Anticipating continued growth, Berry Petroleum increased its credit line by $300 million to $500 million when it reworked its facility last month. Ralph Goehring, executive v.p. and cfo in Bakersfield, Calif., said the company typically does not have a lot of debt and wants to be able to make a larger acquisition in the future, if the right opportunity comes along. It most recently completed a $105 million acquisition from a gas producing property in eastern Colorado in January. It does not have any more immediate takeovers planned. "Even if we can't make future acquisitions of any size, we'll still need capital to develop other properties," said Goehring. He said that as the company has grown, the value of its underlying assets has increased because of the rise in oil prices. It had an EBITDA of about $135 million in 2004.
Berry thought the timing was good to go back to the market because not a lot of other energy companies were refinancing and it believed it could get good pricing. Also, with its old facility set to expire in July 2006, it wanted to replace the loan by the end of the third quarter of 2005 so it would not go on its current balance sheet.
The new facility consists of an unsecured, five-year, $500 million loan. The company has established an initial borrowing base of $350 million, with grid-based pricing. Pricing up to 50% of the borrowing base is LIBOR plus 1%; pricing between 50-75% of the borrowing base is LIBOR plus 1 1/4%; pricing between 75-90% of the borrowing base is LIBOR plus 1 1/2% and over 90% of the borrowing base, pricing is LIBOR plus 1 3/4%. This pricing is a cut by 25 basis points on all levels from the previous facility.
Wells Fargo Bank leads the credit; Société Générale, BNP Paribas and Citibank were carry-overs from the previous facility and JPMorgan was added to the syndicate. "We have relations with [JPMorgan] in other areas, so we invited them to participate," said Goehring. Bank of America opted out of the credit facility during the refinancing.
The decision to use Wells Fargo this time was based solely on the strong job the bank did for the company last time. The company also used Wells Fargo's energy group in Denver, an area Berry is looking to expand in. "In our view, they have done an excellent job managing the credit," he said.
Looking ahead, Goehring said the idea is to grow the company--whether it is through acquisitions or organic growth--without overleveraging. "We would like to do that through some strategic acquisitions, but I think, at this point, we have the capabilities to grow the company substantially with existing assets," he explained.