California oil merger set to benefit from permitting boom

By Nathan Risser, Bloomberg

California Resources Corporation, which is set to take over rival oil driller Berry Corp, stands to benefit from state legislation that would make it easier to drill.

California Resources announced a $717 million all-stock deal Monday to buy Berry, days after California legislators passed state bill 237, which will allow oil-producing Kern County to issue as many as 2,000 new permits per year. The bill marks a sharp shift from years of regulatory scrutiny by the state’s lawmakers toward its oil and gas industry and decades of declining in-state crude production.

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“It’s really a truly significant change,” California Resources CEO Francisco Leon said Monday on a call with analysts discussing the acquisition. “The state is signaling a need for California production,” he said, adding that the company has been having “tremendous, very constructive conversations with the state of California.”

Shares of California Resources gained as much as 8.8% Monday, the largest intraday rise in almost two months. Roth Capital Partners raised the target price on the company Monday to $63 from $56. Jefferies analysts said in a Monday note that there is “undeniable industrial logic” to the merger of the two companies.

Newsom has 30 days to sign the bill, after which Kern County would have the authority to issue new permits effective January 2026. “They’re ready to go,” Leon said on the call, noting that Kern County has been “staffing up on the permit front.” Boosting oil production is seen by the bill’s sponsors and the California Energy Commission as a means of mitigating gasoline price spikes following decades of refinery closures.

California Resources expects to be a major participant in the 2,000 new annual permits and have their own staff ready to go, said Leon. “We have permits ready to be filed, some of the already have been filed,” he said.

Environmental groups have criticized SB 237 and what they see as broader walkbacks in California’s environmental protections.

“Removing environmental safeguards won’t reverse the terminal decline of California oil production but it will allow the industry to do more damage on its way out the door,” said Hollin Kretzmann, an attorney at the Center for Biological Diversity’s Climate Law Institute. “This bill would mean more air, water and greenhouse gas pollution while having no impact on refinery closures or gas prices.”

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