BRY - Berry cut at Jefferies as ongoing permitting challenges 'increasingly problematic'

2023-07-17 14:23:48 ET

Berry Corp. ( NASDAQ: BRY ) -2.7% in Monday's trading as Jefferies downgraded the stock to Hold from Buy with an $8 price target, lowered from $9, saying "continued and ongoing challenges to permitting are increasingly problematic."

Regulatory headwinds are the reason why the company trades at its current multiple, and Jefferies analysts led by Lloyd Byrne said the problem has not changed, "muting the benefits of Berry's long inventory life and headwinds from higher California natural gas prices."

While Berry ( BRY ) has "employed innovative approaches to keeping production relatively flat, ultimately without a sustainable flow of new permits (currently only 45 vs. 200 new drills in 2019), its production will decline, constraining long-term cash flow generation," Jefferies wrote.

Berry ( BRY ) continues to look for scale, "but opportunities remain elusive and are likely being blunted by BRY's high cost of equity and wide bid-ask spreads," according to the analysts.

More on Berry Corp.:

• Financial and valuation comparison to sector peers
• Analysis: Berry Corp." Attractive At Current Prices
• Stock price return: Down 1.5% YTD, up 19% in the past 12 months

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