Berry Petroleum Co. shareholders voted Monday to accept a buyout offer with an estimated value of $4.9 billion from Houston-based LINN Energy and LinnCo, which becomes the 12th largest U.S. oil and gas company with the merger. LINN and LinnCo shareholders also voted “yes” Monday.
Berry Petroleum will continue to operate as a wholly owned subsidiary of LINN. Berry Petroleum Co. shares ceased trading on the New York Stock Exchange at the close of business Monday and the company’s name changed to Berry Petroleum LLC.
Berry operates (and through Monday, owned) the 65-year-old Placerita oil field off of Sierra Highway in Newhall and substantially larger oil and natural gas properties in Kern County, Utah, Colorado and West Texas.
The merger deal was initially announced in February and was supposed to close June 30, but it got sidetracked when the Securities and Exchange Commission launched an informal inquiry into LINN’s hedging strategy. LINN’s share price fell as a result, and by summer, the 1.25 shares of LinnCo that were to be traded for each share of Berry weren’t worth as much. So LINN sweetened the pot and upped the offer to 1.68 shares in November, when the SEC inquiry apparently ended.
LINN is a limited liability company (LLC) that makes “distributions” of income. LinnCo is a C-corp whose sole function is to own shares of LINN and pay “dividends.” (They have different tax implications; one is treated as capital gains at the time of disbursement and the other isn’t.) Both trade on the NASDAQ stock exchange.
Monday’s investor reaction to the merger was tepid. LINN share prices actually fell a bit and analysts said the company overpaid in the end, although they’ve been generally impressed with Berry’s own performance as it ramped up production over the past year.
Berry and the Placerita Field
Berry was a holdover from the old days of oil production, having started in 1909 in Taft and drilling for more than a century in the Midway-Sunset field. Berry became a publicly traded company in 1987 and started looking outside of the San Joaquin Valley. It bought the roughly 700-acre Placerita oil field in 1999 from Aera Energy LLC, a venture of Shell and ExxonMobil. The active part of the Placerita field has been under development since 1948, when it was known as Confusion Hill for its crazy quilt of often conflicting oil claims. It has been good for about 2,300 barrels per day of oil and natural gas equivalent in recent years.
Berry started expanding outside of California in 2003 and moved its corporate headquarters to Denver. At last count, it had 2,850 producing wells and owned more than 200,000 net acres in four states.
Berry had been boosting its oil production all year. Overall, it brought 41,413 daily barrels of oil and natural gas to market during the third quarter of 2013, a 14 percent increase over the same period in 2012. Within California, Berry drilled 18 new oil wells in 3Q 2003, including nine at Placerita.
LINN is a new-style energy company founded in 2003 with a handful of natural gas wells. It went public in 2006 and turned its attention to buying “long-life properties that compliment its asset profile” in the richest oil regions within the United States (Berry operates in many of the same areas). Prior to the Berry buyout, LINN had 1,100 employees in a dozen locations across the country and proved reserves of 4.6 trillion cubic feet equivalent (Tcfe) of oil and natural gas.
LINN grows by roughly 33 percent with the Berry takeover; Berry adds 1.65 Tcfe to the portfolio and boosts LINN’s overall ratio of liquids to 54 percent (from 47 percent). LINN estimates that Berry has possible and probable reserves of another 3.8 Tcfe.