Berry Corporation (bry) Common Stock

Item 1A. Risk Factors

We are subject to various risks and uncertainties in the course of our business. A discussion of such risks and uncertainties may be found under the heading Item 1A. Risk Factors in our Annual Report.

The recent definitive implementation of SB 1137 to restrict the production of oil and gas in certain setback areas is expected to negatively impact our reserves and could result in decreased demand for fossil fuels within the states where we operate.

In September 2022, the Governor of California signed into law SB 1137 which prohibits CalGEM from permitting any new wells, or the rework of existing wells, if the proposed new drill or rework is within 3,200 feet of certain sensitive receptors such as homes, schools or parks, originally effective as of January 1, 2023. On January 6, 2023, CalGEMs emergency regulations to supportAdditional provisions of SB1137, include, among others, the implementatosition of SB 1137 wereHSE controls approved bylicable to wells located within the Office of Administrative Lawsetback areas related to noise, light, and final reguladust pollutions were published. See Part II, Item 2. Managements Discus controls and air emission monitoring, and the immediate suspension and Analysis of Finof operations at production facilities determined not to be in compliancial Condition and Results of OperationsRegulatory MattersSetbacksSB 1137 in this Quarterly Report. e with certain air emission requirements. However, in December 2022, proponents of a voter referendum (the Referendum) collected more than the number of signatures required to put SB 1137 on the November 2024 ballot. On February 3, 2023, the Secretary of State of California certified the signatures and confirmed that the Referendum qualified for the November 2024 ballot and SB 1137 was stayed pending a vote of the California General Election in November 2024, h. However, in June 2024, the ballot proposal was withdrawn with the proposals sponsors instead indicating a view to challenging SB 1137 in court and. Accordingly, the provisions of SB 1137 arwent into immediate effective immediately.

As a r in June 2024. Then on September 30, 2024, the Governor signed into law AB 218, which delayed the deadline for compliance with CalGEMs regulations implementing SB 1137 until July 1, 2026 and further delays compliance with certain other requirements of SB 1137 by up to three years. See Part II, Item 2. Managements Discussion and Analysis of Financial Condition and Results of the sOperationsRegulatory MattersSetbacks established by SB 1137 in this Quarterly Report.

As a result of the June 2024 effectiveness of SB 1137s permitting restrictions, we recorded a non-cash pre-tax asset impairment charge of $44 million,  ($33 million after-tax) on unproved oil and gas properties in certain California locations during the second quarter of 2024. The impairment represents approximately 2% of our total oil and natural gas properties. See The majority of our production is in rural areas in the San Joaquin basin and is unlikely to be affected by SB 1137 as supplemented by AB 218. Approximately 13% of our production for the nine months ended September 30, 2024 was within setback zones subject to SB 1137 and subject to these requirements. We do not expect this law to result in any material change to our overall existing proved developed producing reserves or current production rates. See Note 10Oil and Natural Gas Properties to the Financial Statements.

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Followin addition tog the passage of AB 218 in September 2024 which extended the permitting deadline for certain compliance requirements, by January 1, 2025,  of SB 1137, all wells and facilities within a setback must be in compliance with specific health, safety and environmental requirements pursuant to SB 1137 by July 1, 2026, with leak detection and response plans developed and submitted to CalGEM for agency approval by July 1, 2028. CalGEM must approve these plans by Januaruly 1, 20269 and, beginning on Januaruly 1, 202730, operators are required to suspend operations within setback areas unless they have a CalGEM-approved leak detection and response plan that has been fully implemented. This plan must be updated every five years, and operators must annually report on implementation of these plans as well as the results of baseline water quality testing. The majority of our production is in rural areas in the San Joaquin basin and is unlikely to be affected by SB 1137. Approximately 15% of our production for the six months ended June 30, 2024 was within setback zones subject to SB 1137 and subject to these requirements. We do not expect this law to result in any material change to our overall existingcannot proved developed producing reserves or current production rates. However, we cannot predict edict CalGEMs timeline for approving these plans or , whether CalGEM will require more stringent mitigation in connection with final approval of such plans, or whether circumstances may arise in the future that could adversely impact production within setback zones. Additionally, failure to comply with the requirements of SB 1137 may result in enforcement action and the imposition of substantial fines and penalties.

We may not be successful in refinancing, repaying or extend While we are still assessing the impact and additional costs associated with compliance with SB 1137, the impact and costs are expected to be immaterial.

We may face increased local restrictions on oil and gas exploration and production operations or even be prohibited from operating the maturity of ouin certain areas as a result of recently enacted California legislation.

On September 2026 Notes or our 2021 RBL Facility, and any such refinancing may not be obtainable 5, 2024, the California Governor signed Assembly Bill 3233 (AB 3233) into law, which explicitly authorizes local governments to limit methods for, or even prohibit, oil and gas operations or development within its jurisdiction, including with respect to existing operations. This legislation terms favorable to us. If wspecifically overrides a prior California Supreme Court decision that found limits on the are not ableuthority of local governments to refinance gulate oil and gas operations on the 2026 Notes orbasis of preemption because of extend the matuisting state law providing CalGEM with sole authority dto regulate of the 2021 RBL Facility, the 2021 RBL Facility methods for oil and gas production. Certain jurisdictions within California, including Monterey and Los Angeles, had previously taken steps to limit oil and the 2026 Notes will be classified as gas operations that were struck down by that now invalidated California Supreme Court decision and it is possible that they or other local governments in California may pass similar legislation following AB 3233. We current debt as of August 26, 2024 and February 15, 2025, respely only operate in Kern County and at this time we are not aware of any local governments within Kern County that to seek to materially limit or otherwise prohibit oil and gas operations within its jurisdictively.

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Ton. However, it is difficult to predict he 2021 RBL Facility maow local governments in California may choose to exercise their new authority under AB 3233. While there may be futures on August 26, 2025 legal challenges to AB 3233 and the 2026 Notany local ordinances mature on February 15, 2026. We are currently evaluatenacted thereunder, we cannot predict whether or not such challenges will be successful, or if AB 3233 or any ordinances enacted pursuant to it will be stayed pending prospective financthe outcome of such challenges. Notwithstanding arrangements to refinance ony potential claims for regulatory takings we may have in the event local jurisdictions seek to prohibit any of our 2026 Notesexisting operations, and extendy restrictions theat maturity date of the 2021 RBL Facility. erially limit or prohibit oil and gas production in the areas where we operate could materially impact our operations and financial condition.

We may not be successful in refinancing, repaying or extending the maturity of our 2026 Notes or our 2021 RBL Facility, and any such refinancing may not be obtainable on terms favorable to us. If we are not able to refinance

The 2021 RBL Facility matures on August 26, 2025 and the 2026 Notes or extend the maturity date of tmature on February 15, 2026. The 2021 RBL Facility, the 2021 RBL Facility and is classified as current debt on our balance sheet, and if we are not able to refinance the 2026 Notes , the 2026 Notes will be classified as current debt as of August 26, 2024 and February 15, 2025, respectively. T. Managements ongoing assessment of the failureCompanys ability to repay the 2021 RBL Facility or the and our 2026 Notes promptly followupon maturity could result in a going any succoncern qualification with reclassification to current debt could result in a going spect to our annual audited financial statements. Although we have entered into the 2024 Term Loan Credit Agreement which provides for commitments that we may use to refinance the 2026 Notes and the 2021 RBL Facility, we may not be able to borrow under such commitments if a concern qualification withdition precedent to funding is not satisfied or if the lenders thereunder default under their commitments. As a result, we may be unable to respect to our annual audited financipay the 2021 RBL Facility or the 2026 Notes on their respective maturity dates and could be forced to sell assets, undergo a recapitalization or raise additional equity capital statements.or seek bankruptcy protection.

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