Berry Corp. has a solid formula for success—acquire good oil-producing assets and run them sustainably.

Even in California, where statewide production has declined 40% in six years, Berry has kept output flat net of divestments, CEO Fernando Araujo said at Hart Energy’s SUPER DUG Conference & Expo in Fort Worth, Texas.

Berry is now expanding its operations in Utah’s Uinta Basin, where it’s been since 2003.

“We’ve been operating in California as Berry for well over 100 years,” Araujo said. “So we know our neighborhood, and I truly think that we’re the best operators in the basin, and there’s numbers that can back up that claim.”

Berry reported producing 24,700 bbl/d in the first quarter, down from 26,100 bbl/d in the previous quarter and 25,400 bbl/d a year earlier. Araujo added that Berry’s production is 80% in California and 20% in Utah.

The core of Berry’s production comes from the Midway-Sunset field and the South Belridge field in California’s San Joaquin Basin, which has three of the 20 largest oil fields in the U.S. and represents 45% of the state’s EUR. The basin has some of the highest oil in place per acre in the world and the decline rates are low, in the 11% to 14% range.

“Most of our projects have a rate of return of greater than 100%, even at current strip pricing,” Araujo said. “I’ve worked all over the world and it’s really, really hard to compete with California economics.”

Araujo highlighted Berry’s thermal diatomite play in the Midway-Sunset field, where the company has 200 PUD locations and 1,000 total locations. The field requires high-pressure steam techniques to unlock the oil.

 Since 2019, Berry has boosted production from the play by 25% using reservoir management, sidetracks and workovers. The low decline rate means those 200 PUD locations can sustain Berry’s production levels for three to four years.

In the Uinta Basin, Berry operates 1,200 vertical wells on 100,000 acres. The supporting oil and gas infrastructure includes a gas plant and 500 miles of pipelines. Last year, Berry farmed into a couple of projects in the first phase of its development strategy there.

The company revealed that the six non-operated wells were successful, and in the second phase the company is drilling a four-well pad targeting Uteland Butte.

“We’re really encouraged by the results that we’re getting so far,” Araujo said. “Depending on the assumptions that you make, we have hundreds of possible locations to drill in different reservoirs going forward.”

Berry has multiple cost advantages in Utah, Araujo said.

“We’re in the shallow end of the basin, so we drill shallower wells compared to other operators,” he said. “We’re also drilling three-mile laterals and obviously that gives us a cost advantage on a dollar-per-foot basis. We’re utilizing our own lease gas to fuel our rig and our frac pumps, and that’s significant savings.”

The easy tie-ins to the existing infrastructure put Berry’s total cost at about $650 per lateral foot, he said.

One constraint on Uinta production is takeaway capacity, Araujo said. The state has five refineries that can process about 200,000 bbl/d of crude. Berry sells most of its oil to those refineries under short-term contracts, with the rest going to rail terminals bound for the Gulf Coast or Cushing, Oklahoma.

It’s not a problem yet, Araujo said, and rail terminals are expanding.

“Long-term, especially as production increases in the basin, there is going to be a limitation in terms of how much we can export,” he said. “We are in conversations with different parties about long-term contracts to be able to have access to that capacity. For the short term and medium term, we’re set.”

RELATED

Berry Corp. Ups Hedge Book During Oil Market Volatility

Comments