As California Resources Corp. (CRC) and Berry Corp. combine to create a larger California oil producer, questions loom over the future of Berry’s budding operations in Utah.
CRC announced plans to acquire Berry Corp. for around $717 million, including Berry’s net debt, on Sept. 15. CRC said the deal would give it optionality in an emerging play, but analysts suggest Berry’s 100,000 net acres in Utah’s oil-rich Uinta Basin could be prime for divestiture after the deal closes.
TD Cowen said it expects CRC to divest its Uinta position in 2026, a sale they estimate could bring in at least $400 million to $500 million. Such a sale “would go quite a ways to pay for the entirety” of CRC’s acquisition of Berry, the analysts said.
Given CRC’s focus on California, Jefferies analysts also believe the company could look to divest Berry’s Uinta holdings.
Berry has started to develop its Uinta asset through a series of farm-in agreements with other operators. But Texas Capital Securities analysts noted that “the uncertain commodity price environment likely weighed on the company’s ability to accretively partner with others to develop Berry’s Uinta Basin asset.”
There has been a major ramp-up in Uinta activity over the past two years, including over $4.6 billion of transactions in 2024.
SM Energy partnered with Northern Oil & Gas (NOG) to acquire leading Uinta oil producer XCL Resources for $2.6 billion last year. NOG took a 20% non-operated stake in the XCL assets.
Following the XCL deal, Ovintiv sold its Uinta assets to private E&P FourPoint Resources for $2 billion.
Other Uinta oil producers include publicly traded Crescent Energy and private firms Scout Energy Partners and Uinta Wax Operating.
Branching out from California roots
Dallas-based Berry Corp. traces its origins to California pioneer Clarence Jesse “C.J.” Berry, who built a fortune during the Klondike Gold Rush in Alaska over a century ago.
He drilled his first well in the San Joaquin Basin of Kern County, California, in 1909 before establishing more than a dozen oil ventures that laid the foundation for Berry Corp. today. The company still holds 20,000 net acres in California’s oil-rich Central Valley.
But in 2003, Berry’s quest for growth led the company to expand outside of California. The company acquired assets in Utah’s Uinta Basin, including production from about 1,200 vertical wells.
As horizontal drilling advanced near its Utah acreage in recent years, Berry began testing the horizontal potential of its own Uinta holdings.
Berry brought online four horizontal wells targeting the Uteland Butte Formation during the third quarter. The wells are collectively producing around 3,800 boe/d gross (93% oil) with peak production anticipated in late September or early October.
During the second quarter, Berry announced it would execute another farm-in agreement for a 30% working interest in a horizontal well targeting the shallower Castle Peak bench.
Berry produced 4,200 boe/d (65% oil and liquids) from the Uinta in the second quarter.
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California drilling freeze shows signs of thawing
CRC and Berry are doubling down on their home state just as momentum builds for more in-state oil production under some of the nation’s strictest climate rules.
California lawmakers passed SB 237 on Sept. 13, paving the way for regulators in Kern County to approve up to 2,000 permits for new oil and gas wells per year.
It marks a sharp reversal for California regulators, who in recent years have largely restricted new drilling permits.
SB 237 still awaits approval from Gov. Gavin Newsom.
CRC President and CEO Francisco Leon is encouraged by two other legislative items: SB 614 lifts a moratorium on CO2 pipelines, which supports CRC’s carbon-management business.
A third bill, AB 1207, would extend the state’s cap-and-trade program through 2045, “providing additional clarity and important incentives to support the energy transition,” Leon said on a Sept. 15 call with analysts.
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