Berry Corporation has executed a definitive agreement to acquire Macpherson Energy Corporation, a privately held Kern County, California operator, for $70 million in cash, subject to customary purchase price adjustments. The transaction is structured such that $50 million will be paid at closing and the remainder paid in July 2024.

This is a value creating transaction for Berry and our shareholders that we expect to be fully paid for by mid-year 2024 based on current projections for the pro forma company and $75/barrel Brent pricing. Substantially all of the purchase price will come from reallocating $35 million of Berry’s planned 2023 capital expenditures and the free cash flow expected from the acquired production.(1) The free cash flow generated by the proforma company, after the transaction is fully paid in 2024, is expected to be 15% to 25% greater than Berry standalone, which will enhance returns to Berry’s shareholders.(1) This transaction is consistent with Berry’s shareholder return model, which provides that 20% of annual post-fixed dividend Adjusted Free Cash Flow(2) will be returned to shareholders through variable dividends and the remaining 80% will be used for stock and debt repurchases, as well as bolt-on acquisitions such as this one.

“The acquisition of these high-quality, low decline oil producing properties meets the criteria of our disciplined capital returns strategy – it will be near- and long-term accretive across key financial metrics and increase future free cash flow generation. These assets, which are a natural fit with our existing rural Kern County portfolio, will enable us to optimize our 2023 production plans with greater capital efficiency and enhance future capital allocation flexibility," said Fernando Araujo, Berry’s Chief Executive Officer. “Further, leveraging Berry’s track record of unlocking value from mature assets with existing wellbores in California, we are confident we can achieve significant production upside, even in the current regulatory environment, as well as significant synergies. The addition of these attractively priced assets will strengthen Berry’s operational and financial performance, better position Berry for further consolidation, and support shareholder returns.”(1)

Acquisition Highlights

Shallow Decline Conventional Oil – Adds approximately 2,400 boe/d (100% oil) in 2024 valued at $8/boe of 1P reserves.(3)

• Improves Capital Efficiency – Improves capital efficiency by approximately 25% compared to Berry’s historical trends while reducing Berry’s standalone 2023 capital program by re-allocating $35 million to fund the acquisition.
• Increases Free Cash Flow – Attractively priced at 2.7x 2024 estimated Adjusted EBITDA(2) and expected to deliver an estimated uplift to Adjusted Free Cash Flow(1)(2) of 15% to 25% starting in 2024 compared to Berry standalone.
• Upside Potential for Future Development – Line of sight to further enhance future shareholder returns from upside potential through production enhancing opportunities utilizing proven technologies, plus fully permitted steamflood expansion from existing wells, in addition to more than 80 PUD locations. (3)
• Significant Operational Synergies Offer Further Potential Upside – Additional potential upside through economies of scale cost saving opportunities, including savings related to steam and water management, well work, rig services, facilities, and G&A over the long term.
• Maintains Strong Balance Sheet – The acquisition is not expected to materially impact Berry’s year-end leverage profile in 2023 or future versus a standalone scenario. Berry expects to utilize its reserve-based revolving credit agreement to fund the purchase price, which is expected to be repaid by mid-2024 based on current projections,(1)which include a $35 million reduction in Berry’s 2023 planned capital expenditures and the additional free cash flow expected from the acquired production.(1)  

This acquisition is expected to close in the third quarter of 2023, subject to customary terms and conditions. Management will update its full year 2023 guidance in connection with the acquisition closing.

(1 Based on current projections, including $75 per barrel Brent pricing.
(2) Non-GAAP measures.
(3) Based on third party reserve estimates.

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