Berry (bry)(BRY) - 2021 Q3 - Quarterly Report

Part I – Financial Information Financial Statements (unaudited) Unaudited statements show a Q3 2021 net income of $9.8 million, a significant turnaround from the prior year's loss, while cash from operations decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $1,429,966 | $1,419,810 | | Cash and cash equivalents | $38,161 | $80,557 | | Total oil and natural gas properties, net | $1,174,300 | $1,177,307 | | Total Liabilities | $745,070 | $705,774 | | Long-term debt | $394,285 | $393,480 | | Total Stockholders' Equity | $684,896 | $714,036 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenues and other | $143,414 | $89,749 | $336,864 | $462,467 | | Total expenses and other | $126,521 | $102,409 | $337,768 | $633,994 | | Net income (loss) | $9,836 | $(18,864) | $(24,367) | $(199,065) | | Diluted EPS | $0.12 | $(0.24) | $(0.30) | $(2.50) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $82,258 | $144,419 | | Net cash used in investing activities | $(110,536) | $(74,522) | | Net cash used in financing activities | $(14,118) | $(22,277) | | Net (decrease) increase in cash | $(42,396) | $47,620 | Notes to Condensed Consolidated Financial Statements Key notes detail the company's new $200 million credit facility, a $52.1 million net derivative liability, and the recent acquisition of C&J Well Services - On August 26, 2021, the company entered into a new 2021 RBL Facility with a $500 million commitment and an initial borrowing base of $200 million, maturing in 2025[34][42][43] - The company utilizes derivatives to hedge a portion of its forecasted oil and gas production and gas purchases, with a fair value representing a net liability of $52.1 million as of September 30, 2021[47][59] - For the nine months ended September 30, 2021, the company repurchased 471,022 shares for approximately $2 million, with approximately $48 million remaining available for future repurchases[72] - Effective October 1, 2021, the company completed the acquisition of C&J Well Services for approximately $43 million, with financial results to be included starting in Q4 2021[22][25][91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights improved financial results from higher commodity prices and the strategic acquisition of C&J Well Services - The company is an independent upstream energy company focused on conventional, low geologic risk, long-lived oil reserves primarily in California, Utah, and Colorado[94][95] - Effective October 1, 2021, the company acquired C&J Well Services for approximately $43 million, creating a strategic growth opportunity in well servicing and abandonment[97] - Management uses 'Levered Free Cash Flow' as a primary metric for capital allocation, sustaining production, and funding growth[101] Average Benchmark Prices | Benchmark | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Oil (bbl) – Brent | $73.23 | $43.34 | | Natural gas (mmbtu) – Kern, Delivered | $5.75 | $2.84 | Results of Operations Operating results improved significantly due to a 75% rise in commodity sales, driving Q3 2021 net income despite higher costs and derivative losses Q3 2021 vs Q3 2020 Performance (in thousands) | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Oil, natural gas and NGL sales | $161,058 | $92,239 | 75% | | Total revenues and other | $143,414 | $89,749 | 60% | | Net income (loss) | $9,836 | $(18,864) | 152% | 9 Months 2021 vs 9 Months 2020 Performance (in thousands) | Metric | 9 Months 2021 | 9 Months 2020 | % Change | | :--- | :--- | :--- | :--- | | Oil, natural gas and NGL sales | $444,098 | $284,852 | 56% | | (Losses) gains on derivatives | $(140,021) | $157,398 | n/a | | Net loss | $(24,367) | $(199,065) | (88)% | - Unhedged lease operating expenses per boe increased 36% in Q3 2021 vs Q3 2020, driven by a 109% increase in the unhedged average fuel purchase price for California steam operations[192] - For the nine months ended Sep 30, 2020, the company recorded a non-cash pre-tax asset impairment charge of $289 million on properties in Utah and California, with no such impairment recorded in the 2021 period[223] Liquidity and Capital Resources The company maintained total liquidity of $243 million, secured a new $200 million credit facility, and plans to fund capital expenditures with operating cash flow - Total liquidity as of September 30, 2021 was $243 million, consisting of $43 million in cash and $200 million available under the 2021 RBL Facility[246] - The planned 2021 capital expenditure budget is approximately $120 to $130 million, which is expected to be funded by Levered Free Cash Flow[137] - The company terminated its 2017 RBL Facility and entered into a new 2021 RBL Facility on August 26, 2021, with an initial borrowing base and elected commitment of $200 million, maturing in 2025[248][258] - The company has an active commodity hedging program to protect cash flows, with significant volumes hedged for oil production and gas purchases through 2024[259][262] Non-GAAP Financial Measures The company utilizes non-GAAP measures like Adjusted EBITDA and Levered Free Cash Flow to assess performance, showing mixed results compared to the prior year Adjusted EBITDA and Levered Free Cash Flow (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $9,836 | $(18,864) | $(24,367) | $(199,065) | | Adjusted EBITDA | $59,324 | $61,515 | $151,751 | $190,748 | | Levered Free Cash Flow | $8,692 | $47,206 | $10,693 | $92,876 | Adjusted Net Income (Loss) (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $9,836 | $(18,864) | $(24,367) | $(199,065) | | Adjusted Net Income (Loss) | $11,536 | $13,452 | $10,868 | $36,236 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is commodity price volatility, which it mitigates through an active hedging program using derivative instruments - The company's primary market risk is from volatile oil, natural gas, and NGL prices[314] - As of September 30, 2021, the fair value of the company's hedge portfolio was a net liability of $52 million; a 10% price increase would raise the liability to $190 million, while a 10% decrease would create a net asset of $2 million[316] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[318] - No material changes were made to the company's internal control over financial reporting during the third quarter of 2021[319] Part II – Other Information Legal Proceedings The company is defending a securities class action lawsuit alleging false statements and cannot currently estimate a possible loss - The company is a defendant in the 'Torres Lawsuit,' a securities class action filed on November 20, 2020, alleging false and misleading statements related to business operations and permitting processes[322] - An amended complaint was filed on November 1, 2021, and the company disputes the claims and cannot estimate a possible loss or range of loss at this time[323][324] Risk Factors A key risk involves integrating the newly acquired C&J Well Services, a business line in which the company lacks direct prior experience - The company identifies risks associated with integrating acquired businesses, including potential for insufficient expertise, diversion of management attention, and assumption of liabilities[326][328] - The October 1, 2021 acquisition of C&J Well Services presents specific risks as the company has no prior experience directly providing well servicing, completion, and water logistics services[330] Issuer Purchases of Equity Securities The company repurchased 471,022 shares in Q3 2021, with approximately $47.6 million remaining available under its buyback program Issuer Purchases of Equity Securities (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | July 2021 | — | — | $49,999,000 | | August 2021 | 471,022 | $5.18 | $47,564,000 | | September 2021 | — | — | $47,564,000 | | Total | 471,022 | $5.18 | $47,564,000 | Exhibits This section lists filed exhibits, including required CEO/CFO certifications and the new credit agreement - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[334] - The new Credit Agreement dated August 26, 2021, is incorporated by reference[334]