Oil and natural gas producer Berry Petroleum Company (BRY) Monday said it has signed deal with a private seller to acquire their interests in producing properties principally in Wolfberry trend in West Texas for nearly $126 million in cash, effective January 1, 2010. The transaction is expected to close in March 2010.
The acquisition is estimated to add around 1300 barrels of oil equivalent per day, or MBOE/d, to Berry's production on a twelve month annual average in 2010.
Berry's proved reserve estimates in connection with the properties are 11.2 million barrels of oil equivalent, or MMBOE, 92% of which are in Wolfberry, 85% of which are oil reserves and 23% of which are proved developed reserves. Berry added that it has identified more than 130 drilling locations in Wolfberry trend targeting Spraberry, Dean, Wolfcamp and Strawn formations.
In addition to this, Denver, Colorado-based Berry said it is increasing its 2010 capital budget by an additional $30 million to range between $250 million and $290 million. Berry intends to drill about 27 wells on Permian property and plans to fund the capital from internally generated cash flow. Presently, one rig is drilling and Berry anticipates the acquired properties to provide self-funded production growth over the coming years.
Further, Berry sees its 2010 production to be in a range of 32,250 to 33,000 barrels of oil equivalent per day, or BOED, an 8% to 10% increase over the 2009-year period, and anticipates its production from oil assets to grow 20% by year-end 2010 driven by Diatomite and Wolfberry development.
Commenting on the acquisition, Berry's president and chief executive officer Robert Heinemann said, "We will be the operator of 70% of the acquired properties and plan to transition a new West Texas focused asset team over the coming months."
Separately, Berry said it intends to offer 7.0 million shares of its common stock in an underwritten public offering. Berry foresees to grant the underwriters a 30-day option, solely to cover over-allotments, to purchase up to an additional 1.05 million shares of its common stock.
Berry intends to use the net proceeds from the offering to fund planned acquisition of certain properties in Wolfberry trend of West Texas and for general corporate purposes. Berry noted that pending the application of the proceeds for such purposes, it will use the net proceeds to reduce outstanding borrowings under its senior secured revolving credit facility.
In Friday's regular trading session, BRY closed trading at $30.89 per share on the New York Stock Exchange. In the past 52-week period, the shares have been trading in a range of $5.50 to $31.37.
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