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

California Resources Corporation and Berry Corporation announced a definitive agreement for an all-stock merger, valuing Berry at approximately $717 million, to create a stronger California energy leader.

Summary

• California Resources Corporation (CRC) and Berry Corporation (Berry) have entered into a definitive merger agreement.
• The transaction is an all-stock combination, valuing Berry at approximately $717 million, inclusive of Berry's net debt.
• Existing CRC shareholders are expected to own approximately 94% of the combined company upon closing.
• 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.
• The combined entity would have held approximately 652 million barrels of oil equivalent (MMboe) proved reserves (87% proved developed) as of year-end 2024.
• CRC will acquire C&J Well Services, Berry's California-focused oilfield services subsidiary.
• 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.
• The implied enterprise value for the combined entity is more than $6 billion based on September 12, 2025, closing stock prices.
• The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the first quarter of 2026.

Sentiment

Score: 9

Explanation: The filing announces a strategic all-stock merger that is highly accretive, generates significant synergies, strengthens the balance sheet, and enhances the combined company's asset base and operational capabilities. Management comments are very positive, and the identified risks are standard for M&A, not indicating specific red flags beyond typical integration challenges.

Positives

• The transaction is immediately accretive across key financial metrics, strengthening the ability to deliver sustainable value to shareholders.
• Expected to achieve annual synergies of $80-$90 million within 12 months post-closing, representing approximately 12% of the transaction value.
• Projected second half 2025 per share accretion to both net cash provided by operating activities and free cash flow of more than 10% before estimated synergies.
• The combined company will maintain a strong balance sheet with an estimated pro forma LTM leverage ratio of less than 1.0x.
• Approximately 70% of expected second half 2025 pro forma oil production is hedged at a $68/Bbl Brent floor price.
• The transaction adds high-quality, oil-weighted, mostly conventional proved developed reserves and sustainable cash flow to CRC.
• The acquisition of C&J Well Services will enhance CRC's ability to maintain active wells, strengthen well abandonment capabilities, support safe operations, mitigate future cost inflation, and ensure long-term operational efficiency.
• Berry's large, contiguous Uinta Basin position (~100,000 net acres with significant identified inventory) provides additional operational and financial optionality.
• Berry recently brought online four horizontal wells in the Uinta Basin producing approximately 3.8 MBoe/d gross (~93% oil), with peak production expected in late September to early October.
• 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.
• Strong tailwinds on the regulatory front in California make this a favorable time to consummate the merger.

Risks

• Transaction costs.
• Unknown liabilities.
• The risk that any announcements relating to the transaction could have adverse effects on the market price of CRC's common stock or Berry's common stock.
• The ability to successfully integrate the businesses.
• The ability to achieve projected synergies, or 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, financial condition, and the industry in which they operate.
• Risks related to the potential impact of general economic, political, and market factors on CRC or Berry or the transaction.
• The occurrence of any event, change, or other circumstance that could give rise to the termination of the transaction.
• The risk that stockholders of Berry may not approve the transaction.
• Risks related to disruption of management time from ongoing business operations due to the transaction.
• Effects of the announcement, pendency, or completion of the transaction on the ability of CRC and Berry to retain customers and retain and hire key personnel and maintain relationships with their respective suppliers and customers.
• The risk that all necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated.
• Risks that any of the other closing conditions to the transaction may not be satisfied in a timely manner.

Future Outlook

The combined company expects to significantly lower costs and generate higher free cash flow by realizing substantial corporate and operating synergies. It aims to maintain a strong balance sheet with low leverage, a robust hedge book, and liquidity to pursue new development opportunities amid an improving permitting backdrop in Kern County. The company is positioned to unlock its deep asset inventory and drive long-term cash flow per share growth.

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.
• "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.

Industry Context

This merger creates a stronger, more efficient leader in the California energy sector, consolidating assets in a region with an improving permitting backdrop. The acquisition of C&J Well Services also reflects a trend towards vertical integration to control costs and operational efficiency in a challenging regulatory environment. The focus on low-decline, conventional assets aligns with a strategy for sustainable cash flow in mature basins, while the Uinta Basin assets provide diversification and growth optionality outside California.

Comparison to Industry Standards

• The pro forma entity's estimated next twelve-month base oil production decline rate of 10-15% is peer-leading compared to a peer group average of approximately 27%.
• The transaction value of Berry at approximately 2.9x enterprise value / 2025E adjusted EBITDAX is presented as attractively priced, though specific comparable deal multiples for E&P peer deals are not detailed in the filing.
• The estimated pro forma LTM leverage ratio of less than 1.0x indicates a strong balance sheet, which is generally favorable compared to industry averages, especially for companies pursuing M&A.

Stakeholder Impact

• **Shareholders (CRC)**: Expected to own approximately 94% of the combined company, benefiting from accretion to key financial metrics, significant synergies, a stronger balance sheet, and an enhanced asset base.
• **Shareholders (Berry)**: Receive a 15% premium based on September 12, 2025, closing prices and are expected to benefit from participation in a larger, more sustainable business with an improved capital structure and significant operational synergies.
• **Employees**: The filing notes risks related to retaining and hiring key personnel and potential disruption of management time from ongoing business operations due to the transaction.
• **Customers and Suppliers**: The filing mentions risks related to the effects of the announcement, pendency, or completion of the transaction on the ability to maintain relationships with respective suppliers and customers.
• **Communities**: The combined company aims to ensure communities have 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 of Berry that also constitutes a prospectus of CRC.
• Berry shareholders will need to approve the transaction.
• Required regulatory approvals must be obtained.
• Other customary closing conditions to the transaction must be satisfied.
• CRC's executive management team will lead the combined company from its headquarters in Long Beach, California.
• CRC will provide additional financial and operating guidance for the combined company following the close of the transaction.
• Approximately 50% of the run-rate synergies are expected to be implemented within six months of closing, and the remaining 50% within 12 months.

Key Dates

Recommendation

The all-stock merger is highly strategic, creating a larger, more efficient California energy leader. The transaction is immediately accretive to key financial metrics, including over 10% accretion to operating cash flow and free cash flow per share before synergies. The projected $80-90 million in annual synergies, representing 12% of the transaction value, are substantial and expected to be realized quickly. The combined entity will boast a strong balance sheet with low leverage (<1.0x LTM leverage ratio) and a robust hedge book, providing financial flexibility. The acquisition of Berry's high-quality, low-decline conventional assets, including the C&J Well Services subsidiary, enhances operational control and mitigates cost inflation. The Uinta Basin assets also offer significant future optionality. Given the compelling industrial logic, attractive valuation, and strong financial benefits, this merger positions CRC for significant long-term value creation.

Keywords

Merger, Acquisition, Oil and Gas, Energy, California Resources Corporation, Berry Corporation, CRC, BRY, All-stock transaction, Synergies, Uinta Basin, C&J Well Services, Upstream, Exploration and Production, E&P, Carbon Management, SEC Filing