Berry Petroleum Continues to Suffer as Oil Prices Remain Depressed

Berry Petroleum has tried to keep its operational performance steady this year even as energy prices have remained depressed, but the negative sentiment in the industry has weighed on the stock. Berry shares are down nearly 10% in 2019 and a recovery seems unlikely at this point given its latest results.

Let’s see why.

Weak Oil Prices Are Weighing on Berry’s Performance

Berry Petroleum’s second-quarter production came in at 27,500 barrels of oil equivalent per day, slightly higher than the year-ago period’s output of 26,500 BOE/day. However, the company saw weaker prices across the board.

The realized sales price of oil for Berry dropped to $61.69 per barrel as compared to $67.93 in the prior-year period. However, thanks to Berry’s hedges, its realized price actually increased year over year. The company was able to deliver revenue of $142 million, which was flat from the year-ago period.

This can be considered to be an impressive feat given the company’s flat production profile during the second quarter and the weak pricing scenario. However, the problem for Berry was that it saw a substantial increase in costs during the quarter.

The company’s total operating expenses came in at $20.38 per BOE as compared to $16.89 per BOE a year ago, an increase of more than 20%.

However, due to the impact of derivative gains, Berry’s adjusted net income came in at $20 million during the quarter, up from $14.8 million a year ago. So, Berry’s performance wasn’t all that bad during the quarter and the company also reaffirmed its full-year guidance.

Berry Needs a Resurgence in the End Market

So it is clear that Berry stock won’t be able to deliver upside until and unless there is a recovery in the oil price scenario.

However, such a thing seems unlikely as of now. The WTI crude oil price has been languishing around $55 a barrel for some time now and there is no immediate catalyst in the offing.

In fact, don’t be surprised to see oil prices in the U.S. head lower as the country’s trade war with China is intensifying. CNBC reports that there is a possibility China could put a hold on imports of oil from the U.S.

“I think it is a virtual shoo-in that volumes will slow to a trickle and may even grind to a complete halt,” Stephen Brennock, oil analyst at PVM Oil Associates, told CNBC via email.

Chinese buyers recently rekindled their interest in U.S. crude, as imports climbed to a nine-month high of 247,000 barrels per day in May, according to figures from the Energy Information Administration (EIA).”

As such, if China stops importing U.S. oil, there will be a glut and WTI oil could fall further. This is why Berry Petroleum stock might not turn around anytime soon as the macroeconomic uncertainty will keep prices under check and weigh on the company’s financial performance.