Aug. 23–The new logo atop Berry Petroleum Co. LLC’s Truxtun Avenue headquarters is apt as symbols go — an oil droplet surrounded by a water-evoking blue curve with a lowercase “B” nestled in between. But it hardly begins to tell the story of the company’s dramatic homecoming.
Berry, one of Kern County’s top four or five oil producers, has run the gauntlet since moving its headquarters from Bakersfield to Denver in 2008. It sold five years later to Houston-based Linn Energy LLC in a deal valued at $4.6 billion, then ended up in bankruptcy after both companies fell victim to a sharp and sustained downturn in oil prices.
But now Berry’s back, with an all-new executive roster and a whole new board of directors that includes Gene Voiland, the highly respected former CEO of Bakersfield-based oil producer Aera Energy LLC.
On Wednesday, Berry released its first quarterly earnings report since going public in July. And though its bottom line took a big hit — a second-quarter net loss of $34 million — President and CEO A.T. “Trem” Smith said the red ink was a necessary move to switch from an unfavorable price-hedging strategy to one with stronger upside potential.
“This is a new chapter,” he said. “The story’s continuing.”
The new Berry, as the former Chevron geologist and others have taken to calling the company, has already won what amounts to a show of support from the investment community. Stock analysts at banks including several that underwrote last month’s IPO have issued “buy” ratings, or the equivalent, for Berry’s shares, which now trade on the Nasdaq Global Select Market under the symbol “BRY.”
In bestowing the favorable rating, analysts have pointed to Berry’s commitment to investing in its operations strictly out of its own cash flow, as well as the relatively low maintenance required by its wells in western Kern County.
The earnings report pointed to progress since this year’s first quarter. Driven by its California operations (the company also operates in Colorado, Texas and Utah), production was up a little more than 1 percent at 26,500 barrels of oil equivalent per day. Meanwhile, its operating expenses dropped by $2.72 per barrel produced.
Smith emphasized the company has taken a new approach in several respects. After spending $127 million to overhaul its former hedging strategy, which had been pegged to the U.S. benchmark of West Texas Intermediate, the company’s pricing is now linked to the global standard of Brent, which he said will help insulate Berry from volatility and allow it to realize higher profits.
Another key part of his strategy: Focus on its Kern County oilfield assets. As Berry technical experts assess the value of the company’s out-of-state holdings, the company is planning to concentrate investment on its assets in the Midway-Sunset, Belridge and McKittrick oil fields.
An example he offered was a 504-acre property Berry recently took full control of in South Belridge. With 500 wells producing 3,000 barrels per day, the property has room for as many as 800 additional wells that may boost production to 8,000 barrels daily, he said.
The focus on Kern oilfields could be beneficial locally, in that new drilling generates jobs. And given Berry’s stature as a public company, it could draw attention to California as a wise place to invest, local oilman Chad Hathaway asserted.
If Berry is successful, Hathaway said, “the market eventually has to say, ‘Wait a minute here — these guys are making money (and) they’re in California.'”
The Golden State’s reputation as a destination for oil investment suffered about a decade ago as new regulations delayed oilfield projects; Berry was among those that complained publicly. But on Wednesday, Smith said he’s confident the company’s Sacramento connections and long view of enforcement matters will allow Berry to weather any regulatory complications.
“It’s a planning exercise,” he said, adding that he experienced far more difficult regulatory environments working for Chevron in Russia and the Middle East.
Neighbors in local oilfields have already noticed changes at Berry. An executive at locally based oil producer TRC Operating Co., Charlie Comfort, said Berry seems to have added some sharp people to its ranks.
“They seem to be taking care of business and their operations are what you’d expect from people with operating experience in California,” Comfort said by email. “We’ve had a few meetings with their upper management and have found them to be honest and have more integrity than some of our other” oilfield neighbors.
The praise goes both ways. Smith said Kern County oilmen tend to be diligent, knowledgeable and respectful — “and I’m not kidding, because I’ve worked in places that don’t” treat people with respect.
“We love being here,” he said. “We’re back … and we’re not going anywhere.”
John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThirdGraf.
(c)2018 The Bakersfield Californian (Bakersfield, Calif.)
Visit The Bakersfield Californian (Bakersfield, Calif.) at www.bakersfield.com
Distributed by Tribune Content Agency, LLC.