2010-11-04-2010-10-25

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
$180.0MM
Description

To acquire interest in approximately 9,300 net acres in Wolfberry trend in West Texas, gaining 1,200 BOE/d, 35 MMBOE proved and probable.

Berry Petroleum Co., Denver, (NYSE: BRY) plans to acquire interest in approximately 9,300 net acres in the Wolfberry trend in West Texas from an undisclosed group of sellers for a total $180 million in cash.

Production is expected to be approximately 1,200 barrels of oil equivalent per day at closing, and approximately 2,200 barrels equivalent per day in 2011. Contribution to the company's fourth quarter 2010 production will be minimal given the expected closing date. Proved and probable reserves are approximately 35 million barrels of oil equivalent (76% oil).

Since entering the Permian basin in March, Berry has accumulated approximately 19,350 net acres in the Wolfberry trend. The $313 million of acquisitions in 2010 is expected to provide a five-year drilling inventory in the Wolfberry of 400 locations on forty-acre spacing with an additional 400 potential locations on twenty-acre spacing.

Berry president and chief executive Robert Heinemann says, "We are pleased to bring additional scalable, high margin oil assets into the portfolio which complements our base oil assets in California and Utah. We believe these acquisitions enhance our overall Permian operations with a contiguous 6,800 net acre block and strong per well recoveries of 180,000 barrels equivalent. The first three years of expected production on these assets has a hedging floor of approximately $87 WTI, which should allow these assets to generate operating margins of $62 per barrel."

He adds that Berry expects production from its Permian assets to grow to 9,000 barrels equivalent per day during the next four years.

Berry will fund this acquisition through its credit facility and on a pro forma basis will have liquidity of more than $500 million. The leverage is expected to be in the range of 2.25 to 2.5 times EBITDA in 2011.

The effective date of the transaction is Oct. 1. The deal is expected to close in December.