Berry Corporation (BRY): PESTLE Analysis [Nov-2025 Updated]

The core investment thesis for Berry Corporation (BRY) isn't about the price of Brent crude; it's about navigating the unique, hyper-political risk of being a heavy oil producer in California. Your ability to model future cash flow relies almost entirely on understanding the external forces-Political, Economic, Sociological, Technological, Legal, and Environmental (PESTLE)-that define the state's operating environment. This is a story of regulatory risk versus the stable, low-decline production from Enhanced Oil Recovery (EOR) assets, and the near-term regulatory deadlines are the only thing that truly matters right now.

Political Forces: The Sacramento Headwind

The single biggest political factor is the 3,200-foot oil and gas well setback rule (Senate Bill 1137). Honestly, the uncertainty over this rule is largely gone. The law is fully implemented, and new well permits are prohibited within these Health Protection Zones (HPZs). This political headwind has already cleared the deck of many competitors, but it also creates a permitting nightmare for Berry Corporation's existing operations, especially for routine maintenance and new drilling outside the HPZ. Permitting delays alone can push a key project from a 2025 revenue driver to a 2026 cost sink.

What this estimate hides is the ongoing regulatory development. As of November 2025, the Department of Conservation was still taking public comments on proposed text modifications to the SB 1137 regulations, which ended on November 17, 2025. This means the exact compliance cost for existing facilities-which must meet new safety requirements by July 1, 2026-is still a moving target. The California state legislature is the ultimate risk factor here.

The political risk is the price of admission to the California market.

Economic Realities: Hedging Stability vs. OpEx

Berry Corporation's economic profile is a classic study in risk mitigation. They are highly sensitive to global crude oil price volatility, particularly Brent and West Texas Intermediate (WTI), but their hedging strategy provides a significant buffer. As of October 31, 2025, the company had 18.2 MBbls/d of oil production volumes hedged for the remainder of 2025 at an average Brent price of $74.15/Bbl. That's a clear floor for a substantial portion of their revenue, giving you predictable cash flow.

Here's the quick math: That stable revenue is crucial for funding their capital expenditure (CapEx). Berry Corporation's 2025 capital guidance was initially set between $110 million and $120 million, with roughly 60% allocated to California projects, primarily for their steam-flooding Enhanced Oil Recovery (EOR) assets. Elevated operating expenses (OpEx) due to California's strict compliance requirements-like the reported hedged Lease Operating Expense (LOE) of $26.40/Boe in Q1 2025-remain a structural headwind, but the company's ability to pay down approximately $34 million of total debt year-to-date through Q3 2025 shows financial discipline.

The hedge book is your 2025 safety net.

Sociological Shift: The ESG Pressure Cooker

The sociological landscape in California is fundamentally hostile to fossil fuel production. Strong public and activist opposition is a constant, leading to political pressure that directly translates into the regulatory environment, like the SB 1137 setbacks. This isn't just noise; it's a tangible cost of doing business.

Still, Berry Corporation has a local counter-narrative focused on its role in Kern County, where it is a significant source of local job maintenance and economic stability. This local support is a key lobbying asset. Plus, the increasing investor pressure for transparent Environmental, Social, and Governance (ESG) reporting is forcing the company to be more proactive. For investors, the E in ESG is the most critical, but the S-workforce retention in a high-cost-of-living state and community engagement-is a rising risk that affects operational stability. If local sentiment turns, permitting gets even slower.

Local jobs are the company's best defense.

Technological Edge: EOR and Digital Efficiency

Berry Corporation's reliance on sophisticated Enhanced Oil Recovery (EOR) methods, primarily steam flooding, is its technological moat. EOR allows them to profitably extract heavy oil from mature fields, leading to the low-decline rate assets that underpin their stable production guidance of 24,800 boe/d to 26,000 boe/d for 2025.

The technological challenge, however, is two-fold: water and data. Steam flooding requires massive amounts of water, necessitating defintely efficient water management and recycling technologies in drought-prone California. Also, digitalization of field operations is not a luxury; it's a requirement to optimize production and drive down those high California OpEx costs. The long-term opportunity lies in research into Carbon Capture and Storage (CCS), which, if successful, could fundamentally change the environmental narrative around their heavy oil production.

EOR is the cash engine, but water is the fuel gauge.

Legal Labyrinth: The CEQA and Setback Fight

The legal environment is a complex web of litigation and compliance. The California Environmental Quality Act (CEQA) is the primary hurdle for all projects, requiring extensive environmental review and often leading to project delays or, worse, successful lawsuits from opposition groups. This process is complex and costly.

The most immediate legal risk stems from ongoing litigation challenging the validity of new state environmental regulations, which keeps the goalposts moving. Furthermore, the complex permitting process for water disposal and injection wells-critical to their EOR operations-is a constant source of operational friction. The legal team isn't just defending lawsuits; they are managing the entire operational timeline. If you assume a 12-month permitting cycle, you're probably being optimistic.

Lawsuits are the new permitting fee.

Environmental Cost: Water, Carbon, and Liability

Environmental compliance costs are a non-negotiable structural expense for Berry Corporation. The pressure to reduce greenhouse gas (GHG) emissions under California's aggressive climate goals is intense. This includes compliance costs associated with the California Cap-and-Trade program, which directly impacts their bottom line and is a variable cost you need to model carefully.

Water usage for steam-flooding operations is under high scrutiny, especially in the context of persistent drought concerns in the Central Valley. This environmental factor directly ties into the technological need for recycling. Finally, the significant long-term liability for well abandonment and site remediation is a cost that must be factored into the valuation. It's an unavoidable future cash outflow that the company must provision for today. The environmental challenge is the ultimate long-term capital liability.

Berry Corporation (BRY) - PESTLE Analysis: Political factors

You're operating in an environment where the political winds shift quickly, but the underlying regulatory direction is clear: California wants to phase out oil. This creates a high-stakes, two-sided political risk for Berry Corporation. On one hand, the state legislature and Governor's office maintain a long-term hostile stance. On the other, local and recent state-level actions are creating near-term operational opportunities you can defintely capitalize on.

Uncertainty over the 3,200-foot oil and gas well setback rule (SB 1137) in late 2025.

The biggest regulatory hurdle is the implementation of Senate Bill 1137 (SB 1137), which mandates a 3,200-foot setback for new or reworked oil and gas wells from sensitive receptors like homes and schools. The oil industry dropped its referendum challenge in June 2024, meaning the law is now in effect. This removes the uncertainty of the law's existence but replaces it with the operational and financial uncertainty of compliance.

The immediate impact is on existing wells. The law required all existing wells within this health protection zone to comply with new health, safety, and environmental requirements starting January 1, 2025. Furthermore, the California State Assembly introduced a proposal (AB 2716) that would impose a $10,000-per-day fine on companies operating low-production wells (producing fewer than 15 barrels per day) within this same 3,200-foot perimeter. This is a direct financial threat to the economics of marginal wells in high-density areas.

High political risk from the California state legislature and Governor's office.

The high political risk comes from California's explicit long-term goal to phase out oil extraction by 2045. This overarching policy framework informs all legislative action, creating a permanent headwind for long-term capital investment (CapEx). However, the near-term political climate has become surprisingly constructive, which Berry Corporation's President, Danielle Hunter, noted in the second-quarter 2025 earnings call.

This shift is driven by the state's need for supply stability following pending refinery closures and a desire to avoid fuel price volatility. Governor Newsom proposed a draft bill in mid-2025 to streamline the permitting process for new oil wells, which would allow companies to drill new wells without requiring individual permits from the California Geologic Energy Management Division (CalGEM). The catch is a new requirement: for every new well drilled, two others must be plugged and abandoned, shifting the well remediation cost directly onto producers.

The state's political environment presents a dual reality:

• Long-Term Risk: 2045 phase-out goal and new climate disclosure laws (SB 253, SB 261) that increase compliance costs.
• Near-Term Opportunity: Streamlined permitting proposals and a push to stabilize in-state crude oil production to manage consumer fuel prices.

Federal land use policy changes impacting Kern County operations.

While Berry Corporation's core operations are heavily influenced by state and local policy, federal land use policy is also a factor, particularly in Kern County, which contains significant public land. The U.S. Bureau of Land Management (BLM) is currently in a protracted legal battle over its process for approving new oil and gas drilling permits on federal lands in the San Joaquin Valley.

As of June 2025, the BLM's Bakersfield Field Office published a Notice of Intent to prepare a Supplemental Environmental Impact Statement (EIS) to analyze the effects of oil and gas leasing and development. This process, which is expected to conclude with a Record of Decision in April 2026, is a direct response to legal challenges. While the BLM estimates this could result in the development of 10 to 40 new wells per year on new leases, the immediate reality is that federal permitting is subject to ongoing litigation and environmental review, which introduces delays and uncertainty for any BRY operations on federal mineral estate.

Permitting delays for new drilling and maintenance activities.

Permitting has been a major bottleneck, but the situation is highly fluid in 2025, with a significant contrast between state and local actions. State-level permit approvals for new wells have plummeted, but Kern County is moving to open the door.

Here's the quick math on the permit backlog and forward-looking capacity:

The state's dramatic slowdown in new permits (only two approved in Q3 2025) is a clear indicator of regulatory friction. Still, the Kern County Board of Supervisors' approval of the revised oil and gas rezoning ordinance in June 2025, which allows for potentially 2,700 new wells annually under a single environmental review, is a massive local political victory. The immediate action for Berry Corporation is to aggressively pursue permits under the new Kern County ordinance, leveraging the local political support to bypass the state-level permitting slowdown.

Berry Corporation (BRY) - PESTLE Analysis: Economic factors

Sensitivity to global crude oil price volatility, particularly Brent and WTI.

You know that in the energy sector, price volatility is the single biggest risk. For Berry Corporation, however, this risk is significantly mitigated by a deliberate, defensive hedging strategy. They are not a pure-play bet on rising oil prices, so their free cash flow is less exposed to daily swings in Brent and West Texas Intermediate (WTI) crude. This is a crucial point: their operational stability is prioritized over maximizing upside during a price spike.

The company's management of volatility is so effective that a $2 per barrel of oil equivalent (BOE) reduction in lease operating expenses (LOE) has roughly the same impact on their post-hedge 2025 free cash flow as a $10 increase in crude oil prices. Honestly, that tells you everything about where their focus should be-and is-on cost control. At the projected full-year Brent strip price of around $72 per barrel (as of mid-2025), Berry Corporation is projected to generate approximately $616 million in revenues after accounting for their hedges. That's a solid, predictable revenue floor.

Elevated operating expenses due to strict California environmental compliance.

Operating in California, especially with Enhanced Oil Recovery (EOR) methods like steam-flooding, means higher regulatory costs are a permanent feature of the business model. This isn't a surprise, but it's a structural headwind that must be managed with precision. The full-year 2025 guidance midpoint for Lease Operating Expenses (LOE) is a high $28.90 per BOE. Still, the company has shown it can beat this.

In the first quarter of 2025, their hedged LOE came in at $26.40 per BOE, which is 9% below the guidance midpoint. They achieved this by optimizing steam injection, which directly lowered their energy-related LOE. Plus, the regulatory compliance costs are concrete and non-negotiable. For instance, the company expects to spend between $14 million and $20 million in 2025 just on Plugging and Abandonment (P&A) activities to meet the state's stringent idle well management program obligations. That's a significant, defintely non-productive capital outlay.

Need for significant capital expenditure (CapEx) for steam-flooding EOR projects.

The company's business relies on maintaining production from mature fields, which demands consistent capital investment, particularly in thermal EOR projects in California. The total 2025 capital expenditure budget for E&P operations is set between $110 million and $120 million. This investment is strategically split to balance their core California assets with new growth in Utah.

Approximately 60% of the 2025 capital program is directed to California, where the focus is on low-risk, high-return sidetrack drilling in the thermal diatomite reservoir. These California wells are low capital intensity, with a drilling and completion (D&C) cost of around $0.8 million per well, and they offer attractive internal rates of return (IRRs) averaging 75% to 100%. The remaining 40% of CapEx is allocated to Utah to de-risk commercial-scale horizontal development in the Uinta Basin, which is their primary growth engine.

Hedging strategies to lock in prices for a portion of 2025 production.

Berry Corporation's hedging strategy is the bedrock of its financial stability, ensuring cash flow visibility to fund its capital program and debt reduction goals. This isn't speculation; it's financial engineering to lock in a profit margin.

As of May 2025, the company had 73% of its estimated oil production volumes hedged for the remainder of 2025 at an average price of $74.69 per barrel of Brent crude. They also hedge their input costs, with approximately 80% of their expected natural gas demand for the remainder of 2025 covered by swaps at an average price of $4.24 per MMBtu. The mark-to-market value of their crude oil hedge book stood at a strong $129 million as of May 2, 2025. This hedge book is a valuable asset.

Here's a quick snapshot of the 2025 hedge position:

The strategic action is clear: continue to monitor the sustainability of the lower LOE, because that cost control is now as impactful as a major oil price rally.

Berry Corporation (BRY) - PESTLE Analysis: Social factors

You're operating in a social environment that demands a trade-off: your core business is under intense scrutiny, but your local economic role in Kern County is vital. The key takeaway for 2025 is that investor pressure for transparent Environmental, Social, and Governance (ESG) performance is now a primary driver of operational strategy, forcing you to quantify social and environmental progress with precision.

Strong public and activist opposition to fossil fuel production in California

The social license to operate in California remains tenuous, even as the regulatory climate showed signs of improvement in 2025. Public opposition is highly organized, often manifesting as pressure on regulators and local governments to restrict permits and increase financial assurance requirements.

This sentiment is clear in the scrutiny surrounding the planned all-stock combination with California Resources Corporation (CRC). Activist groups like Consumer Watchdog have publicly demanded that Governor Newsom's administration require full bonding to cover all well plugging and remediation costs, specifically to prevent taxpayers from holding the bag for acquired liabilities. This demand highlights the public's lack of trust regarding the industry's long-term environmental accountability.

The company is defintely managing this by fully aligning its reporting with California's new climate-related disclosures, which is a direct response to the social and political climate.

Focus on local job maintenance and economic stability in Kern County

Berry Corporation's operations are a significant pillar of the local economy in Kern County, California's San Joaquin Basin. While the state pushes for a transition away from fossil fuels, the company's presence is crucial for maintaining regional economic stability and employment.

The company has approximately 1,000 employees as of September 2025, many of whom are based in Bakersfield, California. This workforce provides high-wage jobs and supports a network of local suppliers and service providers. This local economic role gives the company a powerful counter-narrative to the broader anti-fossil fuel movement, positioning it as a community partner focused on safe, responsible operations, which is a key part of its core values.

Your local impact is your best defense against statewide political headwinds.

Increasing investor pressure for transparent Environmental, Social, and Governance (ESG) reporting

Investor demand for quantifiable ESG metrics has moved from a niche concern to a central component of capital allocation. In response, Berry Corporation published its 2025 Sustainability Report in September 2025, which provides expanded disclosures and formal alignment with the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.

This transparency is critical for attracting and retaining institutional capital. The company's 2024 performance, reported in the 2025 report, shows measurable progress, including a 59% reduction in the employee Total Recordable Incident Rate (TRIR) since 2022. This is the kind of concrete data that sophisticated investors now require to assess non-financial risk.

Here's a quick look at the key social and environmental metrics driving investor confidence:

Workforce retention challenges in a high-cost-of-living state

The ability to recruit and retain key technical talent is a persistent risk factor for any California-based energy company. While Kern County is relatively affordable compared to coastal California, the state's overall high cost of living still pressures compensation and benefits packages, especially for specialized roles.

For context, the median sale price for a home in Kern County was approximately $380,000 in October 2025. To mitigate turnover and attract talent, the company offers a competitive compensation structure and flexible work arrangements, including:

• Competitive Wages and a Short-term incentive bonus.
• 401(k) with Company Match and immediate vesting.
• 9/80 flex schedules (nine days of work over two weeks, with a three-day weekend).
• Generous Paid Time Off (PTO) and 4 Volunteer Days per year.

The merger with California Resources Corporation introduces a new retention risk, as the combined entity will need to retain key personnel to realize the targeted $80 million to $90 million in annual synergies within 12 months. The integration process will be a critical test of the company's human capital management strategy.

Finance: draft a quarterly report on key talent retention rates and associated costs by January 15, 2026.

Berry Corporation (BRY) - PESTLE Analysis: Technological factors

Reliance on Sophisticated Enhanced Oil Recovery (EOR) Methods like Steam Flooding

You need to understand that Berry Corporation's core business model is deeply tied to the technological sophistication of its Enhanced Oil Recovery (EOR) techniques, particularly steam flooding. This isn't just a legacy method; it's a high-return, capital-efficient technology that anchors their California operations. The company's focus on its thermal diatomite assets in California is a clear strategic choice, building on the success of these methods.

In 2024, the thermal diatomite asset delivered a return on capital exceeding 100%, which is defintely a strong signal of the technology's effectiveness. This is supported by low development costs, with Drilling & Completion (D&C) costs per well at only around $0.8 million. The quick payback period of roughly one year, even when Brent oil prices are in the $50 to $60 range, showcases the resilience and efficiency of this EOR technology.

Here's the quick math on the EOR efficiency:

• Thermal Diatomite Return: Over 100% Rate of Return (2024 performance).
• D&C Cost Per Well: Approximately $0.8 million.
• Payback Period: Roughly one year at $50-$60/Bbl Brent.

Need for Definitely Efficient Water Management and Recycling Technologies

Operating in water-stressed regions of California, the technology for managing and recycling produced water is not optional-it's a fundamental operational necessity and a key risk mitigator. Berry Corporation has made significant strides in this area, using technology to treat and reuse the water that is co-produced with oil and natural gas. This recycled water is then injected back into the reservoirs for both steam and water flooding operations.

The company's commitment to water technology is evident in the 2025 Sustainability Report highlights, which show measurable progress in 2024. This isn't just environmental posturing; it directly reduces freshwater consumption and minimizes disposal costs, creating a tangible economic benefit.

Digitalization of Field Operations to Optimize Production and Lower Costs

Digitalization, or simply using smart technology to run things better, is driving down Lease Operating Expenses (LOE). This is where the rubber meets the road on margins. The company is strategically deploying technology to reduce energy consumption and cut emissions, which translates directly into lower operating costs. One clean one-liner: technology is now a cost-reduction tool, not just a CapEx line item.

A prime example is the deployment of zero-bleed pneumatic devices across the Utah operations in 2024, replacing older, higher-emission models. This technological upgrade is the primary driver for a target to reduce Scope 1 methane emissions by 80% in 2025 compared to the 2022 baseline. Also, the implementation of solar infrastructure now offsets as much as 20% of the electrical demand for select operations, further lowering the energy component of LOE. In the Uinta Basin, leveraging produced gas to drive pumps is a simple but effective technological optimization, expected to reduce completion costs by approximately $500,000 per well and lowering drilling fuel costs by roughly 25%.

Research into Carbon Capture and Storage (CCS) to Mitigate Emissions

While Berry Corporation's primary focus is on direct emissions reduction from operations-like the methane target-the broader technological landscape of carbon mitigation is critical. The company has a clear, actionable target: an 80% reduction in Scope 1 methane emissions in 2025 from a 2022 baseline. This is being achieved through proven technology adoption (zero-bleed valves) rather than relying on nascent CCS research.

The regulatory environment in California is complex, and past legislative efforts have even sought to ban the use of CO2 in EOR to prevent it from qualifying for Low Carbon Fuel Standard credits, which shows the technological-political friction in their operating area. For now, the most impactful carbon mitigation technology for Berry Corporation is the operational efficiency that reduces the need for energy input and minimizes methane leakage. The company's climate strategy is advanced through formal alignment with the Task Force on Climate-Related Financial Disclosures (TCFD) framework, which mandates a transparent, data-driven approach to climate-related risks and opportunities.

Berry Corporation (BRY) - PESTLE Analysis: Legal factors

Ongoing litigation challenging the validity of new state environmental regulations.

You can't talk about Berry Corporation's legal landscape without starting with the elephant in the room: the California Environmental Quality Act (CEQA) litigation in Kern County. This isn't just a nuisance; it's a direct constraint on the company's core business. A California appellate court found deficiencies in the Kern County Environmental Impact Report (EIR) in March 2024, which has effectively enjoined (restricted) the county's ability to issue new drilling permits based on that EIR. The result is that since late 2022, neither Berry Corporation nor other operators have been able to rely on the standard county EIR to get permits for new wells.

The good news is that the regulatory tone in California is the most constructive it has been in five years, according to company leadership. Kern County is working to adopt a revised EIR to address the court's findings, with a ruling on its sufficiency expected late in 2025. Still, the company is managing: they already have permits in hand to support development activity into 2027, which buys them time. This is a classic legal risk/opportunity scenario, where a favorable ruling could significantly streamline future development projects.

Plus, you have the recent legal action surrounding the proposed all-stock combination with California Resources Corporation. This is a separate, near-term risk, as shareholder rights law firms are investigating the deal for potential breaches of fiduciary duty, with a shareholder vote scheduled for either November 28, 2025, or December 15, 2025.

Strict adherence to the California Environmental Quality Act (CEQA) for all projects.

The injunction on the Kern County EIR means Berry Corporation must now demonstrate CEQA compliance to the California Geologic Energy Management Division (CalGEM) through individual means for new drilling permits, which is a much slower, more complex process. This legal requirement adds significant time and cost to the capital program, especially since approximately 60% of the company's 2025 capital program is directed to California.

To be fair, the company has been active in managing this: they are proceeding with projects that qualify for a Notice of Exemption (NOE) under CEQA, which is a legal finding that a project will not have a significant environmental effect. This is how they keep the lights on and manage their existing asset base.

Here's a quick snapshot of the legal and financial impact of the regulatory environment:

Complex permitting process for water disposal and injection wells.

The permitting process for water disposal and injection wells is governed by the federal Safe Drinking Water Act (SDWA) and the California Underground Injection Control (UIC) program, which CalGEM administers. These regulations are defintely strict, requiring continuous well pressure monitoring, strong testing requirements to identify leaks, and increased data disclosure for projects near water supply wells.

Berry Corporation is actively navigating this complexity, primarily through the rework or workover of existing wells, which often falls under a less burdensome permitting track. For instance, in August and September 2025, the California Department of Conservation (DOC) approved Notices of Exemption (NOEs) for the rework/workover of a total of 10 wells (3 wells and 7 wells, respectively) in the Midway-Sunset oil field. This is a smart move, focusing capital on maintenance and optimization that meets the legal standard of a minor alteration of existing wells.

Compliance with California's stringent workplace safety and labor laws.

California's labor laws are among the most stringent in the nation, and compliance is a continuous, high-stakes operational cost. For 2025, the state minimum wage increased to $16.50 per hour for all employers as of January 1, 2025. This also pushed the minimum annual salary for exempt employees to $68,640.

More critically, the legal landscape for labor disputes changed significantly in 2025 with reforms to the Private Attorneys General Act (PAGA). These reforms, which apply to actions brought on or after June 19, 2024, increase the aggrieved employees' share of penalties from 25% to 35%, while decreasing the Labor and Workforce Development Agency (LWDA)'s share from 75% to 65%.

The company must ensure its safety and labor practices are flawless because the cost of non-compliance has risen, particularly under the new PAGA structure. The reforms, however, also introduce penalty caps for employers who take 'all reasonable steps' to be in prospective compliance, creating a clear action path for mitigating risk.

• State minimum wage rose to $16.50/hour (Jan 1, 2025).
• Exempt employee minimum salary is now $68,640/year (Jan 1, 2025).
• Aggrieved employee share of PAGA penalties increased to 35%.
• New PAGA rules endorse trial courts' power to limit the scope of class claims.

Berry Corporation (BRY) - PESTLE Analysis: Environmental factors

Pressure to reduce greenhouse gas (GHG) emissions under California's climate goals

You need to understand that California's aggressive climate policy is the single biggest operational constraint for Berry Corporation. The state's mandate to reach 40% below 1990 GHG levels by 2030 and achieve net zero GHG emissions by 2045 is the long-term headwind.

The company is responding with concrete, measurable actions, which is what we like to see. For instance, they are targeting an 80% reduction in Scope 1 methane emissions by 2025 compared to their 2022 baseline. They already made significant progress in 2024, achieving a nearly 50% reduction in Scope 1 methane emissions, largely by replacing pneumatic valves in their Utah operations with zero-bleed devices. This is a smart, direct-action approach.

Also, to cut electricity-related emissions, they've deployed solar infrastructure at their Hill Lease operations, offsetting as much as 20% of that lease's electrical demand. That's a clean one-liner on their energy resilience strategy.

High scrutiny on water usage for steam-flooding operations in drought-prone areas

The use of water in thermal enhanced oil recovery (steam-flooding) is a major public and regulatory scrutiny point, especially in the San Joaquin Basin, which is prone to drought. Berry Corporation has focused on increasing its use of non-freshwater sources to maintain its social license to operate.

The strategy is simple: treat and reuse the water that is co-produced from their oil and gas operations. This focus translated into an increase in recycled water usage to 47% in 2024, which directly resulted in a 17% reduction in freshwater consumption compared to 2023. This shows a clear operational commitment, but still, any freshwater use in a drought year will draw criticism.

Compliance costs associated with the California Cap-and-Trade program

The California Cap-and-Trade program, recently extended and renamed 'Cap-and-Invest' until January 1, 2046, is a permanent cost of doing business in the state. This program requires covered entities to either reduce emissions or purchase allowances to account for them.

As of March 31, 2025, the fair value of Berry Corporation's emission allowances held for compliance was $5 million. Also, their 2025 contractual obligations include an additional $19 million for GHG compliance purchase contracts, highlighting the near-term financial commitment to securing the necessary instruments for compliance. The extension of the program to 2045 provides long-term regulatory clarity, but it also locks in a significant, decades-long compliance cost structure.

Significant long-term liability for well abandonment and site remediation

A core financial risk for any long-lived oil producer is the Asset Retirement Obligation (ARO), which is the future cost of plugging wells and remediating sites. For Berry Corporation, this is a substantial, non-discretionary liability.

As of December 31, 2024, the company's total estimated ARO on a discounted basis stood at $202.3 million (or $202,283,000). This is a long-term liability, but a portion of it is due each year.

Here's the quick math on the near-term and long-term breakdown:

To be fair, the company is actively managing this liability through its wholly-owned subsidiary, C&J Well Services. This subsidiary is one of California's largest well servicing and plugging businesses and is used to reduce the environmental risk internally. In 2024 alone, Berry Corporation and its subsidiary plugged more than 1,200 idle wells, which is defintely a key risk mitigation action.