Berry (bry)(BRY) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The price of Brent crude oil has dropped from around $60 per barrel in late February to approximately $30 per barrel, significantly impacting the company's financial outlook [12][56] - The company reported a $289 million pretax, non-cash impairment charge on its Utah property and certain California locations due to the drop in oil prices [55] - Berry expects to end the year generating approximately $100 million of excess leveraged free cash flow, providing flexibility for managing 2021 [56] Business Line Data and Key Metrics Changes - The company drilled 19 sandstone wells in the first quarter, with 39% of capital spent on facilities and equipping to bring online wells drilled in the previous quarter [28][30] - The capital efficiency for the first half of 2020 is expected to be better than in the past, with maintenance capital historically at $10 to $12 per barrel, but the first quarter saw spending of less than $10 per barrel [88][89] Market Data and Key Metrics Changes - Berry sells about 70% of its California crude at prices tied to Brent, minimizing the financial impact of widening differentials between Brent and California oil markets [33] - Current differentials are about Brent minus $5 to $5.54, with expectations of widening in June and July before normalizing [91][92] Company Strategy and Development Direction - The company has implemented a strategic plan to mitigate the impact of the downturn while preparing to capitalize on future market recoveries [19][64] - A significant cut of over 50% to capital expenditures has been announced, along with a temporary suspension of dividends [21][54] - The company is focused on maintaining safe, environmentally friendly operations and managing relationships with regulatory agencies [24][64] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the unprecedented challenges posed by COVID-19 and the oil price environment but remains confident in the company's ability to navigate through the downturn [11][66] - The company is well-positioned to handle the current market conditions and is focused on cash generation and maintaining liquidity [23][56] Other Important Information - The company has not had any layoffs or furloughs during the pandemic, prioritizing employee health and safety [13][15] - Berry has hedged 24,000 barrels per day of oil at approximately $59.87 Brent through 2020, providing some stability against price fluctuations [51] Q&A Session Summary Question: Can you tell us the degree to which you’ve curtailed wells? - Management confirmed that no wells have been proactively shut in, but some steam injections have been reduced to manage production effectively [70][71] Question: Does the storage suggest producing into storage for later sale? - Management indicated that they are evaluating producing into storage to sell at a later date, depending on market conditions [74][75] Question: Any indication from CalGEM on thermal diatomite wells? - Management stated that the moratorium only affects new projects and they are actively engaged with CalGEM to ensure existing projects are not impacted [78][80] Question: What are the production exit rates for 2020? - Management is not updating guidance at this time but indicated that they are prepared to adjust capital spending based on market conditions [84][85] Question: How should we think about California differentials during Q2? - Management noted that most contracts are Brent-based, and while differentials have widened, they do not expect significant negative impacts due to their pricing structure [91][92]