History
Berry borrowed heavily to buy East Texas gas, refinanced its debt, was bought by Linn in 2013, and emerged from Linn's 2016 bankruptcy with a confirmed plan.
2008-2009: A big gas purchase and a debt squeeze
Berry's record opens in June 2008 with a large bet on natural gas. It agreed to buy gas properties on 4,500 net acres in Limestone and Harrison Counties, East Texas, for about $620 million in cash. The properties held 335 billion cubic feet equivalent of proved reserves and about 100 producing wells. The deal closed on July 15, 2008 at an adjusted $653 million. Berry paid for it by drawing about $594 million on a new five-year, $1.5 billion secured credit facility led by Wells Fargo, with a $1 billion borrowing base, meaning the amount lenders would let it borrow against its assets. In October 2008 the base was raised to $1.25 billion and the maturity moved a year earlier, to July 2012.
Then the pressure rose. A $38.5 million bad debt write-off tied to the bankruptcy of Big West, a crude oil buyer, led to a February 2009 amendment that loosened the debt limits in return for higher interest margins. In March Berry ended its contract with Big West and signed a replacement with Tesoro to buy all its Midway Sunset crude, about 12,000 barrels a day, for the six months from April 1.
Berry then replaced its bank debt with bonds. In April 2009 it took a $140 million second-lien loan (debt that ranks behind the bank loan) at 11%. In May it issued $325 million of 10¼% senior notes due 2014, raising about $294 million net. These repaid the second-lien loan and paid down about $154 million of the revolver. A further $125 million of the same notes followed in August at a lower yield of about 9%, bringing them to $450 million.
2010-2012: Cheaper debt, new shares and a restatement
In January 2010 Berry sold new Class A common shares for the first time in this record: 8,000,000, with an option for 1,200,000 more. This diluted existing holders. In June 2010 Berry and bankrupt Flying J agreed that Flying J owed Berry $60.5 million, subject to court approval; nothing had been received at that point.
Berry kept cutting its borrowing costs. In November 2010 it issued $300 million of 6¾% notes due 2020, raising about $294 million net. About $175 million was meant to fund a purchase of producing properties mainly in the Wolfberry trend in West Texas, with the rest going to the revolver. Two weeks later it replaced its bank revolver with a new agreement running to November 2015, with $875 million of lender commitments. An April 2011 amendment extended it to May 2016 and lifted the borrowing base to $1.4 billion.
In February 2011 Berry told investors that its 2007-2009 financial statements should no longer be relied on. After talks with the SEC, hedge gains tied to assets sold in 2009 were moved to discontinued operations, lowering earnings from continuing operations by $12.7 million for 2009 and $1.2 million for 2008. Net earnings were unchanged. The same release reported 2010 net earnings of $83 million, proved reserves of 271 million barrels of oil equivalent and production of 32,666 barrels a day.
In October 2011 Berry reported third-quarter net earnings of $134 million. It had bought back $95 million of its 10.25% notes for $106 million, and it cut its 2011 production growth forecast to about 10% because California regulation slowed its diatomite drilling. In March 2012 it closed a $600 million issue of 6⅜% notes due 2022, raising about $589 million. The money went to redeem $200 million of 8¼% notes, fund a tender offer for up to $150 million of the 10¼% notes, and pay down the revolver.
2013-2014: Sale to Linn
On February 20, 2013 Berry agreed to be acquired by LinnCo, with Linn Energy as the eventual owner, in an all-stock deal at 1.25 LinnCo shares per Berry share. In November the ratio was raised to 1.68, which valued each Berry share at about $53.10 at LinnCo's November 12 close, down from about $55.79 on November 1. Stockholders approved the deal on December 16, 2013, with 42,151,040 votes for and 3,670,065 against. Each Berry share became 1.68 LinnCo shares, and Berry became Berry Petroleum Company, LLC, a wholly owned Linn subsidiary. Its stock was delisted from the NYSE, its directors and officers stepped down, and it ended its SEC registration. By January 2014 it had suspended its duty to file periodic reports. The record then goes quiet for more than two years.
2016-2017: Chapter 11
On May 11, 2016 Berry filed for Chapter 11 bankruptcy in Texas alongside Linn Energy, LinnCo and other Linn subsidiaries. The day before, it had signed a restructuring support agreement with lenders holding at least 66.67% of the Berry and Linn credit facilities. The filing accelerated its bank debt and its 6.75% notes due 2020 and 6.375% notes due 2022, with enforcement stayed.
On January 27, 2017 the court confirmed a plan covering Berry and Linn Acquisition Company. Berry's lenders were to be repaid in full, through a share of an exit facility of up to $550 million plus a paydown, or through term notes. Unsecured noteholders were to receive 82.3% of the new equity or a share of a cash pool. General unsecured creditors were to receive 17.7% of the equity or a share of a $35 million cash pool. As of January 31, 2017, Linn Acquisition held 100% of Berry. All existing equity would be cancelled when the plan took effect. That date had not yet arrived, and the company aimed for it within 30 days without any assurance.
Written from the 29 story beats below (2008 to 31 Jan 2017), which come from the company's own announcements and filings.