425: Berry Sees Opportunity in New CA Oil Production Law

Berry Corporation anticipates significant opportunities for increased oil and gas production in California, particularly in Kern County, following the signing of Senate Bill 237 and ahead of its combination with CRC.

Summary

• Governor Newsom signed Senate Bill 237 into law on September 26, 2025, which is expected to significantly benefit in-state oil and gas production.
• The State of California projects a need to increase in-state oil production to 125 million barrels per year to stabilize refineries and offset natural declines.
• Effective January 1, 2026, the Kern County Environmental Impact Report will be deemed sufficient for full compliance with the California Environmental Quality Act (CEQA) for the next 10 years.
• This new law is expected to ensure a more consistent and reliable permitting process, with Kern County and CalGEM resuming issuance of up to 2,000 new drill well permits each year, a substantial increase from fewer than 100 permits issued since 2023.
• The combined Berry and CRC entity, post-closing, is expected to benefit from the state's push to boost local oil production to supply in-state refineries.

Sentiment

Score: 9

Explanation: The filing conveys a highly optimistic and positive outlook, emphasizing significant regulatory tailwinds, increased operational opportunities, and the strategic benefits of the pending merger. The tone is celebratory regarding the new law and its implications for future growth and stability.

Positives

• Senate Bill 237 supports an increase in in-state oil and gas production, particularly in Kern County, a key operational area for Berry and CRC.
• The new law ensures a more consistent and reliable permitting process by deeming the Kern County Environmental Impact Report sufficient for CEQA compliance for 10 years, effective January 1, 2026.
• Expectations are for Kern County and CalGEM to resume issuing up to 2,000 new drill well permits annually, a significant increase from fewer than 100 permits issued since 2023.
• The combined Berry and CRC company will benefit from the state's initiative to boost local oil production, addressing California's energy security goals.
• The law provides a clear path for increased development activity, leveraging the combined technical expertise and innovation of Berry and CRC.

Risks

• Transaction costs associated with the proposed combination of Berry and CRC.
• Unknown liabilities that may arise from the merger.
• Adverse effects on the market price of Berry's or CRC's common stock due to transaction announcements.
• Challenges in successfully integrating the businesses of Berry and CRC.
• Difficulty or longer-than-expected time to achieve projected synergies from the combination.
• Risks related to financial community and rating agency perceptions of Berry, CRC, or the industry.
• Potential impact of general economic, political, and market factors on Berry, CRC, or the proposed transaction.
• The occurrence of any event, change, or circumstance that could lead to the termination of the proposed transaction.
• Risk that Berry stockholders may not approve the proposed transaction.
• Disruption of management time from ongoing business operations due to the proposed transaction.
• Effects of the announcement, pendency, or completion of the proposed transaction on the ability to retain customers, hire key personnel, and maintain supplier relationships.
• Risk that closing conditions for the proposed transaction may not be satisfied in a timely manner, including regulatory approvals.
• General risks discussed in Berry's and CRC's Annual Reports on Form 10-K and other SEC filings.

Future Outlook

The company anticipates a new, exciting chapter for California's oil and gas industry, driven by the state's push to boost local oil production. The combined Berry and CRC teams will focus on increasing development activity with operational excellence and high HSE standards, working closely to integrate resources and optimize collective strengths post-closing to maximize the value of the combination.

Management Comments

• Fernando Araujo, CEO of Berry Corporation, expressed excitement about Senate Bill 237, calling it a 'significant moment for our company, our industry and all Californians'.
• Araujo stated that the new law presents 'both an exciting challenge and an incredible opportunity for all of us to rise to the call to provide safe, reliable and affordable energy for all Californians'.
• Araujo is 'confident that our combined teams will rise to meet this challenge with operational excellence and high HSE standards in the years to come' after the combination with CRC closes.
• Araujo emphasized that the goal of the combination is 'to maximize the value of our combination with an organization that supports the combined company’s greater scale and goals'.

Industry Context

The announcement highlights a significant shift in California's regulatory environment for the oil and gas industry, moving towards supporting increased in-state production to meet energy security goals. This contrasts with previous periods of stricter permitting and aligns with the state's projected need for 125 million barrels per year of local crude. The new law provides a more stable and predictable operating environment, particularly in Kern County, which is crucial for California-focused producers like Berry and CRC.

Stakeholder Impact

• Shareholders: Expected to benefit from increased production opportunities, enhanced operational stability, and maximized value from the Berry-CRC combination.
• Employees: Presented with an 'exciting challenge and opportunity' to increase development activity and contribute to California's energy security, with integration planning underway for the combined entity.
• Californians: Expected to benefit from access to safe, affordable, reliable energy through increased in-state oil production, contributing to energy security.
• Refineries: Will benefit from increased local crude supply, helping to stabilize operations.

Next Steps

• Berry and CRC will work closely over the next few months to plan the integration of their organizations post-closing.
• The planning will include thoughtfully combining resources, optimizing collective strengths, and building a unified path forward.
• The company will continue to share updates through FAQs, emails, town halls, or dialogue with management and HR teams.

Key Dates

Recommendation

The signing of Senate Bill 237 represents a significant positive catalyst for Berry Corporation and the broader California oil and gas sector. The expected increase in drill well permits from fewer than 100 to up to 2,000 annually, coupled with a 10-year regulatory certainty for Kern County, fundamentally improves the operating environment. This regulatory support, aligned with the state's energy security goals and the pending value-maximizing merger with CRC, positions Berry for substantial growth in production and profitability. This development significantly de-risks future operations and provides a clear path for increased development activity, making it a compelling 'strong buy' for investors.

Keywords

Oil & Gas, California, Kern County, Senate Bill 237, Permitting, Energy Security, Berry Corporation, California Resources Corporation, Merger, Crude Production