Berry (bry)(US:BRY)2021-05-04 16:00Part I – Financial Information Item 1. Financial Statements (unaudited) This section presents the company's unaudited condensed consolidated financial statements for Q1 2021, including Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows, with notes on accounting, debt, derivatives, and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $178,041 | $154,491 | | Total Assets | $1,436,831 | $1,419,810 | | Total Current Liabilities | $212,565 | $175,306 | | Long-term Debt | $393,741 | $393,480 | | Total Liabilities | $745,037 | $705,774 | | Total Stockholders' Equity | $691,794 | $714,036 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Account | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Total Revenues and Other | $94,201 | $339,265 | | Total Expenses and Other | $107,271 | $419,290 | | Loss Before Income Taxes | $(21,698) | $(88,951) | | Net Loss | $(21,322) | $(115,300) | | Diluted Loss Per Share | $(0.27) | $(1.45) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $38,430 | $44,483 | | Net Cash Used in Investing Activities | $(19,937) | $(43,038) | | Net Cash Used in Financing Activities | $(1,688) | $(1,444) | | Net Increase in Cash | $16,805 | $1 | - The company's debt consists of a Revolving Credit Facility (RBL Facility) and $400 million in 7.0% senior unsecured notes due 2026, with no borrowings outstanding under the RBL Facility as of March 31, 2021, which had an available capacity of approximately $193 million2635 - The company utilizes derivative instruments, primarily swaps, to hedge a portion of its forecasted oil and gas production and natural gas purchases to reduce exposure to price fluctuations39 - For Q1 2021, the Board of Directors approved a regular dividend of $0.04 per share, and the company also has a stock repurchase program with $50 million remaining authorization and a bond repurchase program for up to $75 million of its 2026 Notes575836 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's Q1 2021 financial condition and operational results, covering the business environment, operating results analysis, liquidity, capital resources, and non-GAAP financial measure reconciliations Business Environment, Market Conditions and Outlook Management discusses the impact of COVID-19, oil price recovery, Winter Storm Uri's effect on natural gas prices, and the evolving regulatory environment in California, including new rules on wells and potential extraction restrictions - Oil prices improved in early 2021, but the business environment remains uncertain due to the ongoing COVID-19 pandemic and actions by OPEC+9193 Average Benchmark Prices | Benchmark | Q1 2021 | Q4 2020 | Q1 2020 | | :--- | :--- | :--- | :--- | | Oil (bbl) – Brent | $61.32 | $45.26 | $50.82 | | Natural gas (mmbtu) – Kern, Delivered | $7.99 | $3.38 | $1.97 | - Winter Storm Uri in February 2021 caused a dramatic increase in natural gas demand and prices, with the Kern, Delivered Index briefly exceeding $100 per mmbtu98 - The company is subject to increasingly stringent regulations in California, including new rules for idle wells, underground injection control (UIC), and executive orders aiming to phase out fossil fuels and establish setbacks for oil and gas operations109110116 Results of Operations This section analyzes the company's operational and financial results, highlighting increased production, significant revenue growth in Q1 2021 versus Q4 2020 due to higher commodity prices, and a substantial negative swing in derivative results compared to Q1 2020 Average Daily Production (mboe/d) | Period | Q1 2021 | Q4 2020 | Q1 2020 | | :--- | :--- | :--- | :--- | | Total (mboe/d) | 27.1 | 26.6 | 30.8 | - Q1 2021 vs Q4 2020: - Oil, gas, and NGL sales increased by $41 million (44%) due to higher unhedged prices147148 - Electricity sales increased 50% due to higher natural gas prices from Winter Storm Uri - Total operating expenses per boe (hedged basis) decreased 24% to $14.40, driven by favorable gas purchase hedge settlements156 - Q1 2021 vs Q1 2020: - Oil, gas, and NGL sales increased by $13 million (11%) due to higher prices, partially offset by lower volumes172 - A significant swing in derivative results occurred, from a $211.2 million gain in Q1 2020 to a $53.5 million loss in Q1 2021174 - Total operating expenses per boe (hedged basis) decreased 27% to $14.40, largely due to favorable gas purchase hedge settlements181 Liquidity and Capital Resources As of March 31, 2021, the company had $292 million in liquidity, with 2021 capital expenditures of $120-$130 million expected to be funded by operations, alongside details on its RBL facility, hedging strategy, and capital return programs - Total liquidity was $292 million as of March 31, 2021, consisting of $99 million in cash and $193 million in RBL Facility availability211 - The 2021 capital expenditure budget is planned at $120 to $130 million, expected to be funded by cash flow from operations126211 Hedging Position as of March 31, 2021 | Instrument | Period | Hedged Volume | Weighted-Average Price | | :--- | :--- | :--- | :--- | | Fixed Price Oil Swaps (Brent) | Q2-Q4 2021 | 4,364 mbbls | ~$47.50/bbl | | Fixed Price Oil Swaps (Brent) | FY 2022 | 1,095 mbbls | $60.00/bbl | | Fixed Price Gas Purchase Swaps | Q2-Q4 2021 | 11,692,500 mmbtu | ~$2.85/mmbtu | - The company paid a $0.04 per share dividend for Q1 2021 and declared the same for Q2 2021, with $50 million remaining on its stock repurchase authorization and $75 million on its bond repurchase authorization, and no repurchases made under either program in Q1 2021224225226 Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, including Adjusted EBITDA, Levered Free Cash Flow, and Adjusted General and Administrative Expenses, to their most directly comparable GAAP counterparts Adjusted EBITDA and Levered Free Cash Flow Reconciliation (in thousands) | Metric | Q1 2021 | Q4 2020 | Q1 2020 | | :--- | :--- | :--- | :--- | | Net Loss | $(21,322) | $(63,830) | $(115,300) | | Adjusted EBITDA | $51,829 | $53,682 | $71,800 | | Capital Expenditures | $(23,569) | $(14,159) | $(39,703) | | Interest Expense | $(8,485) | $(8,308) | $(8,920) | | Cash Dividends Declared | $(3,474) | $0 | $(9,564) | | Levered Free Cash Flow | $16,301 | $31,215 | $13,613 | Adjusted Net Income Reconciliation (in thousands) | Metric | Q1 2021 | Q4 2020 | Q1 2020 | | :--- | :--- | :--- | :--- | | Net Loss | $(21,322) | $(63,830) | $(115,300) | | Adjusted Net Income | $5,627 | $8,580 | $18,175 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from volatile commodity prices, mitigated by hedging strategies, with its hedge portfolio showing a $47 million net liability as of March 31, 2021, subject to sensitivity analysis for price fluctuations - The most significant market risk is from unpredictable and volatile energy prices261 - As of March 31, 2021, the fair value of the company's hedge positions was a net liability of approximately $47 million264 - A 10% increase in oil and natural gas index prices would result in a net liability of approximately $89 million; a 10% decrease would result in a net liability of approximately $29 million264 Item 4. Controls and Procedures The company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during Q1 2021 - The President and CEO and the Executive VP and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021266 - There were no material changes to the company's internal control over financial reporting during the first quarter of 2021267 Part II – Other Information Item 1. Legal Proceedings This section discloses the company's involvement in legal proceedings, including a securities class action lawsuit and a $409,650 Notice of Violation from the San Joaquin Valley Air Pollution Control District - A securities class action lawsuit was filed against the company and certain officers, alleging false and misleading statements, which the company disputes and intends to defend vigorously270271 - The company received a Notice of Violation from the San Joaquin Valley Air Pollution Control District with a proposed civil penalty of $409,650, which it is currently negotiating272 Item 1A. Risk Factors This section notes no material changes to previously disclosed risk factors and directs readers to the comprehensive discussion in the company's most recent Annual Report on Form 10-K - The company is subject to various risks and uncertainties, which are discussed in the "Item 1A. Risk Factors" section of its most recent Annual Report274 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities This section updates on the company's stock repurchase program, noting $50 million remaining authorization and no repurchases made during Q1 2021 - The company has a stock repurchase program with approximately $50 million remaining authorized for purchases276 - No shares were repurchased under the program during the first quarter of 2021276 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, executive compensation agreements, CEO/CFO certifications, and Inline XBRL data files - The report includes various exhibits, such as the CEO/CFO certifications (Section 302 and 906) and Inline XBRL documents278