Berry Corporation (bry)

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Todd Crabtree, Head of Investor Relations. Please go ahead.

Thank you, Gerald, and welcome, everyone. And thank you for joining us for Barry's second quarter 2023 earnings teleconference. Earlier today, Barry issued an earnings release highlighting 2023 second quarter results. Speaking this morning will be Fernando Araujo, our Chief Executive Officer, and Mike Helm, our Chief Financial Officer. Before we begin, I would like to call your attention to the safe harbor language found in our earnings release that was issued this morning. This 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 filings with the SEC including our 10-Q, which will be filed later today. Our website, bry.com, has a link to the earnings release and our most recent investor presentation. Any information, including forward-looking statements made on this call or contained in the earnings release and that presentation, reflects 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 GAAP 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 Fernando.

Thanks, Todd. Welcome, everyone, and thank you for joining us. In the second quarter, we successfully executed on our strategy to maximize shareholder value and generate meaningful returns. Our operational and financial performance was strong and we delivered on all fronts. We are excited about our pending acquisition of McPherson Energy Corporation, which is on track to close late in the third quarter. This is another step in achieving our important objective of acquiring accretive producing bolt-ons. We currently anticipate that our full year 2023 results from our current operations will be in line with previous guidance except with respect to capital expenditures. We expect 2023 capital expenditures to be approximately $35 million lower than initial guidance. This is a result of the reallocation of capital used to fund a portion of the McPherson transaction. We will fully update guidance in connection with the transaction close. We delivered nearly 7% or more than 1600 barrels per day, higher production volumes quarter over quarter. And we accomplish this with less capital than planned. We expect annual production from our current operations to be at or above the midpoint of our initial guidance. Our base production, which is expected to account for more than 95% of our total 2023 production, is outperforming plan. This is mainly due to the implementation of an optimized steam injection strategy in our California fields. This is a great example of what I mean when I use the term operational excellence. The balance of production comes from our successful work over and sidetrack campaign. Part of the production gain in Q2 was related to recovering deferred production from Q1. Our ongoing commitment is to maximize shareholder returns while ensuring that we remain a responsible and safe producer. In accordance with our shareholder return model, this quarter will pay total dividends of 14 cents per share between fixed and variable. This is in line with our goal to deliver a 2023 cash return in the high single digits based on our current stock price. Additionally, we opportunistically repurchased $10 million of our common stock during the second quarter. We recently announced that we've entered into an agreement to acquire McPherson Energy Corporation, a privately held Kern County operator, for $70 million in cash. This transaction improves capital efficiency and reallocates capital with 80% of the purchase price funded with $35 million from our planned 2023 capital expenditures, plus expected cash flows from the acquired assets in 2023 and 2024. Based on current projections and $75 per barrel Brent pricing, the adjusted free cash flow delivered by the combined company after the transaction is fully paid for in 2024 is expected to be 15 to 25% greater than Berry without McPherson. McPherson assets, which are high quality, low decline producing properties, are a natural fit with our existing rural Kern County portfolio. In addition to the attractive base production, we see upside for near term production enhancement and development opportunities by utilizing existing wellbores. This is a value-creating transaction for BERI and its shareholders, reflective of our disciplined capital return strategy. We are ideally positioned to capture future consolidation opportunities. I will now turn the call over to Mike.