10-K: Berry Corporation (bry) Reports Increased Proved Reserves and Outlines 2025 Capital Program

Berry Corporation (bry) announces a 13% increase in proved reserves, driven by developments in California and Utah, and details its 2025 capital expenditure plans focused on horizontal drilling in the Uinta Basin.

Summary

• Berry Corporation (bry) reported an increase in proved reserves to 107 mmboe as of December 31, 2024, up from 103 mmboe the previous year.
• The increase is attributed to development in Mid-North Diatomite, recompletion opportunities in Round Mountain properties, and horizontal well development in Utah.
• The company's reserve replacement ratio was 166% for California and 147% for the total company.
• PV-10 of proved reserves increased to $2.3 billion, compared to $2.0 billion in the prior year.
• The 2025 capital expenditure budget is projected to be between $110 to $120 million, with a focus on Utah development opportunities.
• Approximately 40% of the 2025 capital will be directed to Utah, compared to 25% in 2024.
• The company plans to drill four horizontal wells in the Uteland Butte and Wasatch reservoirs in the Uinta Basin in 2025.
• Berry expects 2025 production volume to be generally consistent with 2024, with approximately 93% being oil.
• The company spent approximately $15 million on P&A activities in 2024 and expects to spend $14 to $20 million in 2025.
• California oil production is primarily sold under market-sensitive contracts that are typically priced at a differential to Brent.

Sentiment

Score: 7

Explanation: The document presents a balanced view with positive developments in reserves and strategic shifts, but also acknowledges regulatory challenges and market risks. The sentiment is cautiously optimistic.

Positives

• Proved reserves increased by 13% to 107 mmboe.
• PV-10 of proved reserves increased to $2.3 billion.
• The company has $110 million of liquidity as of December 31, 2024.
• The company has a high degree of operational control over its properties.
• The company is strategically positioned to develop its acreage horizontally in the Uinta Basin.
• The company has a strong reputation as a responsible operator and employer in California.
• The company has a best-in-class safety record for C&J Well Services.

Negatives

• The company downgraded nine mmboe of California proved undeveloped reserves in 2024 due to Senate Bill No. 1137.
• The company experienced some delays in the issuance of sidetrack and workover permits in California due to changes in CalGEM's CEQA review process.
• The company is subject to a series of risks arising out of the threat of climate change that could result in increased operating costs, limit the areas in which it may conduct oil and natural gas E&P activities, and reduce demand for the oil and natural gas it produces.
• The company is highly dependent on commodity prices, which historically have been very volatile and are driven by numerous factors beyond its control.

Risks

• The company's business is highly regulated, and governmental authorities can delay or deny permits and approvals.
• The company's operations are subject to a series of risks arising out of the threat of climate change.
• The company may not be able to generate sufficient cash to service its indebtedness.
• The company's hedging activities limit its ability to realize the full benefits of increases or decreases in commodity prices.
• The company has significant concentrations of credit risk with its customers.
• The company is dependent on its cogeneration facilities to produce steam for its operations.
• The company may incur substantial losses and be subject to substantial liability claims as a result of catastrophic events.
• The company may be involved in legal proceedings that could result in substantial liabilities.

Future Outlook

The company intends for its total 2025 production volume to be generally consistent with 2024, and it currently anticipates approximately 93% of that will be oil, consistent with 2024.

Management Comments

• Management expects to fund the 2025 capital programs with cash flow from operations.
• Management believes that horizontal well development of the company's acreage could yield substantial returns, with low break-even economics and a potentially significant runway of future development opportunities.

Industry Context

The announcement reflects a strategic shift towards horizontal drilling in the Uinta Basin, aligning with increased activity and successful results from other operators in the area. The company's focus on low-decline, oil-weighted assets is consistent with a value-driven approach in the current energy market.

Comparison to Industry Standards

• Berry's focus on conventional, shallow oil reservoirs in California contrasts with peers operating primarily in unconventional resource plays, offering a lower-cost development structure.
• The company's annual corporate decline rate averaging 11-14% is competitive within the industry.
• The company's proved undeveloped (PUD) reserves in California are projected to average single-well rates of return of over 100% based on the assumptions prepared by DeGolyer and MacNaughton in the SEC reserves report as of December 31, 2024.

Legal Proceedings

• A shareholder derivative lawsuit (the Assad Lawsuit) was filed in the United States District Court for the Northern District of Texas by putative stockholder George Assad, allegedly on behalf of the Company, that piggy-backs on the Securities Class Action and is currently pending before the same court.
• On January 20, 2023, a second shareholder derivative lawsuit (the Karp Lawsuit, together with the Assad Lawsuit, the Shareholder Derivative Actions) was filed, this time in the United States District Court for the District of Delaware, by putative stockholder Molly Karp, allegedly on behalf of the Company, again piggy-backing on the Securities Class Action.

Stakeholder Impact

• The company's performance impacts shareholders through dividends and stock value.
• The company's operations support local economies in California and Utah.
• The company's commitment to responsible operations affects the communities in which it operates.

Next Steps

• The company plans to proportionally allocate more capital to its Utah development opportunities in 2025.
• The company is in the process of obtaining the remaining permits needed to support its 2025 plans in California.
• The company is actively working to obtain the permits and other approvals needed to support the ongoing development of its properties, including its thermal diatomite assets, in 2025 and beyond.

Key Dates