk) - Macpherson assets are considered high-quality, low-decline oil-producing assets, contiguous with Berry's existing assets in Kern County, California, aligning with Berry's strategy of acquiring accretive producing assets[12](index=12&type=chunk)[13](index=13&type=chunk) - The company plans to reallocate **$35 million** of its 2023 capital expenditures to fund a portion of the Macpherson acquisition price, which will be deducted from 2023 Adjusted Free Cash Flow maintenance capital[54](index=54&type=chunk)[258](index=258&type=chunk)[558](index=558&type=chunk)[589](index=589&type=chunk) [How We Plan and Evaluate Operations](index=27&type=section&id=How%20We%20Plan%20and%20Evaluate%20Operations) The company manages and evaluates operations using metrics such as Adjusted EBITDA, Adjusted Free Cash Flow for shareholder returns, E&P production, field operating metrics, HSE results, G&A expenses, and well servicing performance, aiming to maximize shareholder value and mitigate commodity price risk through hedging [Shareholder Returns](index=27&type=section&id=Shareholder%20Returns) The company updated its shareholder return model in early 2023, doubling the quarterly fixed dividend to **$0.12 per share** and allocating **80%** of Adjusted Free Cash Flow to debt/stock repurchases, strategic growth, and acquisitions, with **20%** for variable dividends, having returned **$363 million** to shareholders since IPO - The company updated its shareholder return model in early 2023, doubling the quarterly fixed dividend to **$0.12 per share**[9](index=9&type=chunk)[586](index=586&type=chunk)[623](index=623&type=chunk) - The annual cumulative allocation of Adjusted Free Cash Flow is **80%** primarily for opportunistic debt or stock repurchases, strategic growth, and accretive producing acquisitions; **20%** is distributed as a variable dividend[9](index=9&type=chunk)[460](index=460&type=chunk)[623](index=623&type=chunk) - Since its IPO, the company has returned **$363 million** to shareholders, including **$249 million** in fixed and variable dividends and **$114 million** used to repurchase **11.9 million** shares (representing **16%** of outstanding shares as of June 30, 2023)[586](index=586&type=chunk) [Production](index=28&type=section&id=Production) Oil and natural gas production is a key driver of the company's operational performance, with continuous monitoring and adjustment of development efforts based on production results, tracked by commodity type and compared to prior and expected outcomes - Oil and natural gas production is a key driver of the company's operational performance, with continuous monitoring and adjustment of development efforts based on production results[17](index=17&type=chunk) [E&P Field Operations](index=28&type=section&id=E%26P%20Field%20Operations) Management assesses E&P field operating efficiency by considering core E&P operating expenses, cogeneration, marketing, and transportation activities, with steam being central to California heavy oil extraction, and fuel gas cost volatility minimized through cogeneration and hedging strategies - Management assesses E&P field operating efficiency by comprehensively considering core E&P operating expenses, as well as cogeneration, marketing, and transportation activities[594](index=594&type=chunk) - Steam is a core component of the company's E&P operations in California, used for heavy oil extraction; the company operates cogeneration facilities to produce steam and electricity, and minimizes fuel gas cost volatility through natural gas purchase hedging strategies and transporting fuel gas from the Rocky Mountains[594](index=594&type=chunk) [Health, Safety & Environmental](index=28&type=section&id=Health,%20Safety%20%26%20Environmental) The company is committed to ethical, safe, and responsible operations, protecting the environment, and caring for employees and communities, monitoring HSE performance through various measures and incorporating HSE metrics into all employee short-term incentive plans, while operating under strict federal, state, and local regulations - The company is committed to operating in an ethical, safe, and responsible manner, protecting the environment, and caring for its employees and communities[19](index=19&type=chunk) - The company monitors HSE performance through various measures and incorporates HSE metrics, including HSE incidents and spill prevention, into all employee short-term incentive plans[19](index=19&type=chunk)[20](index=20&type=chunk) - The company's operations are subject to strict federal, state, and local laws and regulations, which may restrict operations, increase costs, or reduce demand for products and services[595](index=595&type=chunk) [Well Servicing and Abandonment Operations Performance](index=29&type=section&id=Well%20Servicing%20and%20Abandonment%20Operations%20Performance) Well servicing and abandonment operations depend on oil and gas company expenditures, which are partly influenced by commodity price fluctuations, though maintenance spending on existing wells is generally stable and abandonment demand is regulatory-driven, with performance monitored by revenue, costs, and Adjusted EBITDA - Well servicing and abandonment operations depend on expenditures by oil and natural gas companies, which are partially influenced by commodity price fluctuations[22](index=22&type=chunk) - Maintenance expenditures on existing oil and gas wells are generally stable, and demand for well abandonment is primarily driven by regulatory requirements, with less impact from commodity prices[22](index=22&type=chunk) - The company monitors the performance of its well servicing and abandonment business through revenue and costs by service and customer, as well as Adjusted EBITDA[628](index=628&type=chunk) [General and Administrative Expenses](index=29&type=section&id=General%20and%20Administrative%20Expenses) The company continuously monitors cash general and administrative expenses to measure the efficiency of its management activities, as these costs are crucial for supporting asset development and daily operations by corporate and professional teams - The company continuously monitors cash general and administrative expenses to measure the efficiency of its management activities, as these expenses are a critical component supporting asset development and daily operations[597](index=597&type=chunk) - The company uses Adjusted EBITDA, Adjusted Free Cash Flow, E&P business production, E&P field operating metrics, HSE results, general and administrative expenses, and well servicing and abandonment operating performance to manage and evaluate operations[591](index=591&type=chunk) - Adjusted EBITDA is the primary financial and operational metric reported to the Chief Operating Decision Maker (CODM) for analyzing and monitoring the performance of the E&P business and CJWS operations, and is also used for capital allocation and determining strategic hedging needs[622](index=622&type=chunk) [Business Environment, Market Conditions and Outlook](index=29&type=section&id=Business%20Environment,%20Market%20Conditions%20and%20Outlook) This section discusses the business environment and market conditions affecting the company's operations and financial performance, including commodity price volatility, natural gas prices and differentials, global oil inventory changes, cogeneration facility performance, regulatory environment, inflation, and seasonal weather conditions [Commodity Pricing and Differentials](index=29&type=section&id=Commodity%20Pricing%20and%20Differentials) Company operations and financial results are significantly impacted by commodity prices and differentials, which fluctuate due to global geopolitical and economic conditions and local market factors, with oil prices decreasing in H1 2023 and natural gas prices influenced by local fundamentals, transportation, and seasonality, mitigated by hedging and gas transportation strategies - The company's operations and financial results are significantly impacted by commodity prices, including differentials, which fluctuate due to global geopolitical and economic conditions, as well as local market factors[23](index=23&type=chunk)[598](index=598&type=chunk) Average Benchmark Commodity Prices (As of June 30, 2023) | Commodity | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | | Brent Crude Oil ($/barrel) | 77.73 | 82.16 | 111.98 | 79.96 | 104.94 | | WTI Crude Oil ($/barrel) | 73.73 | 76.15 | 108.71 | 74.94 | 101.67 | | SoCal Gas city-gate Natural Gas ($/MMBtu) | 5.66 | 24.81 | 7.53 | 15.23 | 7.13 | | Northwest, Rocky Mountains Natural Gas ($/MMBtu) | 2.85 | 22.36 | 6.69 | 12.61 | 6.23 | | Henry Hub Natural Gas ($/MMBtu) | 2.16 | 2.64 | 7.50 | 2.40 | 6.08 | - The company mitigates the impact of high natural gas prices on its cost structure through hedging strategies and transporting natural gas from the Rocky Mountains, with Western U.S. natural gas prices expected to remain high in 2023[53](index=53&type=chunk)[603](index=603&type=chunk)[661](index=661&type=chunk) [Seasonality](index=33&type=section&id=Seasonality) Seasonal weather conditions impact the company's drilling, production, and well servicing activities, with extreme weather potentially increasing costs, causing production downtime, and delaying transportation, as seen in Q1 2023 with unusual snow and rain in Utah and California - Seasonal weather conditions can affect the company's drilling, production, and well servicing activities, with extreme weather potentially leading to increased costs, production downtime, and transportation delays[33](index=33&type=chunk)[637](index=637&type=chunk) - In the first quarter of 2023, Utah and California experienced increased costs, production downtime, and transportation delays due to unusual snow and rain, but production recovered in the second quarter as weather conditions improved[637](index=637&type=chunk) [Inflation](index=33&type=section&id=Inflation) The company has experienced inflationary pressures leading to increased costs for goods, services, and personnel, impacting capital expenditures and operating costs, driven by supply chain disruptions, demand, labor shortages, and geopolitical conflicts, though inflation rates stabilized in late 2022 and H1 2023 - The company has experienced inflationary pressures, leading to increased costs for goods, services, and personnel, which in turn increased capital expenditures and operating costs[636](index=636&type=chunk) - Inflationary pressures stemmed from supply chain disruptions caused by the COVID-19 pandemic, increased demand, labor shortages, and the conflict in Ukraine[636](index=636&type=chunk) - As of June 30, 2023, the company believes there have been no significant changes in inflationary pressures since December 31, 2022[636](index=636&type=chunk) [Regulatory Matters](index=31&type=section&id=Regulatory%20Matters) Company operations are strictly regulated by federal, state, and local laws, particularly in California, which can restrict drilling, delay permits, and increase costs, with California Senate Bill 1137 (SB 1137) prohibiting new well drilling within 3,200 feet of sensitive receptors currently suspended by referendum - The company's operations are subject to strict federal, state, and local laws and regulations, particularly in California, which may restrict drilling and production activities, lead to delays in permit issuance, and increase operating costs[29](index=29&type=chunk)[604](index=604&type=chunk)[662](index=662&type=chunk) - California Senate Bill 1137 (SB 1137), which prohibits new well drilling or rework of existing wells within 3,200 feet of sensitive receptors, has been suspended by a statewide referendum until a vote in November 2024[663](index=663&type=chunk) - The company has not received any new California drilling permits in 2023, including in CEQA-compliant areas, but continues to receive permits for well workovers and other activities on existing wellbores[29](index=29&type=chunk) [Capital Expenditures](index=34&type=section&id=Capital%20Expenditures) The company's 2023 E&P operating and corporate activities capital expenditure budget is between **$95 million and $105 million**, expected to result in a slight year-over-year production decline, with **$35 million** reallocated for the Macpherson acquisition, and total capital expenditures at approximately **$43 million** as of June 30, 2023 - The company's 2023 capital expenditure budget for E&P operations and corporate activities is between **$95 million** and **$105 million**, which is expected to result in a slight year-over-year production decline[54](index=54&type=chunk) - The company plans to reallocate approximately **$35 million** of its capital expenditures to fund the Macpherson acquisition, thereby reducing drilling, workover, and other activities on traditional Berry assets[54](index=54&type=chunk) Capital Expenditures (As of June 30, 2023) | Indicator | Three Months (thousand dollars) | Six Months (thousand dollars) | | :--- | :--- | :--- | | Total capital expenditures | 21,895 | 42,528 | | E&P and corporate expenditures | 20,961 | 40,213 | | Well servicing and abandonment capital expenditures | 934 | 2,315 | | **Capital Expenditure Allocation (Six Months):** | | | | California operations | 88% | | | Utah operations | 12% | | - The company plans to spend approximately **$21 million** to **$24 million** on plugging and abandonment activities for the full year 2023, exceeding the annual obligation requirements of the California idle well program[665](index=665&type=chunk) [Production and Prices](index=35&type=section&id=Production%20and%20Prices) For the three months ended June 30, 2023, average daily production increased by nearly **7%** quarter-over-quarter to **25.9 MBoe/d**, driven by California steam injection optimization and recovery from weather-related downtime, though the six-month average daily production decreased **6%** year-over-year due to California weather and reduced development, with both oil and natural gas prices declining Average Daily Production (MBoe/d) (As of June 30, 2023) | Region | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | | California | 20.8 | 19.9 | 21.0 | | Utah | 5.1 | 4.4 | 5.2 | | **Total Average Daily Production** | **25.9** | **24.3** | **26.2** | Average Daily Production (MBoe/d) (As of June 30, 2023) | Region | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | California | 20.4 | 21.6 | | Utah | 4.7 | 4.7 | | Colorado | — | 0.2 | | **Total Average Daily Production** | **25.1** | **26.5** | - For the three months ended June 30, 2023, the company's average daily production increased by nearly **7%** (**1.6 MBoe/d**) quarter-over-quarter, primarily due to California steam injection optimization and recovery from weather-related downtime in the first quarter[56](index=56&type=chunk) - For the six months ended June 30, 2023, average daily production decreased **6%** (**1.4 MBoe/d**) year-over-year, primarily due to weather-related downtime in California and reduced development activities[38](index=38&type=chunk) Weighted Average Realized Sales Prices (As of June 30, 2023) | Commodity | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | | Unhedged Oil ($/barrel) | 70.68 | 74.69 | 105.70 | | Hedging Impact ($/barrel) | (0.81) | (3.65) | (21.92) | | Hedged Oil ($/barrel) | 69.87 | 71.04 | 83.78 | | Natural Gas ($/Mcf) | 2.87 | 17.39 | 7.35 | | NGL ($/barrel) | 22.16 | 34.10 | 56.47 | Weighted Average Realized Sales Prices (As of June 30, 2023) | Commodity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Unhedged Oil ($/barrel) | 72.62 | 98.95 | | Hedging Impact ($/barrel) | (2.18) | (18.64) | | Hedged Oil ($/barrel) | 70.44 | 80.31 | | Natural Gas ($/Mcf) | 9.86 | 6.55 | | NGL ($/barrel) | 26.48 | 51.90 | [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section analyzes the company's operating results for Q2 2023 versus Q1 2023, Q2 2023 versus Q2 2022, and H1 2023 versus H1 2022, covering changes in key financial metrics such as revenue, expenses, net income, and Adjusted EBITDA [Three Months Ended June 30, 2023 compared to Three Months Ended March 31, 2023](index=39&type=section&id=Three%20Months%20Ended%20June%2030,%202023%20compared%20to%20Three%20Months%20Ended%20March%2031,%202023) For the three months ended June 30, 2023, net income significantly improved to **$25,770 thousand** from a **$5,859 thousand** loss in the prior quarter, despite a **10%** decrease in total revenue and other, primarily due to a **59%** reduction in lease operating expenses and a **16%** increase in Adjusted EBITDA Operating Results Comparison (Q2 2023 vs Q1 2023) | Indicator | June 30, 2023 (thousand dollars) | March 31, 2023 (thousand dollars) | Change (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Oil, natural gas, and NGL sales | 157,703 | 166,357 | (8,654) | (5)% | | Service revenue | 47,674 | 44,623 | 3,051 | 7% | | Power sales | 3,078 | 5,445 | (2,367) | (43)% | | Derivative gains on oil and natural gas sales | 20,871 | 38,499 | (17,628) | (46)% | | **Total Revenue and Other** | **229,362** | **254,969** | **(25,607)** | **(10)%** | | Lease operating expenses | 54,707 | 134,835 | (80,128) | (59)% | | Derivative losses (gains) on natural gas purchases | 14,024 | (610) | 14,634 | n/a | | **Net Income (Loss)** | **25,770** | **(5,859)** | **31,629** | **540%** | | **Adjusted EBITDA** | **69,055** | **59,337** | **9,718** | **16%** | - Oil, natural gas, and NGL sales decreased **5%**, primarily due to lower natural gas and oil prices, partially offset by increased oil and gas sales volumes[40](index=40&type=chunk) - Lease operating expenses decreased significantly by **59%**, primarily due to a substantial reduction in natural gas (fuel) costs for California steam generation facilities[43](index=43&type=chunk) - Derivative gains on natural gas purchases turned into a **$14 million** loss, primarily due to a sharp decline in natural gas prices in the second quarter after a significant increase in the first quarter[65](index=65&type=chunk) [Three Months Ended June 30, 2023 compared to Three Months Ended June 30, 2022](index=42&type=section&id=Three%20Months%20Ended%20June%2030,%202023%20compared%20to%20Three%20Months%20Ended%20June%2030,%202022) For the three months ended June 30, 2023, net income decreased **41%** to **$25,770 thousand** from **$43,354 thousand** in the prior year, with total revenue and other down **9%** due to a **34%** drop in oil, gas, and NGL sales, partially offset by increased derivative gains, and Adjusted EBITDA declining **37%** Operating Results Comparison (Q2 2023 vs Q2 2022) | Indicator | June 30, 2023 (thousand dollars) | June 30, 2022 (thousand dollars) | Change (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Oil, natural gas, and NGL sales | 157,703 | 240,071 | (82,368) | (34)% | | Service revenue | 47,674 | 46,178 | 1,496 | 3% | | Power sales | 3,078 | 7,419 | (4,341) | (59)% | | Derivative gains (losses) on oil and natural gas sales | 20,871 | (40,658) | 61,529 | n/a | | **Total Revenue and Other** | **229,362** | **253,130** | **(23,768)** | **(9)%** | | Lease operating expenses | 54,707 | 72,455 | (17,748) | (24)% | | Derivative losses on natural gas purchases | 14,024 | 10,661 | 3,363 | 32% | | **Net Income** | **25,770** | **43,354** | **(17,584)** | **(41)%** | | **Adjusted EBITDA** | **69,055** | **109,747** | **(40,692)** | **(37)%** | - Oil, natural gas, and NGL sales decreased **34%**, primarily due to a **$77 million** decrease in oil prices, a **$4 million** decrease in natural gas prices, and a **$1 million** decrease in natural gas sales volumes[652](index=652&type=chunk) - Lease operating expenses decreased **24%**, primarily due to a significant **$19 million** decrease in natural gas (fuel) purchase prices[654](index=654&type=chunk) - Derivative losses on natural gas purchases increased **32%**, primarily due to fluctuations in natural gas price indices[455](index=455&type=chunk) [Six Months Ended June 30, 2023 compared to Six Months Ended June 30, 2022](index=45&type=section&id=Six%20Months%20Ended%20June%2030,%202023%20compared%20to%20Six%20Months%20Ended%20June%2030,%202022) For the six months ended June 30, 2023, net income significantly improved to **$19,911 thousand** from a **$13,456 thousand** loss in the prior year, with total revenue and other increasing **39%** due to higher derivative gains offsetting lower oil and gas sales, though lease operating expenses rose **40%** and Adjusted EBITDA decreased **37.5%** Operating Results Comparison (H1 2023 vs H1 2022) | Indicator | June 30, 2023 (thousand dollars) | June 30, 2022 (thousand dollars) | Change (thousand dollars) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Oil, natural gas, and NGL sales | 324,060 | 450,422 | (126,362) | (28)% | | Service revenue | 92,297 | 86,014 | 6,283 | 7% | | Power sales | 8,523 | 12,838 | (4,315) | (34)% | | Derivative gains (losses) on oil and natural gas sales | 59,370 | (202,516) | 261,886 | n/a | | **Total Revenue and Other** | **484,331** | **347,212** | **137,119** | **39%** | | Lease operating expenses | 189,542 | 135,579 | 53,963 | 40% | | Derivative losses (gains) on natural gas purchases | 13,414 | (18,393) | 31,807 | n/a | | **Net Income (Loss)** | **19,911** | **(13,456)** | **33,367** | **248%** | | **Adjusted EBITDA** | **128,392** | **205,459** | **(77,067)** | **(37.5%)** | - Oil, natural gas, and NGL sales decreased **28%**, primarily due to a **$111 million** decrease in oil prices and a **$15 million** decrease in oil sales volumes[80](index=80&type=chunk) - Lease operating expenses increased **40%**, primarily due to higher natural gas (fuel) prices for California steam facilities[457](index=457&type=chunk) - Derivative gains on natural gas purchases turned into a **$13 million** loss, primarily due to lower 2023 forward prices relative to the fixed prices of the derivatives[86](index=86&type=chunk) [E&P Field Operations](index=48&type=section&id=E%26P%20Field%20Operations) Management assesses E&P field operating efficiency by considering core E&P operating expenses, cogeneration, marketing, and transportation activities, with steam being central to California heavy oil extraction, and fuel gas cost volatility minimized through cogeneration and hedging strategies, with lease operating expenses, power production expenses, and transportation expenses as key components - Management assesses E&P field operating efficiency by comprehensively considering core E&P operating expenses, as well as cogeneration, marketing, and transportation activities[459](index=459&type=chunk) - Steam is a core component of the company's E&P operations in California, used for heavy oil extraction; the company operates cogeneration facilities to produce steam and electricity, and minimizes fuel gas cost volatility through natural gas purchase hedging strategies and transporting fuel gas from the Rocky Mountains[459](index=459&type=chunk) E&P Field Operating Expenses (Per Boe) (As of June 30, 2023) | Expense Type | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | | Lease operating expenses | 23.17 | 61.65 | 30.37 | | Power production expenses | 0.54 | 1.14 | 2.57 | | Transportation expenses | 0.46 | 0.48 | 0.46 | | **Total** | **24.17** | **63.27** | **33.40** | E&P Field Operating Expenses (Per Boe) (As of June 30, 2023) | Expense Type | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Lease operating expenses | 41.68 | 28.30 | | Power production expenses | 0.83 | 2.21 | | Transportation expenses | 0.47 | 0.47 | | Marketing expenses | — | 0.06 | | **Total** | **42.98** | **31.04** | [Non-GAAP Financial Measures](index=50&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures such as Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss), and Adjusted G&A Expenses to assess financial condition, operating performance, and cash flows, providing reconciliation to the most directly comparable GAAP measures for management and external users - The company uses non-GAAP financial measures such as Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss), and Adjusted General and Administrative Expenses to assess financial condition, operating performance, and cash flows[96](index=96&type=chunk)[156](index=156&type=chunk)[159](index=159&type=chunk)[483](index=483&type=chunk) - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation, depletion and amortization, derivative gains or losses (excluding cash settlements of derivatives), impairments, equity compensation expense, and non-recurring items[126](index=126&type=chunk)[327](index=327&type=chunk) - Adjusted Free Cash Flow is defined as cash flow from operating activities less regular fixed dividends and maintenance capital[15](index=15&type=chunk)[299](index=299&type=chunk)[460](index=460&type=chunk) Adjusted EBITDA Reconciliation to Net Income (Loss) (As of June 30, 2023) | Indicator | Three Months Ended June 30, 2023 (thousand dollars) | Three Months Ended March 31, 2023 (thousand dollars) | Three Months Ended June 30, 2022 (thousand dollars) | Six Months Ended June 30, 2023 (thousand dollars) | Six Months Ended June 30, 2022 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | 25,770 | (5,859) | 43,354 | 19,911 | (13,456) | | Add: Interest expense | 8,794 | 7,837 | 7,729 | 16,631 | 15,404 | | Add: Income tax expense (benefit) | 10,616 | (2,913) | 2,145 | 7,703 | (1,206) | | Add: Depreciation, depletion, and amortization | 39,755 | 40,121 | 38,055 | 79,876 | 77,832 | | Less: Derivative gains (losses) | (6,847) | (39,109) | 51,319 | (45,956) | 184,123 | | Less: Cash (paid) received on settled derivatives | (12,524) | 47,467 | (37,628) | 34,943 | (69,780) | | Add: Equity compensation expense | 3,552 | 4,766 | 4,420 | 8,318 | 8,222 | | Add: Acquisition costs | 972 | — | — | 972 | — | | Add: Non-recurring costs | — | 7,313 | — | 7,313 | 198 | | **Adjusted EBITDA** | **69,055** | **59,337** | **109,747** | **128,392** | **205,459** | Adjusted Free Cash Flow Reconciliation (As of June 30, 2023) | Indicator | Three Months Ended June 30, 2023 (thousand dollars) | Three Months Ended March 31, 2023 (thousand dollars) | Three Months Ended June 30, 2022 (thousand dollars) | Six Months Ended June 30, 2023 (thousand dollars) | Six Months Ended June 30, 2022 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net cash from operating activities | 62,538 | 1,781 | 111,242 | 64,319 | 159,772 | | Less: Maintenance capital | (19,625) | (19,272) | (32,134) | (38,897) | (58,571) | | Less: Fixed dividends | (9,139) | (9,190) | (4,726) | (18,329) | (9,962) | | **Adjusted Free Cash Flow** | **33,774** | **(26,681)** | **74,382** | **7,093** | **91,239** | Adjusted Net Income (Loss) Reconciliation to Net Income (Loss) (As of June 30, 2023) | Indicator | Three Months Ended June 30, 2023 (thousand dollars) | Three Months Ended March 31, 2023 (thousand dollars) | Three Months Ended June 30, 2022 (thousand dollars) | Six Months Ended June 30, 2023 (thousand dollars) | Six Months Ended June 30, 2022 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | 25,770 | (5,859) | 43,354 | 19,911 | (13,456) | | Add (Less): Derivative gains (losses) | (6,847) | (39,109) | 51,319 | (45,956) | 184,123 | | Add (Less): Cash (paid) received on settled derivatives | (12,524) | 47,467 | (37,628) | 34,943 | (69,780) | | Add (Less): Acquisition costs | 972 | — | — | 972 | — | | Add (Less): Non-recurring costs | — | 7,313 | — | 7,313 | 198 | | Income tax expense (benefit) adjustment | 5,328 | (4,219) | (3,807) | 1,109 | (32,170) | | **Adjusted Net Income** | **11,666** | **5,307** | **53,591** | **16,973** | **73,037** | Adjusted General and Administrative Expenses Reconciliation (As of June 30, 2023) | Indicator | Three Months Ended June 30, 2023 (thousand dollars) | Three Months Ended March 31, 2023 (thousand dollars) | Three Months Ended June 30, 2022 (thousand dollars) | Six Months Ended June 30, 2023 (thousand dollars) | Six Months Ended June 30, 2022 (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | General and administrative expenses | 22,488 | 31,669 | 23,183 | 54,157 | 46,125 | | Less: Non-cash equity compensation expense | (3,379) | (4,619) | (4,263) | (7,998) | (7,969) | | Less: Non-recurring costs | — | (7,313) | — | (7,313) | (198) | | **Adjusted General and Administrative Expenses** | **19,109** | **19,737** | **18,920** | **38,846** | **37,958** | [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, the company's liquidity was **$186 million**, comprising **$9 million** cash, **$165 million** available under the 2021 RBL facility, and **$12 million** under the 2022 ABL facility, with existing resources expected to support operations for the next 12 months, alongside **$400 million** in 2026 Senior Unsecured Notes - As of June 30, 2023, the company's liquidity was **$186 million**, consisting of **$9 million** in cash, **$165 million** in available borrowing capacity under the 2021 RBL credit facility, and **$12 million** in available borrowing capacity under the 2022 ABL credit facility[141](index=141&type=chunk) - The company expects its existing liquidity, capital resources, and cash to be sufficient to support business operations for the next 12 months[174](index=174&type=chunk) - The company holds **$400 million** in Senior Unsecured Notes due 2026[141](index=141&type=chunk)[182](index=182&type=chunk)[202](index=202&type=chunk) [2021 RBL Facility](index=58&type=section&id=2021%20RBL%20Facility) The 2021 RBL facility has a **$500 million** revolving commitment, a **$200 million** borrowing base and total commitment, and a **$20 million** letter of credit sublimit, maturing on August 26, 2025, used for general corporate purposes, with **$25 million** outstanding borrowings and **$10 million** outstanding letters of credit as of June 30, 2023, and approximately **$165 million** available - The 2021 RBL credit facility has a **$500 million** revolving commitment, a **$200 million** borrowing base and total commitment, and a **$20 million** letter of credit sublimit[145](index=145&type=chunk)[466](index=466&type=chunk) - This facility matures on August 26, 2025, and is used for general corporate purposes, including working capital[145](index=145&type=chunk)[466](index=466&type=chunk) - As of June 30, 2023, the company had **$25 million** in outstanding borrowings and **$10 million** in outstanding letters of credit, with approximately **$165 million** in available borrowing capacity, and was in compliance with all debt covenants[146](index=146&type=chunk)[147](index=147&type=chunk)[490](index=490&type=chunk)[518](index=518&type=chunk) [2022 ABL Facility](index=59&type=section&id=2022%20ABL%20Facility) The 2022 ABL facility allows CJWS to borrow up to **$15 million** or the borrowing base, with a **$7.5 million** letter of credit sublimit and a borrowing base of **80%** of eligible accounts receivable, totaling **$14 million** as of June 30, 2023, with no outstanding borrowings, **$2 million** in letters of credit, and **$12 million** available - The 2022 ABL credit facility allows CJWS to borrow up to **$15 million** or the borrowing base, whichever is less, with a **$7.5 million** letter of credit sublimit[148](index=148&type=chunk)[468](index=468&type=chunk) - The borrowing base is **80%** of eligible accounts receivable, which was **$14 million** as of June 30, 2023[148](index=148&type=chunk)[468](index=468&type=chunk) - As of June 30, 2023, CJWS had no outstanding borrowings, **$2 million** in outstanding letters of credit, and **$12 million** in available borrowing capacity, and was in compliance with all debt covenants[200](index=200&type=chunk)[201](index=201&type=chunk)[520](index=520&type=chunk)[521](index=521&type=chunk) [Senior Unsecured Notes](index=60&type=section&id=Senior%20Unsecured%20Notes) In February 2018, Berry LLC completed a private offering of **$400 million** 7.0% Senior Unsecured Notes due February 2026, which are senior unsecured obligations of Berry LLC and fully and unconditionally guaranteed by Berry Corp., with the company in compliance with all covenants as of June 30, 2023 - In February 2018, Berry LLC completed a private offering of **$400 million** 7.0% Senior Unsecured Notes due February 2026[182](index=182&type=chunk)[522](index=522&type=chunk) - These notes are senior unsecured obligations of Berry LLC and are fully and unconditionally guaranteed on a senior unsecured basis by Berry Corp[151](index=151&type=chunk)[471](index=471&type=chunk) - As of June 30, 2023, the company was in compliance with all covenants of the 2026 Notes[202](index=202&type=chunk)[494](index=494&type=chunk) [Debt Repurchase Program](index=60&type=section&id=Debt%20Repurchase%20Program) In February 2020, the board approved a plan to spend up to **$75 million** for opportunistic repurchases of the 2026 Notes, with the manner, timing, and amount of repurchases determined by market conditions and other factors, subject to commencement or suspension at any time, though no notes have been repurchased under this plan - In February 2020, the Board of Directors approved a plan to spend up to **$75 million** for opportunistic repurchases of the 2026 Notes[183](index=183&type=chunk)[203](index=203&type=chunk)[495](index=495&type=chunk) - The manner, timing, and amount of repurchases will be determined based on market conditions, compliance with existing agreements, and other factors, and may be commenced or suspended at any time, but the company has not repurchased any notes under this program[183](index=183&type=chunk)[203](index=203&type=chunk)[495](index=495&type=chunk) [Hedging](index=60&type=section&id=Hedging) The company protects a significant portion of its anticipated cash flows through a commodity hedging program, including swaps, puts, calls, and collars, to mitigate the impact of declining oil and gas prices and rising natural gas purchase prices, aiming to cover operating and most fixed expenses and meet 2021 RBL facility hedging requirements - The company protects a significant portion of its anticipated cash flows through a commodity hedging program, including swaps, put options, call options, and collar options, to mitigate the impact of declining oil and natural gas prices and rising natural gas purchase prices[184](index=184&type=chunk) - The company's objective is to cover operating expenses and most fixed expenses (including capital required to maintain production levels, interest, and fixed dividends), and to meet the hedging requirements of the 2021 RBL credit facility[496](index=496&type=chunk) Historical Results of Hedging Activities (As of June 30, 2023) | Indicator | Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | | Crude Oil (per barrel): | | | | | | | Unhedged realized sales price | 70.68 | 74.69 | 105.70 | 72.62 | 98.95 | | Derivative settlement impact | (0.81) | (3.65) | (21.92) | (2.18) | (18.64) | | Hedged realized sales price | 69.87 | 71.04 | 83.78 | 70.44 | 80.31 | | Purchased Natural Gas (per MMBtu): | | | | | | | Unhedged purchase price | 3.44 | 20.74 | 7.30 | 11.86 | 6.80 | | Derivative settlement impact | 2.20 | (11.86) | (1.89) | (4.64) | (1.08) | | Hedged purchase price | 5.64 | 8.88 | 5.41 | 7.22 | 5.72 | [Lawsuits, Claims, Commitments, and Contingencies](index=65&type=section&id=Lawsuits,%20Claims,%20Commitments,%20and%20Contingencies) The company is involved in various legal proceedings, including a securities class action settled for **$2.5 million** and two shareholder derivative lawsuits, with an assessment that reasonably possible losses beyond accrued amounts will not materially impact financial condition or operating results - The company is involved in various legal proceedings in the normal course of business, including a securities class action lawsuit and two shareholder derivative lawsuits[269](index=269&type=chunk) - The securities class action lawsuit was settled for **$2.5 million** on July 31, 2023[224](index=224&type=chunk) - The company has assessed reasonably possible losses exceeding the amounts accrued and believes they will not have a material adverse effect on its financial condition or results of operations[245](index=245&type=chunk) [Contractual Obligations](index=67&type=section&id=Contractual%20Obligations) As of June 30, 2023, total contractual obligations amounted to **$99,797 thousand**, primarily comprising **$82,697 thousand** in transportation contracts and **$17,100 thousand** in other purchase obligations, including drilling commitments in California Summary of Contractual Obligations (As of June 30, 2023) | Obligation Type | Total (thousand dollars) | Less than 1 Year (thousand dollars) | 1-3 Years (thousand dollars) | 3-5 Years (thousand dollars) | Thereafter (thousand dollars) | | :--- | :--- | :--- | :--- | :--- | :--- | | Transportation contracts | 82,697 | 10,084 | 16,935 | 16,165 | 39,513 | | Other purchase obligations | 17,100 | 17,100 | — | — | — | | **Total Contractual Obligations** | **99,797** | **27,184** | **16,935** | **16,165** | **39,513** | - Other purchase obligations include drilling commitments in California, requiring the drilling of **57 wells** by June 2024 with a minimum commitment of **$17.1 million**; in November 2022, this commitment was revised to require **28 wells** by October 2023 with a minimum commitment of **$8.4 million**[227](index=227&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's most significant market risk is the price volatility of oil, natural gas, and NGLs, with management expecting energy prices to remain unpredictable and potentially volatile, managed through a commodity hedging program using derivatives such as swaps, call options, put options, and collars - The company's most significant market risk is the price volatility of oil, natural gas, and NGLs, with management expecting energy prices to remain unpredictable and potentially volatile[258](index=258&type=chunk) - The company manages commodity price risk through a commodity hedging program, utilizing derivative instruments such as swaps, call options, put options, and collar options, not for speculative trading[280](index=280&type=chunk) - As of June 30, 2023, the fair value of hedging positions was a net asset of approximately **$3 million**; a **10%** increase in oil and gas index prices would result in a net liability of approximately **$54 million**, while a **10%** decrease would result in a net asset of approximately **$62 million**[259](index=259&type=chunk) [Price Risk](index=71&type=section&id=Price%20Risk) The company manages commodity price risk through a commodity hedging program to mitigate the impact of price fluctuations on oil and natural gas production and natural gas purchases, using derivatives such as swaps, call options, put options, and collars, with actual gains or losses dependent on commodity prices at settlement and subject to counterparty credit risk - The company manages commodity price risk through a commodity hedging program to mitigate the impact of price fluctuations on oil and natural gas production and natural gas purchases[280](index=280&type=chunk) - Hedging strategies include the use of swaps, call options, put options, and collar options, and are not used for speculative trading[280](index=280&type=chunk) - Actual gains or losses on derivative contracts depend on the underlying commodity prices at the designated settlement date, and there is credit risk associated with counterparty non-performance[281](index=281&type=chunk) [Item 4. Controls and Procedures](index=72&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures are designed to ensure that information required for reports filed under the Exchange Act is timely recorded, processed, summarized, and reported, with the CEO and CFO assessing them as effective as of June 30, 2023, and no significant changes in internal control occurring during the quarter - The company's disclosure controls and procedures are designed to ensure that information required for reports filed under the Exchange Act is timely recorded, processed, summarized, and reported[261](index=261&type=chunk) - As of June 30, 2023, the Chief Executive Officer and Chief Financial Officer evaluated and concluded that the company's disclosure controls and procedures were effective[282](index=282&type=chunk) - No significant changes in the company's internal control over financial reporting occurred during the second quarter of 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[283](index=283&type=chunk) Part II – Other Information [Item 1. Legal Proceedings](index=73&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a securities class action settled for **$2.5 million** and two shareh