Berry Corporation (bry)

ladies and gentlemen thank you for standing by and welcome to the berry corporation second quarter 2021 earnings conference call at this time all participants are in the listener only mode after the speaker's presentation there will be a question and answer session to ask a question during this session you will need to press star 1 on your telephone please be advised that today's conference call is being recorded if you require any further assistance please press star zero. I will now turn the conference over to your speaker today, Todd Crabtree, Manager of Investor Relations. Please go ahead, sir.

Thank you, Christelle, and welcome to everyone. Thank you for joining us for Barry's second quarter 2021 earnings teleconference. Yesterday afternoon, Barry issued an earnings release highlighting second quarter results. Speaking this morning will be Trem Smith, Chairman and CEO of Yahoo, Chief Operating Officer and Executive Vice President, and Kerry Bates, Chief Financial Officer and Executive Vice President. Tram will discuss our second quarter performance as well as our expectations for the remainder of 2021. Fernando and then Kerry will share further details on how we are addressing the operational and financial aspects of our business. Before turning it over to questions, Tram will make a few concluding remarks. Before we begin, I want to call your attention to the safe harbor language found in our earnings release. The earnings release and today's discussion contain certain projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. These include risks and other factors outlined in our findings with the SEC. Our website, bry.com, has a link to the earnings release and our most recent investor presentation. Any information, including forelooking statements made on this call or contained in the earnings release and that presentation, reflect our analysis as of the date made. We have no plans or duty to update them except as required by law. Please refer to the tables in our earnings release and on our website for reconciliation between all adjusted measures mentioned in today's call and the related gap measures. We will also post the replay link of this call and the transcript on our website. I will now turn the call over to Trem Smith.

Thank you, Todd. Good morning, everyone, and thanks for joining us today. The BERI team continues to execute our 2020-2021 plan with excellence. BERI had a solid quarter consistent with our expectations and annual guidance, and we remain committed to our disciplined financial principles and to delivering long-term value to our shareholders. We continue to reduce our non-energy costs on a sustainable basis despite increasing commodity prices, without compromising our safety and environmental standards. Our safety record remains exceptional. Furthermore, we grew our production in the second quarter approximately 1 percent and are on target to keep production essentially flat year on year per our plan. Our business model remains simple, durable, and resilient, and we have proven it generates free cash flow in all but the most extreme market environments. This is not just a promise for free cash flow in the future. It's what we have already been doing. At Barry, we generate free cash flow today and have for the past four years. Further, and in line with our key financial tenet, we continue to generate and live out of levered free cash flow. We are not aware of another U.S.-based company that defines it like we do. In addition to the normal expenses like OPEX, taxes, and G&A, we include interest, dividends, and the capex needed to keep production flat, or what we call maintenance capital. Only cash generated after these expenses is considered by Barry to be discretionary free cash flow, or levered free cash flow. Our levered free cash flow should only grow going forward as our hedges put in place during the pandemic begin to roll off. As we pass the midpoint of the year, we are seeing positive signs in the industry. The price of oil is up almost $30 from a year ago. The demand for oil is increasing as vehicle miles traveled in the U.S. has bounced back to pre-COVID levels, and overall air travel in the U.S. is returning to normal. The oil supply in the U.S. has declined approximately 15% from pre-pandemic levels and is stable for the moment at around 11.2 million barrels a day. However, rig counts in the U.S. and overseas remain well below pre-pandemic levels as many resource companies are spending less capital and completing their significant inventory of ducts. which are wells drilled but left uncompleted after the market collapse and pandemic of last year. Therefore, as demand continues to grow and the inventory of ducks is depleted, supply, especially in the U.S., is likely to continue to fall. Berry, however, is in a terrific position to meet the growing demand and continues to create value in its conventional reservoirs, through the drill bit in both California, where we are currently the most active operator with three rigs drilling new wells, and in Utah. Remember, we are not a resource operator. We produce from shallow, low-declined, predictable, conventional reservoirs, making our drilling programs low-risk and repeatable. In the second quarter, we drilled 50 new wells in California and eight in Utah. 21 or 42% of the California wells and 5 or 62.5% of the Utah wells are coming on production in Q3. Furthermore, I want to be very clear that once again we have not been impacted in any meaningful way by governmental or regulatory constraints in California. We are continuing to receive permits and we are continuing to drill. In other words, despite political distractions and headlines, we have always maintained or grown our production, lived within our levered free cash flow, and increased shareholder value. By all measures, Barry is on track to have a strong 2021 and beyond. Reflecting this, the Board approved a 50 percent increase to our third quarter dividend to six cents per share. a top-tier return in the small mid-cap E&P space. Our model gives us the visibility to potentially increase incrementally our dividend as we continue to meet our cash needs through free cash flow generation. We believe the current best use of capital is to keep production flat, enabling us to return capital and increase shareholder returns. Strategic acquisitions continue to be a priority for the BERI team, as we look to increase our scale through accretive value-adding M&A. To be clear, however, the status quo outlook for Barry is very strong. We continue to create significant value for our shareholders and will continue to based on the current strip. While we are looking for and evaluating beneficial M&A opportunities, I am encouraged that we have more than three decades of inventory in our sandstone reservoirs alone that will help meet California's long-term energy demand, which, by the way, is not slowing down, and provide value to all stakeholders for decades to come. We understand the importance of environmental, social, and governance matters, or ESG, to all our stakeholders and the growing interest of our investors. We are continuing to enhance our work in this area, as well as our disclosures. Yesterday, we published our quarterly update report, which you can find on the sustainability page of our website, bry.com. Notably, we have introduced disclosures aligned with the SASB metrics for our industry. All in all, our business model continues to work just like it has since we became public. It continues to perform. We continue to generate value for our shareholders, and we are positioned to do so well into the future. I will now turn it over to Fernando.