Buy-recommended Berry Petroleum (BRY) offers unlevered appreciation potential of 14% to estimated net present value [NPV] of $44 a share that includes recognition of developing resource value in Rocky Mountain acquisitions of the past few years.
Second quarter results reported on August 1 displayed unlevered cash flow (Ebitda) decline for natural gas because volume growth was offset by lower price before hedging.
Berry and other Rocky Mountain natural gas producers eagerly await new pipeline capacity due next year to move volumes to eastern markets. Meanwhile, Berry does well while it waits because NPV is concentrated 73% on oil production. The diatomite and Poso Creek projects are contributing to growing oil volume.
The company’s aggressive expansion is supported by long-term oil price that appears to be in an uptrend despite volatility of short-term quotes. Investors apparently like management’s strategy as BRY stock trades above its 200-day average.
Originally published on August 2, 2007.
BRY 1-yr chart: