Debt

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Debt

Debt

The following table summarizes our outstanding debt:

	September 30, 2024		December 31, 2023		Interest Rate	Maturity	Security
	(in thousands)
2021 RBL Facility					variable rates 10.25% (2024) and 10.50% (2023)	August 26, 2025	Mortgage on 90% of Present Value of proven oil and gas reserves and lien on certain other assets
Long-term	$	—	$	31,000
Current	27,500		—
2022 ABL Facility	—		—		variable rates 9.25% (2024) and 9.75% (2023)	June 5, 2027	CJWS property and certain other assets
2026 Notes	400,000		400,000		7.0%	February 15, 2026	Unsecured
Debt - Principal Amount	427,500		431,000
Debt Issuance Costs	(2,000)		(3,007)
Current Portion of Debt	(27,500)		—
Long-Term Debt, net	$	398,000	$	427,993

Deferred Financing Costs

We incurred legal and bank fees related to the issuance of debt. At September 30, 2024 and December 31, 2023, debt issuance costs reported in “other noncurrent assets” on the balance sheet were approximately (i) $2 million and $3 million, respectively, net of amortization, for the Credit Agreement, dated as of August 26, 2021, among Berry Corp, as a guarantor, Berry LLC, as the borrower, JPMorgan Chase Bank, N.A., as the administrative agent and an issuing bank, and each of the lenders from time to time party thereto (as amended, restated, modified or otherwise supplemented from time to time, the “2021 RBL Facility”) and (ii) an immaterial amount, net of amortization, for the Revolving Loan and Security Agreement, dated as of August 9, 2022, among C&J and C&J Management, as borrowers, and Tri Counties Bank, as lender (as amended, restated, supplemented or otherwise modified from time to time, the “2022 ABL Facility”). At September 30, 2024 and December 31, 2023, debt issuance costs, net of amortization, for the unsecured notes due February 2026 (the “2026 Notes”) reported in “Long-Term Debt, net” on the balance sheet were approximately $2 million and $3 million, respectively.

For each of the three month periods ended September 30, 2024 and 2023, the amortization expense for the 2021 RBL Facility, the 2022 ABL Facility and the 2026 Notes, combined, was approximately $1 million. For each of the nine month periods ended September 30, 2024 and 2023, the amortization expense for the 2021 RBL Facility, the 2022 ABL Facility and the 2026 Notes, combined, was approximately $2 million. The amortization of debt issuance costs is presented in “interest expense” on the condensed consolidated statements of operations.

Fair Value

Our debt is recorded at the carrying amount on the balance sheets. The carrying amounts of the 2021 RBL Facility and the 2022 ABL Facility approximate fair value because the interest rates are variable and reflect market rates. The 2021 RBL Facility and 2022 ABL Facility are Level 2 in the fair value hierarchy. The fair value of the 2026 Notes was approximately $388 million and $391 million at September 30, 2024 and December 31, 2023, respectively. The 2026 Notes are Level 1 in the fair value hierarchy and the fair value is based on available market pricing.

2021 RBL Facility

The 2021 RBL Facility provides for a revolving loan with up to $500 million of commitment, subject to a borrowing base and an aggregate elected commitment amount. The borrowing base under the 2021 RBL Facility is redetermined semi-annually, and the borrowing base redeterminations generally become effective each May and November, although the borrower and the lenders may each make one interim redetermination between scheduled redeterminations. On August 20, 2024, the scheduled semi-annual redetermination of the borrowing base occurred under the Credit Agreement, dated as of August 26, 2021 (as amended, supplemented or otherwise modified, the “Credit Agreement”), by and among Berry Corporation (bry) as a guarantor, Berry LLC, our wholly-owned subsidiary, as the borrower (the “Borrower”), JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. In connection with such redetermination, the Borrower’s borrowing base and aggregate elected committed amount are each $125 million (previously $200 million), effective as of the redetermination date. In accordance with the Credit Agreement, the next scheduled semi-annual borrowing base redetermination will be in or around November 2024.

As of September 30, 2024, the 2021 RBL Facility had a $500 million revolving commitment, a $125 million borrowing base, a $125 million aggregate elected commitment amount and a $20 million sublimit for the issuance of letters of credit (with borrowing availability being reduced by the face amount of any letters of credit issued under the subfacility). Availability under the 2021 RBL Facility may not exceed the lesser of the aggregate elected commitment amount or the borrowing base less outstanding advances and letters of credit. The 2021 RBL Facility matures on August 26, 2025, unless terminated earlier in accordance with the terms of the 2021 RBL Facility. The 2021 RBL Facility is available to us for general corporate purposes, including working capital.

The outstanding borrowings under the 2021 RBL Facility bear interest at a rate equal to, at our option, either (a) a customary base rate plus an applicable margin ranging from 2.0% to 3.0% or (b) a term SOFR reference rate, plus an applicable margin ranging from 3.0% to 4.0%, in each case determined based on the utilization level under the 2021 RBL Facility. Interest on base rate borrowings is payable quarterly in arrears and interest on term SOFR borrowings accrues in respect of interest periods of one, three or six months, at the election of the borrower, and is payable on the last day of such interest period (or, for interest periods of six months, three months after the commencement of such interest period and at the end of such interest period). Unused commitment fees are charged at a rate of 0.50%.

The 2021 RBL Facility provides that, to the extent we incur unsecured indebtedness, including any amounts raised in the future, the borrowing base will be reduced by an amount equal to 25% of the amount of such unsecured debt. In addition, the 2021 RBL Facility requires us to maintain on a consolidated basis as of each quarter-end (i) a leverage ratio of not more than 2.75 to 1.0 and (ii) a current ratio of not less than 1.0 to 1.0. As of September 30, 2024, we were in compliance with all of covenants under the 2021 RBL Facility.

The 2021 RBL Facility also contains other customary affirmative and negative covenants, as well as events of default and remedies. If we do not comply with the financial and other covenants in the 2021 RBL Facility, the lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the 2021 RBL Facility and terminate the commitments thereunder.

The 2021 RBL Facility is guaranteed by Berry Corp. and certain of its subsidiaries. Each future subsidiary of Berry Corp., with certain exceptions, is required to guarantee our obligations and obligations of the other guarantors under the 2021 RBL Facility and under certain hedging transactions and banking services arrangements. The lenders under the 2021 RBL Facility hold a mortgage on at least 90% of the present value of our proven oil and gas reserves. The obligations of Berry LLC and the guarantors are also secured by liens on substantially all of our personal property, subject to customary exceptions. C&J and C&J Management do not guarantee the 2021 RBL Facility or grant any liens on their assets to secure any obligations under the 2021 RBL Facility.

On July 30, 2024, we entered into a letter agreement to amend the 2021 RBL Facility to extend the permitted tenor of certain commodity hedging agreements which we may enter into, from a tenor not to exceed 48 months to a tenor not to exceed 60 months.

As of September 30, 2024, we had $28 million borrowings outstanding, $9 million in letters of credit outstanding and approximately $88 million of available borrowing capacity under the 2021 RBL Facility. Under the terms of the 2024 Term Loan Agreement, the 2021 RBL Facility will be terminated upon funding of the 2024 Term Loan.

2022 ABL Facility

Subject to satisfaction of customary conditions precedent to borrowing, as of September 30, 2024, C&J and C&J Management could borrow up to the lesser of (x) $10 million and (y) the borrowing base under the 2022 ABL Facility, with a letter of credit subfacility for the issuance of letters of credit in an aggregate amount not to exceed $7.5 million (with borrowing availability being reduced by the face amount of any letters of credit issued under the subfacility). The “borrowing base” is an amount equal to 80% of the balance due on eligible accounts receivable, subject to reserves that the lender may implement in its reasonable discretion. As of September 30, 2024, the borrowing base was $10 million. Interest on the outstanding principal amount of the revolving loans under the 2022 ABL Facility accrues at a per annum rate equal to 1.25% in excess of the variable rate of interest, on a per annum basis, which is announced and/or published in the “Money Rates” section of The Wall Street Journal from time to time as its “Prime Rate”. Interest is due quarterly, in arrears. In June 2024, we entered into the Third Amendment to Revolving Loan and Security Agreement and Amendment to Other Loan Documents which, among other things, extended the maturity of the 2022 ABL Facility from June 5, 2025 to June 5, 2027, unless terminated earlier in accordance with the terms of the 2022 ABL Facility.

The 2022 ABL Facility requires C&J and C&J Management to comply with the following financial covenants: (i) maintain on a consolidated basis a ratio of total liabilities to tangible net worth of no greater than 1.5 to 1.0 at any time; (ii) reduce the amount of revolving advances outstanding under the 2022 ABL Facility to not more than 90% of the lesser of (a) the maximum revolving advance amount or (b) the borrowing base, as of the lender’s close of business on the last day of each fiscal quarter; and (iii) maintain net income before taxes of not less than $1.00 as of each fiscal year end. As of September 30, 2024, each of C&J and C&J Management was in compliance with all of the covenants under the 2022 ABL Facility.

The 2022 ABL Facility also contains other customary affirmative and negative covenants, as well as events of default and remedies. If C&J or C&J Management does not comply with the financial and other covenants in the 2022 ABL Facility, the lender may, subject to customary cure rights, require immediate payment of all amounts outstanding under the 2022 ABL Facility and terminate the commitment thereunder. The obligations of C&J and C&J Management under the 2022 ABL Facility are guaranteed by C&J Management and C&J, respectively, and are secured by liens on substantially all of the personal property of C&J and C&J Management, subject to customary exceptions. The obligations of C&J and C&J Management under the 2022 ABL Facility are not guaranteed by Berry Corp. or Berry LLC and Berry Corp. and Berry LLC do not and are not required to provide any credit support for such obligations.

As of September 30, 2024, each of C&J and C&J Management had no borrowings and $3 million letters of credit outstanding with $7 million of available borrowing capacity under the 2022 ABL Facility. Under the terms of the 2024 Term Loan Agreement, the 2022 ABL Facility will be terminated upon funding of the 2024 Term Loan.

Senior Unsecured Notes Due February 2026

In February 2018, Berry LLC completed a private issuance of $400 million in aggregate principal amount of 7.0% senior unsecured notes due February 2026, which resulted in net proceeds to us of approximately $391 million after deducting expenses and the initial purchasers’ discount.

The 2026 Notes are Berry LLC’s senior unsecured obligations and rank equally in right of payment with all of our other senior indebtedness and senior to any of our subordinated indebtedness. The 2026 Notes are fully and unconditionally guaranteed on a senior unsecured basis by Berry Corp and certain of its subsidiaries. C&J and C&J Management do not guarantee the 2026 Notes.

The indenture governing the 2026 Notes contains customary covenants and events of default (in some cases, subject to grace periods). We were in compliance with all covenants under the 2026 Notes as of September 30, 2024.

In conjunction with and subject to the closing of the 2024 Term Loan Credit Agreement discussed below, the Company is required to redeem the 2026 Notes. This report does not constitute a notice of redemption of the 2026 Notes.

2024 Term Loan Credit Agreement

Subsequent to the end of the third quarter of 2024, but before the issuance date of these financials, the Company entered into a Senior Secured Term Loan Credit Agreement (the “2024 Term Loan Credit Agreement”) among the Company, as borrower, certain subsidiaries of the Company, as guarantors, Breakwall Credit Management LLC, as administrative agent, and the lenders from time to time party thereto.

The 2024 Term Loan Credit Agreement provides for aggregate commitments equal to $545 million, consisting of (i) an initial term loan facility in the aggregate principal amount of $450 million (the “Initial Term Loans”), and (ii) a delayed draw term loan facility in an aggregate principal amount of up to $95 million which is available from the date of the first borrowing of the Initial Term Loans (the “Funding Date”) until the date that is two years after the effectiveness of the 2024 Term Loan Credit Agreement (the “Working Capital Term Loan Facility”). The ability of the Company to borrow under the 2024 Term Loan Credit Agreement, including to refinance the 2026 Notes, 2021 RBL Facility, and the 2022 ABL Facility, is subject to satisfaction of certain customary conditions precedent, as further set forth in the 2024 Term Loan Credit Agreement, including (a) the repayment and termination of liens under each of the 2021 RBL Facility and 2022 ABL Facility and (b) satisfaction and discharge of the 2026 Notes. The proceeds of the Initial Term Loans are limited in their use to the satisfaction and discharge of existing debt, payment of fees and expenses in connection with the 2024 Term Loan Credit Agreement and other related transactions, capital expenditures in accordance with the 2024 Term Loan Credit Agreement, working capital, and other general corporate purposes. A requirement of funding the Initial Term Loans is (a) the contemporaneous termination of the 2022 ABL Facility and the 2021 RBL Facility, including satisfaction and discharge of any remaining balances thereon and (b) the satisfaction and discharge of the 2026 Notes.

The 2024 Term Loan Credit Agreement will have an initial maturity date of three years from the Funding Date, which may be extended by up to two one-year increments subject to payment of extension fees, and satisfaction of certain other customary conditions. Quarterly debt service payments of an amount equal to the sum of 2.5% of (a) the face value of the Initial Term Loan and (b) the aggregate amount of delayed draws made from the Working Capital Term Loan Facility are required beginning in March 2025.

Loans under the 2024 Term Loan Credit Agreement will bear interest at a rate per annum equal to Term SOFR (as defined in the 2024 Term Loan Credit Agreement) plus an applicable margin of 7.50%. If an Event of Default (as defined in the 2024 Term Loan Credit Agreement) exists and is continuing, upon the election of the Majority Lenders (as defined in the 2024 Term Loan Credit Agreement) under the 2024 Term Loan Credit Agreement, or automatically without such election, in the case of a bankruptcy, insolvency, or payment default, all amounts outstanding under the 2024 Term Loan Credit Agreement will bear interest at 2.00% per annum above the rate and margin otherwise applicable thereto (it being understood that the Majority Lenders may elect for the application of default interest to commence on any date that is on or after the occurrence of such Event of Default while such

Event of Default is continuing). The Company will be able to repay any amounts borrowed prior to the maturity date (i) without any premium for any optional prepayment on or prior to the date that is 24 months after the Funding Date and (ii) thereafter, subject to a concurrent payment of 2.75% of the principal amount being repaid.

On the Funding Date, the 2024 Term Loan Credit Agreement will be guaranteed by the Company and all of its wholly owned subsidiaries and will be secured by a first lien security interest in substantially all assets of the Company and all of its wholly owned subsidiaries.

The 2024 Term Loan Credit Agreement allows the Company to replace the commitments and outstanding borrowings under the Working Capital Term Loan Facility with a super-priority reserve based credit facility of up to $95 million (the “New RBL Facility”), subject to terms and conditions set forth therin, including the entry by the Company and the subsidiaries of the Company party thereto into of an intercreditor agreement, as more fully described in the 2024 Term Loan Credit Agreement.

The 2024 Term Loan Credit Agreement also contains certain financial covenants, including (a) minimum liquidity of $25 million as of the last day of any calendar month and (b) commencing with the fiscal quarter ending March 31, 2025, (i) a total net leverage ratio that may not exceed 2.5 to 1.0 and (ii) an asset coverage ratio that may not be less than 1.3 to 1.0 as of the last day of any fiscal quarter, in each case, as fully more described in the 2024 Term Loan Credit Agreement.

Additionally, the 2024 Term Loan Credit Agreement contains additional restrictive covenants that (i) from and after the effective date thereof, limit the ability of the Company and its subsidiaries to, among other things, pay dividends or prepay other debt, make investments and loans, enter into mergers and acquisitions, and sell assets, and (ii) from and after the Funding Date, will limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness (with such exceptions including the New RBL Facility), incur additional liens, enter into certain hedging transactions, engage in transactions with affiliates and make certain capital expenditures.

In addition, the 2024 Term Loan Credit Agreement is subject to customary events of default, including a change in control (which change of control event of default is subject to a carve-out for no decline in the Company’s corporate credit rating). If an event of default occurs and is continuing, the administrative agent or the majority lenders may accelerate any amounts outstanding and terminate lender commitments and exercise remedies against any collateral.

The 2024 Term Loan Credit Agreement became effective on November 6, 2024 (the “Closing”).

The foregoing description of the 2024 Term Loan Credit Agreement is qualified in its entirety by reference to the 2024 Term Loan Credit Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated by reference.