GaryKavanagh/iStock via Getty Images Berry Corporation ( BRY ) looks capable of paying out total dividends of approximately $2 per share and generating positive cash flow (before dividends) of over $3 per share at $90 Brent in 2022.
In a longer-term (after 2022) $70 Brent scenario, I believe that Berry could be worth around $10 per share as a one-year price estimate. When combined with the dividends, that could give Berry a 35% total return from its current share price. Acquisitions and Divestitures
Berry made a couple of minor transactions in early 2022. It divested its Piceance Basin assets in January 2022. These assets had proved reserves with a PV-10 of $15 million (based on SEC pricing) at the end of 2021. The Piceance Basin assets produced 6.4 MMCF per day (100% natural gas) in Q4 2021. Berry noted that its Piceance assets had relatively high operating costs for a gas field and it hadn’t drilled wells there in seven years. It also is reducing future abandonment costs by $26 million by this divestiture.
In February 2022, Berry acquired Antelope Creek in the Uinta Basin, which is a bolt-on property that roughly replaces the 750 BOEPD in production lost with its Placerita divestiture in 2021.
Berry does not appear to have mentioned the consideration for these acquisitions and divestitures, but both transactions are relatively minor, so it shouldn’t have much of a net effect. 2022 Outlook
Berry provided guidance for an average of 25,500 to 27,500 BOEPD in production during 2022. Berry’s production is now 92% oil after its Piceance Basin divestiture in January 2022. Production is roughly flat year-over-year after adjusting for the acquisitions and divestitures.
At current Brent strip of approximately $90 for 2022, Berry should be able to generate $781 million in oil and gas revenue. It also projects $27 million in adjusted EBITDA from its Well Servicing & Abandonment segment, while its 2022 hedges have around negative $78 million in value.
This results in a projection of $730 million in total revenue for Berry in 2022. For ease of calculation, I have just treated the Well Servicing & Abandonment segment EBITDA as net revenues. Type Units $/Unit $ Millions Oil 8,898,700 $85.00 $756 NGLs 146,000 $45.00 $7 Natural Gas 3,766,800 $4.75 $18 Well Servicing & Abandonment EBITDA $27 Hedge Value -$78 Total Revenue $730 Source: Author’s Work
With $130 million in Development and Production segment capex and $8 million in Well Servicing & Abandonment segment capex, Berry is projected to have $477 million in cash expenditures. It is also currently paying out $19 million per year in fixed dividends. Expenses $ Millions Operating Expenses $203 Taxes, Other than Income Taxes $50 Cash G&A (Development and Production) $58 Cash Interest $28 Capital Expenditures $138 Fixed Dividend $19 Total Expenses $496 Source: Author’s Work
This results in an estimate of $234 million in discretionary cash flow in a $90 Brent scenario for 2022.
This is around $2.92 per share in discretionary cash flow, which could translate into around $1.75 per share in cash variable dividends (depending on any debt repurchases). This would put the total dividend at $1.99 per share.
Another $94 million would be allocated towards organic growth, share repurchases and/or capital retention. Notes On Valuation
If Berry pays out approximately $2 per share in dividends based on 2022 results, then I’d estimate its value (in early 2023) at around $10 per share in a longer-term $70 Brent environment. This would result in around a 35% total return over that period if it reaches $10 per share and pays $2 per share in dividends.
In a long-term $75 Brent environment, Berry could be worth around $11.70 per share in a year, which would be a 50+% total return from its current price when the dividend is added in. Conclusion
Berry looks capable of generating over $3 per share in positive cash flow in 2022 (at $90 Brent) while keeping its production flat year-over-year. Based on its capital return framework, it would be able to pay approximately $2 per share in total dividends based on its 2022 results.
Overall, Berry looks to have good potential at its current share price, with my belief that a long-term $70 Brent scenario could still lead to some share price appreciation even if it pays out $2 per share in dividends over the next year. Free Trial Offer
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source Berry Corp.: Dividend Could Approach $2 Over The Next Year
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