California-focused oil producer Berry Corp. is expanding its position through M&A.
Dallas-based Berry Corp. agreed to acquire Macpherson Energy Corp., a privately held operator in Kern County, California, for $70 million in cash, the companies announced July 17.
Scooping up Macpherson Energy will add about 2,400 boe/d (100% oil) of crude production in 2024, Berry said.
Under the terms of the agreement, Berry will pay $50 million at closing—which is expected to occur in the third quarter.
The company expects to pay the remaining $20 million by July 2024 based on its current projects for the pro forma company and Brent crude pricing of $75/bbl.
After the deal is fully paid out in mid-2024, the combined company’s free cash flow is expected to be 15% to 25% greater than Berry on a standalone basis.
“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 Berry Corp. CEO Fernando Araujo in a news release.
“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,” he said.
Berry plans to finance a portion of the Macpherson acquisition by reallocating $35 million from its own 2023 capital spending plan.
Incremental free cash flow expected from the acquired production will also contribute to the final purchase price, Berry said.
Berry was represented by Guggenheim Securities LLC as exclusive financial adviser and Vinson & Elkins LLP as legal counsel.
As of the end of 2022, Berry held approximately 15,000 net acres in the San Joaquin basin in Kern County, California, according to Securities & Exchange Commission filings. The company saw first-quarter California production of 19,900 boe/d, Berry reported in earnings in May.
Berry also has assets in the oil-rich windows in the Uinta Basin of Utah.
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