Berry Corporation: A Strong Buy for Defensive Energy Exposure Amid Commodity Volatility

In an era of relentless commodity price swings and macroeconomic uncertainty, energy investors are increasingly prioritizing companies that balance growth with risk mitigation. Berry Corporation (BRY) stands out as a compelling case study in this regard. By combining aggressive production expansion, disciplined debt reduction, and a sophisticated hedging program, the company has positioned itself as a defensive play in a sector often plagued by boom-and-bust cycles. For investors seeking to hedge against energy market volatility while capitalizing on long-term value creation, Berry's strategy offers a rare combination of resilience and upside potential.

Strategic Hedging: Locking in Stability Amid Chaos

Berry's hedging program is a masterclass in risk management. As of July 31, 2025, the company had hedged 71% of its 2025 oil production at an average price of $74.59 per barrel of Brent crude, with 63% of 2026 production locked in at $69.55 per barrel. These hedges include a mix of swaps, collars, and puts, with a notable conversion of 2.3 MBbls/d of collars and puts into swaps in 2026 and 2027. This shift effectively raised the average floor price by $6 per barrel, creating a buffer against potential price collapses.

The significance of these hedges cannot be overstated. In a market where oil prices have swung between $65 and $90 in 2025 alone, Berry's fixed-price contracts ensure predictable cash flows. This stability is critical for sustaining production growth and debt reduction, even if spot prices dip below $70. For context, shows how the company's shares have outperformed the broader sector during periods of price volatility, a testament to the effectiveness of its hedging strategy.

Production Growth: Fueling the Engine of Value Creation

Berry's operational execution has been equally impressive. In Q2 2025, the company averaged 23.9 MBoe/d of production, with 92% oil content, aligning with its full-year guidance of 24,800–26,000 boe/d. The upcoming contribution from four horizontal Uinta wells—two already in flowback or completion—will further accelerate output. Early frac operations also pushed forward capital expenditures into Q2, ensuring a smoother path to achieving 2025 production targets.

This growth is not just about volume. With 93% of total production expected to be oil in 2025, Berry is capitalizing on the higher margins of crude over natural gas. The company's gas purchase hedges, covering 80% of expected demand at $4.22 per MMBtu, add another layer of protection for non-core production. Together, these factors create a diversified yet focused production profile that can withstand sector-wide headwinds.

Debt Reduction: Building a Foundation for Shareholder Returns

Berry's financial discipline is the third pillar of its investment thesis. In Q2 2025, the company paid down $11 million of debt, bringing year-to-date reductions to $23 million. With a remaining target of $45 million in 2025, the company is on track to significantly de-risk its balance sheet. As of June 30, 2025, Berry had $428 million outstanding on its term loan facility and $101 million in liquidity (including $20 million in cash and $49 million in available borrowing capacity). This liquidity ensures the company can fund its 2025 capital program with cash flow, avoiding the need for dilutive financing.

The debt reduction strategy is not just about deleveraging—it's about unlocking shareholder value. With a stronger balance sheet, Berry can reinvest in high-margin projects or boost returns through dividends and buybacks. The company's hedging program further amplifies this potential by ensuring consistent cash flows to support these initiatives.

A Convincing Case for Long-Term Investors

Berry Corporation's combination of strategic hedging, production growth, and debt reduction creates a compelling narrative for defensive energy exposure. While the broader market remains fixated on short-term price swings, Berry is building a fortress-like business model that prioritizes long-term stability. For investors, this translates to a stock that is less correlated with speculative energy plays and more aligned with the fundamentals of disciplined capital allocation.

The upcoming August 7, 2025, conference call will provide further clarity on the company's Q2 results and 2026 guidance. However, based on current metrics, the case for Berry is clear: it is a strong buy for those seeking to hedge against commodity volatility while participating in a company that is actively building long-term value.

In a high-uncertainty market, Berry's approach offers a blueprint for sustainable growth. For investors willing to look beyond the noise of daily price swings, the company's stock represents a rare opportunity to combine defensive positioning with growth potential.