8-K: CRC to Acquire Berry Corp in $717M All-Stock Deal

California Resources Corporation announced an all-stock merger agreement to acquire Berry Corporation for approximately $717 million, creating a stronger California energy leader.

Summary

• California Resources Corporation (CRC) and Berry Corporation (BRY) have entered into a definitive Agreement and Plan of Merger for an all-stock transaction.
• The merger values Berry Corporation at approximately $717 million, which includes Berry's net debt.
• Berry shareholders will receive a fixed exchange ratio of 0.0718 shares of CRC common stock for each share of BRY common stock owned, representing a 15% premium based on closing prices on September 12, 2025.
• Upon closing, existing CRC shareholders are expected to own approximately 94% of the combined company.
• On a pro forma basis, the combined company would have produced approximately 161 thousand barrels of oil equivalent per day (Mboe/d) (81% oil) in the second quarter of 2025.
• Pro forma proved reserves for the combined entity would be approximately 652 million barrels of oil equivalent (MMboe) as of year-end 2024, with 87% proved developed.
• CRC plans to refinance Berry's outstanding debt, which was $408 million as of June 30, 2025.
• The transaction is expected to close in the first quarter of 2026, subject to customary closing conditions, including regulatory approvals and Berry shareholder approval.

Sentiment

Score: 9

Explanation: The filing announces a highly accretive all-stock merger with significant projected synergies, improved financial metrics, and a strengthened market position in California. Management commentary is overwhelmingly positive, emphasizing value creation and operational efficiencies.

Positives

• The transaction is expected to be immediately accretive to net cash provided by operating activities and free cash flow per share by more than 10% in the second half of 2025, before estimated synergies.
• CRC anticipates achieving annual synergies of $80-90 million within 12 months post-closing, with approximately 50% implemented within six months.
• The combination adds high-quality, oil-weighted, mostly conventional proved developed reserves and sustainable cash flow to CRC's portfolio.
• CRC will acquire C&J Well Services, Berry's California-focused oilfield services subsidiary, which is expected to enhance well operations, secure the supply chain, and mitigate future cost inflation.
• The combined company is projected to maintain a strong balance sheet with an estimated pro forma LTM leverage ratio of less than 1.0x.
• Approximately 70% of the expected second half 2025 pro forma oil production is hedged at a $68/Bbl Brent floor price, providing financial stability.
• Berry's large, contiguous Uinta Basin position (~100,000 net acres) provides additional operational and financial optionality, with new horizontal wells recently producing ~3.8 MBoe/d gross (~93% oil).
• Berry has permits in hand to execute a one-rig California drilling program through 2026, indicating near-term development potential.
• The combined entity is expected to have a peer-leading low base oil decline rate of 10-15%, significantly lower than the peer group average of approximately 27%.

Risks

• Transaction costs and unknown liabilities associated with the proposed merger.
• The risk that announcements relating to the transaction could have adverse effects on the market price of Berry's or CRC's common stock.
• Challenges in successfully integrating the businesses of Berry and CRC.
• The ability to achieve projected synergies, or that it may take longer than expected to achieve those synergies.
• Risks related to financial community and rating agency perceptions of CRC and Berry or their respective businesses, operations, and financial condition.
• Potential impact of general economic, political, and market factors on CRC, Berry, or the proposed transaction.
• The occurrence of any event, change, or other circumstance that could give rise to the termination of the proposed transaction.
• The risk that Berry's stockholders may not approve the proposed transaction.
• The risk that any of the other closing conditions to the proposed transaction may not be satisfied in a timely manner, including the risk that all necessary regulatory approvals may not be obtained or may be obtained subject to unanticipated conditions.
• Risks related to 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 of CRC and Berry to retain customers, hire key personnel, and maintain relationships with their respective suppliers and customers.

Future Outlook

The combined company expects to achieve significant annual synergies of $80-90 million within 12 months post-closing, with half implemented within six months. Management anticipates the merger will significantly lower costs, generate higher free cash flow, and drive long-term cash flow per share growth. The combined entity aims to maintain a strong balance sheet with low leverage and robust liquidity, providing flexibility for new development opportunities, especially with an improving permitting backdrop in Kern County. The Uinta Basin assets are expected to provide additional operational and financial optionality, with new horizontal wells recently brought online.

Management Comments

• "This transaction is attractively valued and immediately accretive across key financial metrics, strengthening our ability to deliver sustainable value to shareholders." Francisco Leon, CRC President and CEO.
• "By realizing substantial corporate and operating synergies, we expect to significantly lower costs and generate higher free cash flow." Francisco Leon, CRC President and CEO.
• "The combined company will maintain a strong balance sheet with low leverage, a robust hedge book and liquidity—providing the flexibility to pursue new development opportunities amid an improving permitting backdrop in Kern County." Francisco Leon, CRC President and CEO.
• "We are now well positioned to unlock our deep asset inventory and drive long-term cash flow per share growth." Francisco Leon, CRC President and CEO.
• "This announcement presents a compelling value proposition for our shareholders." Rene Hornbaker, Berry's Board Chair.
• "The industrial logic of this merger will allow Berry shareholders to benefit from the creation of a larger and more sustainable business, with an improved capital structure and significant operational synergies." Rene Hornbaker, Berry's Board Chair.
• "The strong tailwinds we are seeing on the regulatory front makes this the right time to consummate this merger." Rene Hornbaker, Berry's Board Chair.
• "The combined company will ensure our communities have access to safe, reliable and affordable energy through responsible in-state production, all while delivering significant long-term value for shareholders." Rene Hornbaker, Berry's Board Chair.

Industry Context

This merger creates a larger, more efficient leader in the California energy sector, consolidating assets and expertise. The acquisition of Berry's C&J Well Services subsidiary by CRC suggests a strategic move towards vertical integration to control costs and enhance operational efficiency in a region with specific regulatory and environmental considerations. The mention of an "improving permitting backdrop in Kern County" and "strong tailwinds on the regulatory front" indicates a potentially more favorable operating environment for in-state oil and gas production in California, which could be a significant factor driving consolidation and investment in the region. The focus on "responsibly sourced energy" and "environmental stewardship" aligns with broader industry trends towards sustainability, even within traditional energy sectors.

Comparison to Industry Standards

• The combined company's estimated pro forma base oil decline rate of 10-15% is significantly lower than the peer group average of approximately 27%, indicating a more stable and long-lived asset base.
• The transaction is priced at approximately 2.9x enterprise value / 2025E adjusted EBITDAX, which is presented as an attractive valuation compared to other E&P peer deals.
• The combined company's estimated pro forma LTM leverage ratio of less than 1.0x suggests a strong financial position and disciplined capital management compared to many industry peers.

Stakeholder Impact

• Shareholders (Berry): Will receive a 15% premium based on September 12, 2025 closing prices and will become shareholders of a larger, more sustainable business with an improved capital structure and significant operational synergies.
• Shareholders (CRC): Expected to own approximately 94% of the combined company, benefiting from an immediately accretive transaction, significant synergies, enhanced free cash flow, and a stronger market position.
• Employees: Potential for disruption of management time and effects on the ability to retain and hire key personnel due to the transaction.
• Customers & Suppliers: Potential effects on the ability of the combined entity to maintain relationships with respective suppliers and customers.
• Communities: The combined company aims to ensure access to safe, reliable, and affordable energy through responsible in-state production.

Next Steps

• CRC will file a registration statement on Form S-4 with the SEC, which will include a proxy statement/prospectus for Berry shareholders.
• Berry shareholders will need to approve the proposed transaction.
• The companies need to obtain required regulatory approvals.
• The transaction is expected to close in the first quarter of 2026.
• Following the close, CRC will provide additional financial and operating guidance for the combined company.
• CRC plans to refinance Berry's outstanding debt and may pursue a new debt issuance.

Key Dates

Recommendation

The all-stock merger is presented as highly accretive to key financial metrics for CRC, with substantial synergies expected to drive increased free cash flow and shareholder value. The combined entity will boast a stronger balance sheet, a lower decline asset base, and enhanced operational capabilities through the acquisition of C&J Well Services. The 15% premium for Berry shareholders and the strategic fit within California's energy landscape, coupled with an improving regulatory environment, suggest a compelling long-term value proposition for the combined company.

Keywords

Merger, Acquisition, Oil and Gas, Energy, California Resources Corporation, Berry Corporation, BRY, CRC, All-stock transaction, Upstream, Oilfield services, Synergies, Accretion, Proved reserves, Uinta Basin, San Joaquin Basin, C&J Well Services