Berry’s stock price decline has mirrored the weakness in oil prices, and its latest set of results was not very strong. Under these circumstances, does it make sense to buy Berry Petroleum’s dip?
The State of Affairs at Berry
Berry Petroleum missed Wall Street’s estimates in the first quarter of 2019. The company’s non-GAAP earnings per share of $0.30 were a couple of cents behind consensus estimates, while revenue of $141.8 million was also lower than what analysts were expecting.
Berry managed to increase its adjusted net income over the year-ago quarter. The company’s adjusted net income of $24.2 million was significantly higher than the prior-year period’s figure of $15 million. Its adjusted EBITDA also shot up to $68.5 million as compared to $44.5 million in the prior-year period.
The top and bottom line jump is really impressive considering that Berry was weighed down by weak pricing during the quarter. The company’s average realized price of oil was down to $56.88 per barrel during the quarter as compared to $62.14 in the year-ago period. But taking into account the impact of derivative settlements, Berry’s oil price increased from $52.74 per barrel a year ago to $62.03 per barrel this time.
On the other hand, strong natural gas prices aided Berry’s financial growth last quarter. The company clocked a natural gas price of $3.83 per Mcf as compared to the year-ago period’s price of $2.64 per Mcf.
In all, even though Berry’s results were not up to the mark as per analysts’ expectations last quarter, they were good enough to keep investors’ faith in good spirits. The good news for Berry investors is that oil prices have started moving up, and this could give it a much-needed boost.
Better Times Ahead?
The price of WTI crude has inched back up to $58 per barrel from just over $51 per barrel a couple of weeks ago. Looking ahead, don’t be surprised to see the crude oil price rise further as the U.S. and China are coming back to the table to resolve the trade war.
A resolution to the U.S.-China trade war will be good news for oil prices and Berry Petroleum as it should ideally lead to stronger oil demand. The Chinese have reduced their imports of U.S. crude, and one way they might start buying again is when the trade war comes to an end.
Meanwhile, further sanctions on Iran by the U.S. will prove to be another catalyst for oil prices as they will reduce end-market supply. As such, there’s a good chance that Berry Petroleum will be able to get back on track thanks to a potential improvement in oil prices.
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