November Company Update

Transcription

1 BERRY PETROLEUM COMPANY - November Company Update California Diatomite Asset Berry Petroleum Company Broadway, Ste. 37 Denver CO, IR BERRY PETROLEUM COMPANY - November

2 Safe Harbor and Cautionary Note Safe Harbor Under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements concerning expectations about the Company s future business and results of operations. Words such as anticipate, will, intend, continue, target(s), expect, achieve, strategy, future, estimated, or other comparable words or phrases or the negative of those words, and other words of similar meaning indicate forward-looking statements. These statements include but are not limited to forward-looking statements about acquisitions of properties, expectations of plans, strategies, objectives and anticipated financial and operating results of the Company. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including those discussed under Risk Factors in the Company s SEC filings, which could cause its actual results to differ from those projected in any forward-looking statements that it makes. The Company believes that it is important to communicate its future expectations. However, there may be events in the future that the Company is unable to accurately predict or control and that may cause its actual results to differ materially from the expectations describe in its forward-looking statements. Forward-looking statements speak only as of the date of such statement. Cautionary Note Regarding Hydrocarbon Disclosures The U.S. Securities and Exchange Commission (SEC) requires oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, under existing economic condition, operating methods, and governmental regulations. Beginning with year-end reserves for 29, the SEC permits the optional disclosure of probable and possible reserves. The SEC defines probable reserves as those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered. The SEC defines possible reserves as those additional reserves that are less certain to be recovered than probable reserves. The Company applies these definitions in estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any estimates provided in this presentation that are not specifically designated as being estimates of reserves may include estimated quantities not necessarily calculated in accordance with, or contemplated by, the SEC s reserve reporting guidelines. The Company uses terms describing hydrocarbon quantities in this presentation including oil in place and barrels in place that the SEC s guidelines prohibit it from including in filings with the SEC. These estimates are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are substantially less certain. Investors are urged to consider closely the reserves disclosures in the Company s Annual Report on Form 1-K for the year ended December 31, 29. Unless otherwise stated, hydrocarbon volume estimates have not been risked by Company management. Factors affecting ultimate recovery include the scope of the Company s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, commodity prices, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors, and actual drilling results, including geological and mechanical factors affecting recovery rates. Accordingly, actual quantities that may be ultimately recovered from the Company's interests will differ substantially from its estimates of potential reserves, and could be significantly less than its targeted recovery rate. In addition, the Company s estimates of reserves may change significantly as development of its resource plays and prospects provide additional data. BERRY PETROLEUM COMPANY - November 21 2

3 Investing to Grow Oil Production Oil Expected to Increase to 75% of Production by 214 Long-Term Organic Oil Growth Development Oil Diatomite, Steam Floods, Wolfberry Base Oil S. Midway, Poso Creek, Uinta Natural Gas E. Texas, Piceance Berry s Asset Portfolio Base oil assets primarily consist of proved developed reserves and require minimal maintenance capital Development oil assets expected to drive the company s growth and receive the majority of capital over the next several years: Diatomite production expected to grow from 3, BOPD to over 15, BOPD in 214 Wolfberry assets expected to grow to 9, BOPD based on a four-rig 4-acre development Five early stage steam floods such as Ethel D and 21Z could each contribute production in the range of 2, BOPD 3, BOPD Natural gas assets will be allocated limited capital at current prices Growth in natural gas production can be balanced with increased demand for steam in California Natural gas assets are primarily held by production and Berry can maintain option for increased development at higher prices '4 '5 '6 '7 '8 '9 '1E '14E BERRY PETROLEUM COMPANY - November 21 3

4 Wolfberry Assets Total of 19,35 Acres in the Permian, 75% NRI Recently announced acquisition of 9,3 net acres with a 6,8 contiguous net acre block in Ector County kum Terry Permian Asset Acreage Map Lynn Wolfcamp Trend Garza Kent Expected production of approximately 5,2 BOED in 211 from the Permian assets 4 drilling locations on 4 s in the Wolfberry Gaines Dawson Borden Scurry Infill drilling development of 4 potential locations Upside potential resides in 2-acre down spacing and in developing the deeper Strawn and Atoka formations Andrews Martin Howard Mitchell Spraberry Trend Ector Midland Glasscock Sterling 6,8 Contiguous Acre Block Crane Upton Reagan Irion PETRA 3/17/21 3:3:44 PM Source: Texas Bureau of Economic Geologists BERRY PETROLEUM COMPANY - November 21 4

5 Acquisitions Build Scale, Support Oil Growth Commentary The recent acquisitions are consistent with Berry s strategy to add scalable, high margin, oil assets that can complement Berry s low base decline in California Berry s combined position in the Wolfberry expected to grow to over 9, BOED over the next four years The acquisitions provide Berry the inventory to further focus its capital activities on oil development with 9% of 211 capital expected to be directed towards oil development Oil assets expected to grow 2% in 211 while gas production will decline with limited investment Berry s production in 211 is expected to be 7% oil with corporate operating margins of $33 per barrel at $75 WTI Building Berry s Scale in the Wolfberry 1 st Half 1 Acquisitions Recent Acquisitions Pro Forma Net Acres 1,5 9,3 19, Production BOED 3, 2,2 5,2 211 Capital - $MM $65 $65 $13 4-acre Undeveloped Locations acre Locations BERRY PETROLEUM COMPANY - November 21 5

6 Strong Margins and Returns High IP s and Recoveries per Well Cash Margins of $62 per BOE 3 $87 WTI 25 2 Range of Acquisition Well Results to Date Realized Price Operating Cost $73.5 ($6.) 15 Production Tax ($4.7) 1 Existing Permian Type Curve G&A ($1.) 5 Margin $61.8 Illustrative Comparative Economics Single Well Rates of Return Total Well Cost ($ s) $1,55 $1,6 Gross Reserves Net Reserves Single Well F & D ($/BOE) Current Permian 16 MBOE 12 MBOE $12.9 Acquisition 18 MBOE 135 MBOE $11.85 Pre-tax ROR 13% 11% 9% 7% 5% 3% Acquisition Berry s Current Wolfberry 1% $5. $6. $7. $8. $9. $1. NYMEX Oil Price ($/Bbl) BERRY PETROLEUM COMPANY - November 21 6

7 Company Profile Key Statistics and Guidance Key Statistics 211E Capital Distribution E Gas Utah CA Base Capital ($MM) $29 - $31 $375 - $425 CA Dev Permian % Oil Capital 63% ~9% Production (MBOED) % Oil Production % % 211E Production Mix Operating Margin ($/BOE) $3 $33 Utah CA Base Gas Permian CA Dev BERRY PETROLEUM COMPANY - November 21 7

8 Oil Hedge Positions $87 WTI Floor Under the Acquisition Approximately 65% of oil production is hedged in 211 Berry s oil production is effectively hedged to $78 WTI if WTI is $8 in 211 A floor of about $87 per barrel WTI has been put under the oil economics of the acquisition using 3 way collars: $1 $8 $6 $4 $ ,5 bbl/d with $7 / $86 / $ , bbl/d with $7 / $87 / $ , bbl/d with $7 / $87 / $ Hedged WTI Oil Price Bbl/D 7,27 2, 1,75 1, 1, 5 3,5 Bbl/D 3, 2, 1, 1, 1, 5, Bbl/D 1, 1, 5, 211 Oil Hedges WTI Price 57/73 75/ /75/92 6/8/11 65/85/97 7/86/ Oil Hedges WTI Price 65/86 75/1 6/8/12 6/8/97 65/85/97 7/87/ Oil Hedges WTI Price 6/8/13 65/85/97 7/87/13 $ $5 $6 $7 $8 $ WTI Price/Bbl BERRY PETROLEUM COMPANY - November 21 8

9 Berry s California Assets - 11 MM+ Barrels Proved ~5 MM Barrels of Oil in Place Under Development on 5,3 acres North Midway-Sunset/Diatomite Poso Creek McKittrick Placerita South Midway-Sunset 3 Miles Pilot Steam Flood Area BERRY PETROLEUM COMPANY - November 21 9

10 California Crude Oil Fundamentals California State Production vs. Refining Capacity California Gross Oil Production (MBbl/D) MBOED 2,5 2, 1,5 1, California State Production California Refining Demand Chevron Aera (Shell/Exxon) Oxy Plains Berry Seneca Venoco Year California Differential vs. WTI Oil to Gas Price Ratio California Differential to WTI ($/Bbl) WTI ($/BBL) Futures BERRY PETROLEUM COMPANY - November 21 1

11 S. Midway-Sunset Low Base Decline Asset Highlights Stable production from the 4th largest producing field in the U.S 8, BOPD from 2, acres, 95% working interest, 94% NRI Heavy crude (13 API) produced using steam injection with development focused on deeper pay zones and continuous injection in flanks Upside comes from improved recovery through steam optimization and development of Ethel D S. Midway-Sunset Field Map 3 S. Midway Ethel D Continuous Steam Injection at S. Midway S. Midway-Sunset Production Continuous Continuous Vertical Steam Vertical Injectors Steam Injectors 1, 8, Depletion Depletion BOED 6, 4, 2, Wet Zone Wet Zone BERRY PETROLEUM COMPANY - November 21 11

12 Diatomite Resource 36 Million Barrels in Place on 54 acres Asset Highlights 54 acres, 1% working interest, 9% NRI Diatomite Field Map PAN 25 producing wells with full development of 1, total wells on half-acre spacing Belgian Section 2 Diatomite contains 15 API gravity heavy oil Average depth of 8 feet 36 million barrels of oil in place, targeting 23% recovery Severini A&E Southwestern Upside comes from increased recovery and lower steam oil ratio (SOR) Fairfield Diatomite Permitting Update Received permits for the next phase of diatomite development Working on project approval for the remaining development in the next six months Will run a two-rig drilling program beginning in October 21 BERRY PETROLEUM COMPANY - November 21 12

13 Diatomite Resource - $1. - $1.5 Billion NAV Permit Delay Has Shifted Production Out 6 Months Production Forecast From Current Development Plan (BOED) 2, 15, BOED 1, 5, BOPD 5, Actual Forecast Diatomite Economics California Differential $/BOE WTI $75. $ 7. Steam Operating Costs ($4.5 HH) $1. Non-Steam Operating Costs $ 6. Diatomite Resource Oil-in-Place 36 MMBOE 23% Recovery 83 MMBOE 4% Recovery 144 MMBOE Current Proved 35 MMBOE Production Taxes Margin $ 2. $5. BERRY PETROLEUM COMPANY - November 21 13

14 Poso Creek Development a Model for Heavy Oil Steam Floods Asset Highlights Poso Creek Development 8 acres, 1% working interest, 86% NRI Approximately 23 producing wells with an average depth of 1,3 feet 1 11 Approximately half of the field is under steam flood while the remainder uses cyclic steam USL 35 Poso Creek development shows the 3-year appraisal, drilling and development cycle of typical heavy oil steam Flood 15 POSO USL MC VAN Projected Production Forecast (BOED) DESERT GLOW 5, 4, USL 17 FITZHUGH BOED 3, 2, Actual Forecast N LEO 1, ENAS BERRY PETROLEUM COMPANY - November 21 14

15 Next Generation Heavy Oil Projects Focused on Similar Acquisition Opportunities to 21Z Next generation heavy oil projects are higher viscosity with higher steam to oil ratio and tighter spacing than traditional Midway-Sunset developments Acquired McKittrick 21Z in 29 AERA s redevelopment of Calso field was used as analogy for 21Z development Began a pilot at 21Z in late pilot performance has been strong and supports a full development Building infrastructure and targeting a 5-well development program in 211 Continuing to evaluate steam flood pilot performance at Ethel D and N. Midway and have been encouraged with results to date AERA s CALSO Tulare Development McKittrick 21Z Field LocatorMap Chevron s 1Y Diatomite Development 21Z Berry s Diatomite Development Pan Berry s Pilots USL 12 Mya BERRY PETROLEUM COMPANY - November 21 15

16 Uinta Assets Brundage Canyon Overview Asset Highlights Uinta Basin Map 55, acres in Brundage Canyon with a 1% WI, 8% NRI Altamont Bluebell 42 Producing wells on 4-acre spacing Approximately 6% crude oil and 4% natural gas Cedar Rim Operating margins of approximately $3/BOE at $75 WTI Drilling inventory of 325 wells, majority in the Ashley Forest; awaiting EIS for full development of the Ashley Forest Lake Canyon Brundage Canyon Ashley Forest Monument Butte Big Wash 6 miles Riverbend BOED 8, 7, 6, 5, 4, 3, 2, 1, Projected Production Forecast (BOED) Actual Forecast Berry 21 Drilling Non-Operated 1 Drilling Berry s Acreage BERRY PETROLEUM COMPANY - November 21 16

17 Natural Gas Assets Consumption Reduces Sensitivity to Natural Gas Prices East Texas Asset Highlights Oakes in Limestone County - 2,641 gross acres, 1 producing wells Darco in Harrison County - 2,112 gross acres, 4 producing wells 95% working interest (8% NRI) Deferring drilling activities in E. Texas during 211 and reallocating capital to oil projects Piceance Basin Asset Highlights Garden Gulch - 3,95 net acres (62.5% WI, 5% NRI) North Parachute - 4,13 net acres (95% WI, 79% NRI) Approximately 15 producing wells Drilling in 211 to earn acreage Berry consumes 7% of its natural gas production for steam generation Financial hedges protect long gas volumes 19, MMBtu/d hedged in 21 15, MMBtu/d hedged in 211 Limited natural gas sensitivity - $1 increase in gas price in 211 increases net income by ~$2 million MMBtu/D 9, 6, 3, Commentary Natural Gas Balance 21E 211E Consumption Hedges Long Volume BERRY PETROLEUM COMPANY - November 21 17

18 Capitalization Commentary Pro forma liquidity is over $7 million Strong cash flows from the existing and acquired assets along with hedging activities - target leverage in the range of 2.25x to 2.5x by year-end 211 ($ in millions) Pro Forma Capitalization and Liquidity 1 Capitalization: Pro Forma Senior Secured Credit Facility $ 121 Senior Notes Due Senior Notes Due 22 Senior Subordinated Notes Due Total Debt $1,71 Book Equity 2 1,4 Total book capitalization $2,111 Liquidity: Borrowing Base $ 875 Amount Drawn Total Liquidity $ 731 1) Pro Forma $175 of acquisition payments to be made subsequent to Sep. 3, 21 and $3 million of Senior Notes issued in November 21 2) As of Sep. 3, 21 3) Includes $23 million of outstanding letters of credit BERRY PETROLEUM COMPANY - November 21 18

19 Berry s Key Messages Berry s Oil Resources Unrisked oil resource potential of approximately 4 million BOE Inventory of over 3, drilling locations on oil properties Accelerated development of light oil supported by low base decline in heavy oil assets Berry s Strategic Plan 214 Outlook Focus development on oil assets, increasing oil production to >75% Grow Wolfberry production to over 9, BOED; Diatomite to 15, BOED Increase company-wide operating margin to $37 - $4 per BOE Latest Wolfberry Acquisitions Adds scale to Berry s Wolfberry position bringing current drilling inventory of over 5 years Delivers approximately $62 per barrel margins at hedged $87 WTI Provides the ability for Berry to run multiple drilling rigs and accelerate oil growth Preliminary View of 211 Capital budget between $375 million and $425 million funded from internal cash flow Expect to spend 9% capital on oil projects with oil assets growing 2% Estimated annual average production growth of 15%, with organic growth of 9% BERRY PETROLEUM COMPANY - November 21 19