SEC Filing | Berry Corporation (bry)

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bry-20220930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2022


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_______________ to _______________

Commission file number 001-38606

Berry Corporation (bry)

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation or organization)						81-5410470 (I.R.S. Employer Identification Number)

16000 Dallas Parkway, Suite 500

Dallas, Texas 75248

(661) 616-3900

(Address of principal executive offices, including zip code

Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class Common Stock, par value $0.001 per share			Trading Symbol BRY			Name of each exchange on which registered Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Shares of common stock outstanding as of October 31, 2022 76,767,503

Table of Contents


		Page
Part I – Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67
Item 4.	Controls and Procedures	67

Part II – Other Information
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities	69
Item 6.	Exhibits	71
	Glossary of Terms	72
	Signatures	80

The financial information and certain other information presented in this report have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column in certain tables in this report. In addition, certain percentages presented in this report reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers, or may not sum due to rounding.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

BERRY CORPORATION (bry)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	September 30, 2022		December 31, 2021
	(in thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	41,473	$	15,283
Accounts receivable, net of allowance for doubtful accounts of $866 at September 30, 2022 and $866 at December 31, 2021	93,635		86,269
Derivative instruments	10,052		—

Other current assets	36,738		45,946
Total current assets	181,898		147,498
Noncurrent assets:
Oil and natural gas properties	1,658,008		1,537,894
Accumulated depletion and amortization	(434,447)		(340,328)
Total oil and natural gas properties, net	1,223,561		1,197,566
Other property and equipment	148,118		140,710
Accumulated depreciation	(51,699)		(36,927)
Total other property and equipment, net	96,419		103,783
Derivative instruments	11,588		1,070

Other noncurrent assets	10,886		6,562
Total assets	$	1,524,352	$	1,456,479
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	156,844	$	157,524
Derivative instruments	20,954		29,625


Total current liabilities	177,798		187,149
Noncurrent liabilities:
Long-term debt	395,432		394,566
Derivative instruments	4,245		18,577
Deferred income taxes	8,042		1,831
Asset retirement obligations	137,751		143,926
Other noncurrent liabilities	31,835		17,782
Commitments and Contingencies - Note 4
Stockholders' Equity:
Common stock ($0.001 par value; 750,000,000 shares authorized; 86,350,771 and 85,590,417 shares issued; and 76,767,503 and 80,007,149 shares outstanding, at September 30, 2022 and December 31, 2021, respectively)	86		86
Additional paid-in-capital	852,568		912,471
Treasury stock, at cost (9,583,268 and 5,583,268 shares at September 30, 2022 and December 31, 2021, respectively)	(94,136)		(52,436)
Retained earnings (deficit)	10,731		(167,473)
Total stockholders' equity	769,249		692,648
Total liabilities and stockholders' equity	$	1,524,352	$	1,456,479

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BERRY CORPORATION (bry)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands, except per share amounts)
Revenues and other:
Oil, natural gas and natural gas liquids sales	$	203,585	$	161,058	$	654,007	$	444,098
Services revenue	48,594		—		134,608		—
Electricity sales	9,711		12,371		22,549		29,328
Gains (losses) on oil and gas sales derivatives	114,279		(30,864)		(88,237)		(140,021)
Marketing revenues	—		732		289		3,087
Other revenues	277		117		442		372
Total revenues and other	376,446		143,414		723,658		336,864
Expenses and other:
Lease operating expenses	79,141		60,930		214,720		168,756
Costs of services	37,628		—		107,809		—
Electricity generation expenses	6,055		7,128		16,640		19,488
Transportation expenses	1,277		1,806		3,543		5,139
Marketing expenses	—		715		299		2,986
General and administrative expenses	23,388		17,614		69,513		50,749
Depreciation, depletion, and amortization	39,506		35,902		117,338		105,592

Taxes, other than income taxes	7,335		13,420		25,154		34,580

Gains on natural gas purchase derivatives	(28,942)		(14,980)		(47,335)		(54,349)
Other operating expenses	623		3,986		4,745		4,827
Total expenses and other	166,011		126,521		512,426		337,768
Other (expenses) income:
Interest expense	(7,867)		(7,810)		(23,271)		(24,513)
Other, net	(24)		(5)		(79)		(156)
Total other expenses	(7,891)		(7,815)		(23,350)		(24,669)

Income (loss) before income taxes	202,544		9,078		187,882		(25,573)
Income tax expense (benefit)	10,884		(758)		9,678		(1,206)
Net income (loss)	$	191,660	$	9,836	$	178,204	$	(24,367)



Net income (loss) per share:
Basic	$	2.46	$	0.12	$	2.25	$	(0.30)
Diluted	$	2.34	$	0.12	$	2.13	$	(0.30)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BERRY CORPORATION (bry)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)



	Nine-Month Period Ended September 30, 2021
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Deficit		Total Stockholders’ Equity
	(in thousands)
December 31, 2020	$	85	$	915,877	$	(49,995)	$	(151,931)	$	714,036

Shares withheld for payment of taxes on equity awards and other	—		(1,442)		—		—		(1,442)
Stock based compensation	—		3,995		—		—		3,995
Issuance of common stock	1		—		—		—		1

Dividends declared on common stock, $0.04/share	—		(3,474)		—		—		(3,474)
Net loss	—		—		—		(21,322)		(21,322)
March 31, 2021	86		914,956		(49,995)		(173,253)		691,794
Shares withheld for payment of taxes on equity awards and other	—		(78)		—		—		(78)
Stock based compensation	—		3,042		—		—		3,042
Dividends declared on common stock, $0.04/share	—		(3,219)		—		—		(3,219)
Net loss	—		—		—		(12,881)		(12,881)
June 30, 2021	86		914,701		(49,995)		(186,134)		678,658
Shares withheld for payment of taxes on equity awards and other	—		(23)		—		—		(23)
Stock based compensation	—		3,672		—		—		3,672
Purchases of treasury stock	—		—		(2,441)		—		(2,441)
Dividends declared on common stock, $0.06/share	—		(4,806)		—		—		(4,806)
Net income	—		—		—		9,836		9,836
September 30, 2021	$	86	$	913,544	$	(52,436)	$	(176,298)	$	684,896

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BERRY CORPORATION (bry)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Nine-Month Period Ended September 30, 2022
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings (Deficit)		Total Stockholders’ Equity
	(in thousands)
December 31, 2021	$	86	$	912,471	$	(52,436)	$	(167,473)	$	692,648

Shares withheld for payment of taxes on equity awards and other	—		(4,096)		—		—		(4,096)
Stock based compensation	—		3,920		—		—		3,920


Dividends declared on common stock, $0.06/share	—		(5,236)		—		—		(5,236)
Net loss	—		—		—		(56,810)		(56,810)
March 31, 2022	86		907,059		(52,436)		(224,283)		630,426
Shares withheld for payment of taxes on equity awards and other	—		(6)		—		—		(6)
Stock based compensation	—		4,720		—		—		4,720

Purchases of treasury stock	—		—		(22,760)		—		(22,760)
Dividends declared on common stock, $0.19/share	—		(14,965)		—		—		(14,965)
Net income	—		—		—		43,354		43,354
June 30, 2022	86		896,808		(75,196)		(180,929)		640,769
Shares withheld for payment of taxes on equity awards and other	—		(34)		—		—		(34)
Stock based compensation	—		4,625		—		—		4,625
Purchases of treasury stock	—		—		(18,940)		—		(18,940)
Dividends declared on common stock, $0.62/share	—		(48,831)		—		—		(48,831)
Net income	—		—		—		191,660		191,660
September 30, 2022	$	86	$	852,568	$	(94,136)	$	10,731	$	769,249

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BERRY CORPORATION (bry)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	178,204	$	(24,367)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	117,338		105,592
Amortization of debt issuance costs	1,531		3,839

Stock-based compensation expense	12,623		10,219
Deferred income taxes	6,211		(1,231)
Decrease in allowance for doubtful accounts	—		(500)
Other operating (income) expenses	(120)		3,988

Derivative activities:
Total losses	40,902		85,672
Cash settlements on derivatives	(84,519)		(54,204)

Changes in assets and liabilities:
Increase in accounts receivable	(7,334)		(16,760)
Decrease (increase) in other assets	2,320		(19,062)
Decrease in accounts payable and accrued expenses	(11,281)		(11,343)
(Decrease) increase in other liabilities	(341)		415
Net cash provided by operating activities	255,534		82,258

Cash flows from investing activities:
Capital expenditures:
Capital expenditures	(102,523)		(105,046)


Changes in capital expenditures accruals	14,129		5,299

Acquisitions, net of cash received	(21,270)		(11,649)


Proceeds from sale of property and equipment and other	—		860

Net cash used in investing activities	(109,664)		(110,536)

Cash flows from financing activities:
Borrowings under 2021 RBL credit facility	206,000		—
Repayments on 2021 RBL credit facility	(206,000)		—
Borrowings under 2022 ABL credit facility	2,067		—
Repayments on 2022 ABL credit facility	(2,067)		—


Dividends paid on common stock	(73,844)		(6,686)
Purchase of treasury stock	(41,700)		(2,440)
Shares withheld for payment of taxes on equity awards and other	(4,136)		(1,543)

Debt issuance costs	—		(3,449)







Net cash used in financing activities	(119,680)		(14,118)
Net increase (decrease) in cash and cash equivalents	26,190		(42,396)
Cash and cash equivalents:
Beginning	15,283		80,557
Ending	$	41,473	$	38,161

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BERRY CORPORATION (bry)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

“Berry Corp.” refers to Berry Corporation (bry), a Delaware corporation, which is the sole member of each of its three Delaware limited liability company subsidiaries: (1) Berry Petroleum Company, LLC (“Berry LLC”), (2) CJ Berry Well Services Management, LLC (“C&J Management”) and (3) C&J Well Services, LLC (“C&J”). As the context may require, the “Company”, “we”, “our” or similar words refer to Berry Corp. and its subsidiary, Berry LLC, and as of October 1, 2021 this also includes C&J and C&J Management.

Nature of Business

We are a western United States independent upstream energy company with a focus on onshore, low geologic risk, long-lived conventional oil and gas reserves in the San Joaquin basin of California and the Uinta basin of Utah, with well servicing and abandonment capabilities in California. Since October 1, 2021, we have operated in two business segments: (i) development and production (“D&P”) and (ii) well servicing and abandonment.

Berry Corp. was incorporated under Delaware law in February 2017 and its common stock began trading on NASDAQ under the symbol “bry” in July 2018. Berry Corp. operates through its three wholly owned subsidiaries. Berry LLC owns and operates our oil and gas assets (D&P segment). In January 2022, we divested our natural gas properties in the Piceance basin of Colorado. On October 1, 2021, we completed the acquisition of one of the largest upstream well servicing and abandonment businesses in California, which now constitutes our well servicing and abandonment segment, also referred to as “CJWS”.

Principles of Consolidation and Reporting

The condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), which requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. In management’s opinion, the accompanying financial statements contain all normal, recurring adjustments that are necessary to fairly present our interim unaudited condensed consolidated financial statements. We eliminated all significant intercompany transactions and balances upon consolidation. For oil and gas exploration and production joint ventures in which we have a direct working interest, we account for our proportionate share of assets, liabilities, revenue, expense and cash flows within the relevant lines of the financial statements.

We prepared this report pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information, which permit the omission of certain disclosures to the extent they have not changed materially since the latest annual financial statements. We believe our disclosures are adequate to make the disclosed information not misleading. The results reported in these unaudited condensed consolidated financial statements may not accurately forecast results for future periods. This Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2021.

New Accounting Standards Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months and to include qualitative and quantitative disclosures with respect to the amount, timing, and uncertainty of cash flows arising from leases. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842), which is an update to the lease standard providing an optional transition approach for land easements allowing entities to evaluate only new or modified land easements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provided optional transition relief allowing a prospective approach in applying the new rules by not adjusting comparative period financial information for the effects of the new rules and not requiring disclosures for periods before the effective date. As an emerging growth company, we have elected to delay the adoption of these rules until they are applicable to non-SEC issuers. During the second quarter of 2020, this adoption date was further delayed by

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BERRY CORPORATION (bry)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

FASB until fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We adopted these rules in the first quarter of 2022 prospectively.

Note 2—Debt

The following table summarizes our outstanding debt:


	September 30, 2022		December 31, 2021		Interest Rate	Maturity	Security
	(in thousands)
2021 RBL Facility	$	—	$	—	variable rates 7.5% (2022) and 5.3% (2021)	August 26, 2025	Mortgage on 90% of Present Value of proven oil and gas reserves and lien on certain other assets
2022 ABL Facility	—		n/a		variable rates 6.8% (2022)	June 5, 2025	Personal property assets, other than excluded accounts

2026 Notes	400,000		400,000		7.0%	February 15, 2026	Unsecured
Long-Term Debt - Principal Amount	400,000		400,000
Less: Debt Issuance Costs	(4,568)		(5,434)
Long-Term Debt, net	$	395,432	$	394,566

Deferred Financing Costs

We incurred legal and bank fees related to the issuance of debt. At September 30, 2022 and December 31, 2021, debt issuance costs for the 2021 RBL Facility (as defined below) reported in “other noncurrent assets” on the balance sheet were approximately $4 million and $5 million net of amortization, respectively. At September 30, 2022 and December 31, 2021, debt issuance costs, net of amortization, for the unsecured notes due February 2026 (the “2026 Notes”) reported in “Long-Term Debt, net” on the balance sheet was approximately $5 million.

For each of the three month periods ended September 30, 2022 and 2021, the amortization expense for the 2021 RBL Facility, the 2017 RBL Facility (as defined below) and the 2026 Notes, combined, was approximately $1 million. For each of the nine month periods ended September 30, 2022 and 2021, the amortization expense for the 2021 RBL Facility, the 2017 RBL Facility and the 2026 Notes, combined, was approximately $2 million and $4 million, respectively. The amortization of debt issuance costs is presented in “interest expense” in the condensed consolidated statements of operations.

Fair Value

Our debt is recorded at the carrying amount on the balance sheets. The carrying amounts of the 2021 RBL Facility and the 2022 ABL Facility approximate fair value, classified as Level 1, because the interest rates are variable and reflect market rates. The fair value of the 2026 Notes was approximately $359 million and $400 million at September 30, 2022 and December 31, 2021, respectively.

2021 RBL Facility

On August 26, 2021, Berry Corp, as a guarantor, together with Berry LLC, as the borrower, entered into a credit agreement that provided for a revolving loan with up to $500 million of commitment, subject to a reserve borrowing base (as amended by the First Amendment, the Second Amendment and the Third Amendment, each as defined below, the “2021 RBL Facility”). Our initial borrowing base was $200 million. The 2021 RBL Facility provides a letter of credit subfacility for the issuance of letters of credit in an aggregate amount not to exceed $20 million.

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BERRY CORPORATION (bry)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Issuances of letters of credit reduce the borrowing availability for revolving loans under the 2021 RBL Facility on a dollar for dollar basis. The 2021 RBL Facility matures on August 26, 2025, unless terminated earlier in accordance with the 2021 RBL Facility terms. Borrowing base redeterminations generally become effective each May and November, although the borrower and the lenders may each make one interim redetermination between scheduled redeterminations. In December 2021, we completed the first scheduled semi-annual borrowing base redetermination and entered into that certain First Amendment to Credit Agreement (the “First Amendment”), which resulted in a reaffirmed borrowing base at $200 million and changes to the hedging covenants in respect of the exclusion of short puts or similar derivatives in the calculation of minimum and maximum hedging requirements.

In May 2022, Berry Corp., as a guarantor, and Berry LLC, as the borrower, entered into that certain Second Amendment to Credit Agreement and Limited Consent and Waiver (the “Second Amendment”) pursuant to which, among other things, the requisite lenders under the 2021 RBL Facility (i) consented to certain dividends and distributions and to certain investments made by Berry LLC in C&J and/or C&J Management, in each case, as further described therein, (ii) waived certain minimum hedging requirements for the time periods described therein, (iii) waived any breach, default or event of default which may have arisen as a result of any of the foregoing, (iv) amended the restricted payments covenant to give us additional flexibility to make restricted payments, subject to satisfaction of certain leverage and availability conditions and other conditions described below and in the Second Amendment and (v) amended the minimum hedging covenant to not, until October 1, 2022, require hedges for any full calendar month from and after January 1, 2025, as further described in the Second Amendment. In May 2022, we also completed our semi-annual borrowing base redetermination and entered into the Third Amendment to the Credit Agreement (the “Third Amendment”), which among other things (1) increased the borrowing base from $200 million to $250 million; (2) established the Aggregate Elected Commitment Amounts (as defined in the 2021 RBL Facility) at $200 million initially; and (3) converted all outstanding Eurodollar Loans (into Term Benchmark Loans (each as defined in the 2021 RBL Facility) with an initial interest period of one-month’s duration and otherwise give effect to the transition from the London interbank offered rate (“LIBOR”) to the secured overnight financing rate (“SOFR”) by replacing the adjusted LIBOR rate with the term SOFR rate for one, three or six months plus 0.1% (subject to a floor of 0.5%).

If the outstanding principal balance of the revolving loans and the aggregate face amount of all letters of credit under the 2021 RBL Facility exceeds the borrowing base at any time as a result of a redetermination of the borrowing base, we have the option within 30 days to take any of the following actions, either individually or in combination: make a lump sum payment curing the deficiency, deliver reserve engineering reports and mortgages covering additional oil and gas properties sufficient in certain lenders’ opinion to increase the borrowing base and cure the deficiency or begin making equal monthly principal payments that will cure the deficiency within the next six-month period. Upon certain adjustments to the borrowing base other than a result of a redetermination, we are required to make a lump sum payment in an amount equal to the amount by which the outstanding principal balance of the revolving loans and the aggregate face amount of all letters of credit under the 2021 RBL Facility exceeds the borrowing base. In addition, the 2021 RBL Facility provides that if there are any outstanding borrowings and the consolidated cash balance exceeds $20 million at the end of each calendar week, such excess amounts shall be used to prepay borrowings under the credit agreement. Otherwise, any unpaid principal will be due at maturity.

The outstanding borrowings under the revolving loan bear interest at a rate equal to either (i) a customary base rate plus an applicable margin ranging from 2.0% to 3.0% per annum, and (ii) a customary benchmark rate plus an applicable margin ranging from 3.0% to 4.0% per annum, and in each case depending on levels of borrowing base utilization. In addition, we must pay the lenders a quarterly commitment fee of 0.5% on the average daily unused amount of the borrowing availability under the 2021 RBL Facility. We have the right to prepay any borrowings under the 2021 RBL Facility with prior notice at any time without a prepayment penalty.

The 2021 RBL Facility requires us to maintain on a consolidated basis as of each quarter-end (i) a leverage ratio of not more than 3.0 to 1.0 and (ii) a current ratio of not less than 1.0 to 1.0. As of September 30, 2022, our leverage ratio and current ratio were 1.2:1.0 and 2.3:1.0, respectively. In addition, the 2021 RBL Facility currently provides that, to the extent we incur unsecured indebtedness, including any amounts raised in the future, the borrowing base will be reduced by an amount equal to 25% of the amount of such unsecured debt. We were in compliance with all financial covenants under the 2021 RBL Facility as of September 30, 2022.

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BERRY CORPORATION (bry)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The 2021 RBL Facility contains usual and customary events of default and remedies for credit facilities of a similar nature. The 2021 RBL Facility also places restrictions on the borrower and its restricted subsidiaries with respect to additional indebtedness, liens, dividends and other payments to shareholders, repurchases or redemptions of our common stock, redemptions of the borrower’s senior notes, investments, acquisitions, mergers, asset dispositions, transactions with affiliates, hedging transactions and other matters.

From and after August 26, 2022, the 2021 RBL Facility permits us to repurchase certain indebtedness so long as both before and after giving pro forma effect to such repurchase, no default or event of default exists, availability is equal to or greater than 20% of the borrowing base and our pro forma leverage ratio is less than or equal to 2.0 to 1.0. The 2021 RBL Facility also permits us to make restricted payments so long as both before and after giving pro forma effect to such distribution, no default or event of default exists, availability exceeds 75% of the borrowing base, and our pro forma leverage ratio is less than or equal to 1.5 to 1.0. In addition, we can make other restricted payments in an aggregate amount not to exceed 100% of Free Cash Flow (as defined under the 2021 RBL Facility) for the fiscal quarter most recently ended prior to such distribution so long as, in addition to other conditions and limitations as described in the 2021 RBL Facility, both before and after giving pro forma effect to such distribution, no default or event of default exists, availability is greater than 20% of the borrowing base and our pro forma leverage ratio is less than or equal to 2.0 to 1.0.

Berry LLC is the borrower on the 2021 RBL Facility and Berry Corp. is the guarantor. Each future subsidiary of

Berry Corp., with certain exceptions, is required to guarantee our obligations and obligations of the other guarantors under the 2021 RBL Facility and under certain hedging transactions and banking services arrangements (the “Guaranteed Obligations”). The lenders under the 2021 RBL Facility hold a mortgage on at least 90% of the present value of our proven oil and gas reserves. The obligations of Berry LLC and the guarantors are also secured by liens on substantially all of our personal property, subject to customary exceptions.

As of September 30, 2022, we had no borrowings outstanding, $7 million in letters of credit outstanding and approximately $193 million of available borrowing capacity under the 2021 RBL Facility.

2022 ABL Facility

On August 9, 2022, C&J and C&J Management, which are the two entities that constitute the well servicing and abandonment segment referred to as CJWS, as borrowers, entered into a credit agreement with Tri Counties Bank, as lender, that provides for a revolving loan facility, subject to satisfaction of customary conditions precedent to borrowing, of up to the lesser of (x) $15 million and (y) the borrowing base (“the “2022 ABL Facility”). The “borrowing base” is an amount equal to 80% percent of the balance due on eligible accounts receivable, subject to reserves that Tri Counties Bank may implement in its reasonable discretion. Interest on the outstanding principal amount of the revolving loans under the 2022 ABL Facility accrues at a per annum rate equal to 1.25% in excess of The Wall Street Journal Prime Rate. The “Wall Street Journal Prime Rate” is the variable rate of interest, on a per annum basis, which is announced and/or published in the “Money Rates” section of The Wall Street Journal from time to time as its “Prime Rate”. The rate will be redetermined whenever The Wall Street Journal Prime Rate changes. Interest is due quarterly, in arrears, starting on September 30, 2022 and will continue to be due and payable in arrears on the last day of each calendar quarter thereafter. On June 5, 2025 the entire unpaid principal balance of the revolving loans under the 2022 ABL Facility, and all unpaid interest thereon, will be due and payable. The 2022 ABL Facility provides a letter of credit sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $7.5 million.

The 2022 ABL Facility requires CJWS to comply with the following financial covenants (i) maintain on a consolidated basis a ratio of total liabilities to tangible net worth of no greater than 1.5 to 1.0 at any time; (ii) reduce the amount of revolving advances outstanding under the 2022 ABL Facility to not more than 90% of the lesser of (a) the maximum revolving advance amount, or (b) the borrowing base, as of Tri Counties Bank’s close of business on the last day of each fiscal quarter; and (iii) maintain net income before taxes of not less than $1.00 as of each fiscal year end.

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The 2022 ABL Facility contains usual and customary events of default and remedies for credit facilities of a similar nature. The 2022 ABL Facility also places restrictions on CJWS with respect to additional indebtedness, liens, dividends and other distributions, investments, acquisitions, mergers, asset dispositions and other matters. CJWS’s obligations under the 2022 ABL Facility are not guaranteed by Berry Corp. or Berry LLC and Berry Corp. and Berry LLC do not and are not required to provide any credit support for such obligations. We were in compliance with all financial covenants under the 2022 ABL Facility as of September 30, 2022.

As of September 30, 2022, CJWS had no borrowings and no letters of credit outstanding with $15 million of available borrowing capacity under the 2022 ABL Facility.

2017 RBL Facility

On July 31, 2017, we entered into a credit agreement that provided for a revolving loan with up to $1.5 billion of commitment, subject to a reserve borrowing base (“2017 RBL Facility”). On August 26, 2021, we cancelled the 2017 RBL Facility agreement, which had a borrowing base of $200 million and there were no borrowings outstanding at the time of cancellation.

Debt Repurchase Program

In February 2020, our Board of Directors adopted a program to spend up to $75 million for the opportunistic repurchase of our 2026 Notes. The manner, timing and amount of any purchases will be determined based on our evaluation of market conditions, compliance with outstanding agreements and other factors, may be commenced or suspended at any time without notice and do not obligate Berry Corp. to purchase the 2026 Notes during any period or at all. We have not yet repurchased any notes under this program.

Note 3—Derivatives

We utilize derivatives, such as swaps, puts, calls and collars, to hedge a portion of our forecasted oil and gas production and gas purchases to reduce exposure to fluctuations in oil and natural gas prices, which addresses our market risk. In addition to the hedging requirements of the 2021 RBL Facility, we target covering our operating expenses and a majority of our fixed charges, which includes capital needed to sustain production levels, as well as interest and fixed dividends as applicable, with the oil and gas sales hedges for a period of up to three years out. Additionally, we target fixing the price for a large portion of our natural gas purchases used in our steam operations for up to three years. We have also entered into Utah gas transportation contracts to help reduce the price fluctuation exposure, however these do not qualify as hedges. We also, from time to time, have entered into agreements to purchase a portion of the natural gas we require for our operations, which we do not record at fair value as derivatives because they qualify for normal purchases and normal sales exclusions. We had no such transactions in the periods presented.

For fixed-price oil and gas sales swaps, we are the seller, so we make settlement payments for prices above the indicated weighted-average price per bbl and per mmbtu, respectively, and receive settlement payments for prices below the indicated weighted-average price per bbl and per mmbtu, respectively.

For our long put spreads, in addition to any deferred premium payments, we would receive settlement payments for prices below the indicated highest price of the long put with the maximum payment received per bbl equal to the difference between the indicated prices of the long and short put. No payment would be made or received for prices above the highest indicated price of the long put. The short put spreads offset the long put spreads.

A Producer Collar is used for the sale of our produced oil and is the combination of buying a put option and selling a call option. We would receive settlement payments for prices below the indicated weighted-average price per bbl of the put option and we would make settlement payments for prices above the indicated weighted-average price of the call option. No payment would be made or received for prices in between the indicated weighted-average price of the put and call.

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A Consumer Collar is used for the purchase of fuel gas and is the combination of buying a call option and selling a put option. We would receive settlement payments for prices above the indicated weighted-average price of the call option and we would make settlement payments for prices below the indicated weighted-average price of the put option. No payment would be made or received for prices in between the indicated weighted-average price of the put and call.

For some of our options we paid or received a premium at the time the positions were created and for others, the premium payment or receipt is deferred until the time of settlement. As of September 30, 2022 we have net payable deferred premiums of approximately $6 million, which is reflected in the mark-to-market valuation and will be payable through December 31, 2024.

We use oil and gas production hedges to protect our sales against decreases in oil and gas prices. We also use natural gas purchase hedges to protect our natural gas purchases against increases in prices. We do not enter into derivative contracts for speculative trading purposes and have not accounted for our derivatives as cash-flow or fair-value hedges. The changes in fair value of these instruments are recorded in current earnings. Gains (losses) on oil and gas sales hedges are classified in the revenues and other section of the statement of operations, while natural gas purchase hedges are included in expenses and other section of the statement of operations.

As of September 30, 2022, we had the following hedges for our crude oil production and natural gas purchases.


	Q4 2022		FY 2023		FY 2024		FY 2025
Brent - Crude Oil production
Swaps
Hedged volume (bbls)	1,288,000		3,433,528		1,917,000		—
Weighted-average price ($/bbl)	$	76.07	$	73.06	$	75.52	$	—

Put Spreads
Long $50/$40 Put Spread hedged volume (bbls)	414,000		2,555,000		1,647,000		—
Short $50/$40 Put Spread hedged volume (bbls)	46,000		365,000		366,000		—

Producer Collars							—
Hedged volume (bbls)	—		1,460,000		1,098,000		—
Weighted-average price ($/bbl)	$	—	$40.00/$106.00		$40.00/$105.00		$	—



Henry Hub - Natural Gas purchases



Consumer Collars
Hedged volume (mmbtu)	3,680,000		5,430,000		—		—
Weighted-average price ($/mmbtu)	$4.00/$2.75		$4.00/$2.75		$	—	$	—
NWPL - Natural Gas purchases
Swaps
Hedged volume (mmbtu)	1,220,000		12,800,000		7,320,000		6,080,000
Weighted-average price ($/mmbtu)	$	6.40	$	5.48	$	4.27	$	4.27

In addition to the table above, in October we added the following sold oil swaps (Brent): 3,750 bbl/d at $90.48 beginning November 2022 through December 2022, 4,000 bbl/d at $82.85 beginning January 2023 through December 2023, 1,500 bbl/d at $89.00 beginning January 2023 through June 2023, 3,335 bbl/d at $76.58 beginning January 2024 through December 2024, and 1,250 bbl/d at $77.95 beginning July 2024 through December 2024. Including these additional swaps, our swap position increased to 10,049,388 bbls at a weighted-average price of $76.70.

In October we also added Producer Collars (Brent) of 1,000 bbl/d for 2025 at $50.00/$98.50, which are in addition to the table above.

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Our commodity derivatives are measured at fair value using industry-standard models with various inputs including publicly available underlying commodity prices and forward curves, and all are classified as Level 2 in the required fair value hierarchy for the periods presented. These commodity derivatives are subject to counterparty netting. The following tables present the fair values (gross and net) of our outstanding derivatives as of September 30, 2022 and December 31, 2021:


	September 30, 2022
	Balance Sheet Classification	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheet		Net Fair Value Presented in the Balance Sheet
	(in thousands)
Assets:
Commodity Contracts	Current assets	$	36,857	$	(26,805)	$	10,052
Commodity Contracts	Non-current assets	43,435		(31,847)		11,588
Liabilities:
Commodity Contracts	Current liabilities	(47,759)		26,805		(20,954)
Commodity Contracts	Non-current liabilities	(36,092)		31,847		(4,245)
Total derivatives		$	(3,559)	$	—	$	(3,559)


	December 31, 2021
	Balance Sheet Classification	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheet		Net Fair Value Presented in the Balance Sheet
	(in thousands)
Assets:
Commodity Contracts	Current assets	$	5,360	$	(5,360)	$	—
Commodity Contracts	Non-current assets	29,828		(28,758)		1,070
Liabilities:
Commodity Contracts	Current liabilities	(34,985)		5,360		(29,625)
Commodity Contracts	Non-current liabilities	(47,335)		28,758		(18,577)
Total derivatives		$	(47,132)	$	—	$	(47,132)

By using derivative instruments to economically hedge exposure to changes in commodity prices, we expose ourselves to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk. We do not receive collateral from our counterparties.

We minimize the credit risk in derivative instruments by limiting our exposure to any single counterparty. In addition, our 2021 RBL Facility prevents us from entering into hedging arrangements that are secured, except with our lenders and their affiliates that have margin call requirements, that otherwise require us to provide collateral or with a non-lender counterparty that does not have an A or A2 credit rating or better from Standards & Poor’s or Moody’s, respectively. In accordance with our standard practice, our commodity derivatives are subject to counterparty netting under agreements governing such derivatives which partially mitigates the counterparty nonperformance risk.

Note 4—Lawsuits, Claims, Commitments and Contingencies

In the normal course of business, we, or our subsidiaries, are the subject of, or party to, pending or threatened legal proceedings, contingencies and commitments involving a variety of matters that seek, or may seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, fines and penalties, remediation costs, or injunctive or declaratory relief.

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We accrue for currently outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. We have not recorded any reserve balances at September 30, 2022 and December 31, 2021. We also evaluate the amount of reasonably possible losses that we could incur as a result of these matters. We believe that reasonably possible losses that we could incur in excess of accruals on our balance sheet would not be material to our consolidated financial position or results of operations.

We, or our subsidiaries, or both, have indemnified various parties against specific liabilities those parties might incur in the future in connection with transactions that they have entered into with us. As of September 30, 2022, we are not aware of material indemnity claims pending or threatened against us.

Securities Litigation Matters

On November 20, 2020, Luis Torres, individually and on behalf of a putative class, filed a securities class action lawsuit (the “Torres Lawsuit”) in the United States District Court for the Northern District of Texas against Berry Corp. and certain of its current and former directors and officers (collectively, the “Defendants”). The complaint asserts violations of Sections 11 and 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Exchange Act, on behalf of a putative class of all persons who purchased or otherwise acquired (i) common stock pursuant and/or traceable to the Company’s 2018 IPO; or (ii) Berry Corp.'s securities between July 26, 2018 and November 3, 2020 (the “Class Period”). In particular, the complaint alleges that the Defendants made false and misleading statements during the Class Period and in the offering materials for the IPO, concerning the Company’s business, operational efficiency and stability, and compliance policies, that artificially inflated the Company’s stock price, resulting in injury to the purported class members when the value of Berry Corp.’s common stock declined following release of its financial results for the third quarter of 2020 on November 3, 2020.

On January 21, 2021, multiple plaintiffs filed motions in the Torres Lawsuit seeking to be appointed lead plaintiff and lead counsel. After briefing and a stipulation between the remaining movants, the Court appointed Luis Torres and Allia DeAngelis as co-lead plaintiffs on August 18, 2021. On November 1, 2021, the co-lead plaintiffs filed an amended complaint asserting claims on behalf of the same putative class under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Exchange Act, alleging, among other things, that the Company and the individual Defendants made false and misleading statements between July 26, 2018 and November 3, 2020 regarding the Company’s permits and permitting processes. The amended complaint does not quantify the alleged losses but seeks to recover all damages sustained by the putative class as a result of these alleged securities violations, as well as attorneys’ fees and costs. The Defendants filed a Motion to Dismiss on January 24, 2022, and on September 13, 2022, the Court issued an order denying that motion. The Defendants have moved for reconsideration and/or clarification of the September 13 order, and that motion is currently pending.

We dispute these claims and intend to defend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, we cannot reasonably estimate the possible loss or range of loss that may result from this action.

On October 20, 2022, a shareholder derivative lawsuit was filed in the United States District Court for the Northern District of Texas by putative stockholder George Assad, allegedly on behalf of the Company, that piggy-backs on the securities class action referenced above and which is currently pending before the same Court. The derivative complaint names certain current and former officers and directors as defendants, and generally alleges that they breached their fiduciary duties by causing or failing to prevent the securities violations alleged in the securities class action. The derivative complaint also alleges claims for unjust enrichment as against all defendants, and claims for contribution and indemnification under Sections 10(b) and 21D of the Exchange Act. The Company and the individual defendants believe the claims in the shareholder derivative action are without merit and intend to defend vigorously against them, but there can be no assurances as to the outcome. At this time, we are unable to estimate the probability or the amount of liability, if any, related to this matter.

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(Unaudited)

Note 5—Equity

Cash Dividends

For the nine months ended September 30, 2022, our Board of Directors declared quarterly fixed cash dividends totaling $0.18 per share, as well as variable cash dividends of $0.69 per share which were based on the results of the first two quarters of 2022, for a total of $0.87 per share. In October 2022, the Board of Directors approved the fourth quarter $0.06 per share fixed cash dividend, as well as a variable dividend of $0.41 based on the third quarter results.

The Company anticipates that it will continue to pay quarterly cash dividend in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company’s future earnings, financial condition, capital requirements, and other factors.

Stock Repurchase Program

We repurchased 2,000,000 shares during the three months ended September 30, 2022 for approximately $19 million. For the nine months ended September 30, 2022, we repurchased 4,000,000 shares for approximately $42 million. As of September 30, 2022, the Company had repurchased a total of 9,528,704 shares under the stock repurchase program for approximately $94 million in aggregate, which is 12% of outstanding shares. As previously disclosed, the Company implemented a shareholder return model in early 2022, for which the Company intends to allocate a portion of Discretionary Free Cash Flow to opportunistic share repurchases.

In April 2022, our Board of Directors approved an increase of $102 million to the Company’s stock repurchase authorization bringing the Company’s remaining share repurchase authority to $150 million. As of September 30, 2022, the Company’s remaining total share repurchase authority is $108 million, after the repurchases made in the second and third quarters of 2022. The Board’s authorization permits the Company to make purchases of its common stock from time to time in the open market and in privately negotiated transactions, subject to market conditions and other factors, up to the aggregate amount authorized by the Board. The Board’s authorization has no expiration date.

Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means, as determined in the Company's sole discretion. The manner, timing and amount of any purchases will be determined based on our evaluation of market conditions, stock price, compliance with outstanding agreements and other factors, may be commenced or suspended at any time without notice and does not obligate the company to purchase shares during any period or at all. Any shares repurchased are reflected as treasury stock and any shares acquired will be available for general corporate purposes.

Stock-Based Compensation

In February 2022, the Company granted awards of approximately 1,300,000 shares of restricted stock units (“RSUs”), which will vest annually in equal amounts over three years. In March 2022, the Company granted awards of approximately 611,000 shares performance-based restricted stock units (“PSUs”), which will cliff vest, if at all, at the end of a three year performance period. The RSUs awarded are equity awards as they will be settled in stock. The PSUs awarded were accounted for as liability awards as of March 31, 2022, but converted to equity awards during the second quarter of 2022. The accounting of the awards was converted as a result of the 2022 Omnibus Incentive Plan (the “2022 Plan”) being approved by the stockholders in May 2022. The fair value of these awards was approximately $19 million on the date the 2022 Plan was approved and this will be the value of these awards through the date of their vesting.

The RSUs awarded in February 2022 are solely time-based awards. Of the PSUs awarded to certain Berry employees (excluding CJWS employee awards) in March 2022, (a) 50% of such will vest, if at all, based on a total stockholder return (“TSR”) performance metric (the “TSR PSUs”), which is defined as the capital gains per share of stock plus dividends paid assuming reinvestment, with TSR measured on an absolute basis and relative to the TSR of the 44 exploration and production companies in the Vanguard World Fund - Vanguard Energy ETF Index plus the S&P SmallCap 600 Value Index (collectively, the “Peer Group”) during the performance period and (b) 50% of such

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(Unaudited)

awards will vest, if at all, based on the consolidated Company's average cash returned on invested capital (“CROIC PSUs”) over the performance period. The PSUs awarded to certain CJWS employees in March 2022 will vest, if at all, based on the CJWS average cash returned on invested capital (“ROIC PSUs”) over the performance period. Depending on the results achieved during the three-year performance period, the actual number of shares that a grant recipient receives at the end of the period may range from 0% to 250% of the TSR PSUs granted and from 0% to 200% of the CROIC and ROIC PSUs granted.

The fair value of the RSUs was determined using the grant date stock price. The fair value of the CROIC PSUs and ROIC PSUs was determined using the stock price and estimated performance as of the reporting period as the awards are liability awards. The fair value of the TSR PSUs was determined using a Monte Carlo simulation analysis to estimate the total shareholder return ranking of the Company, including a comparison against the Peer Group over the performance periods as of the reporting period as the awards are liability awards. The expected volatility of the Company’s common stock at the date of grant was estimated based on average volatility rates for the Company and selected guideline public companies. The dividend yield assumption was based on the then current annualized declared dividend. The risk-free interest rate assumption was based on observed interest rates consistent with the approximate three-year performance measurement period.

Note 6—Supplemental Disclosures to the Financial Statements

Other current assets reported on the condensed consolidated balance sheets included the following:


	September 30, 2022		December 31, 2021
	(in thousands)
Prepaid expenses	$	20,362	$	26,840
Materials and supplies	10,068		9,533

Deposits	3,459		6,415

Oil inventories	2,623		2,933
Other	226		225
Total other current assets	$	36,738	$	45,946

Other non-current assets at September 30, 2022 included approximately $7 million of operating lease right-of-use assets, net of amortization and $4 million of deferred financing costs, net of amortization. At December 31, 2021 other non-current assets included approximately $5 million of deferred financing costs, net of amortization.

Accounts payable and accrued expenses on the condensed consolidated balance sheets included the following:


	September 30, 2022		December 31, 2021
	(in thousands)
Accounts payable-trade	$	19,987	$	17,699
Accrued expenses	70,038		62,962
Royalties payable	28,798		24,816
Greenhouse gas liability - current portion	—		7,513
Taxes other than income tax liability	11,303		8,273
Accrued interest	3,811		10,736
Dividends payable	—		4,800
Asset retirement obligations - current portion	20,000		20,000
Operating lease liability	1,749		—
Other	1,158		725
Total accounts payable and accrued expenses	$	156,844	$	157,524

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(Unaudited)

The decrease of $6 million in the long-term portion of the asset retirement obligations from $144 million at December 31, 2021 to $138 million at September 30, 2022 was due to $16 million of liabilities settled during the period, and a $1 million reduction related to property sales. These decreases were offset by $8 million of accretion and $3 million of liabilities incurred.

Other noncurrent liabilities at September 30, 2022 included approximately $26 million of greenhouse gas liability and $6 million of operating lease noncurrent liability. For December 31, 2021, we had $18 million in greenhouse gas liability.

Supplemental Information on the Statement of Operations

For the three months ended September 30, 2022, other operating expenses were less than $1 million. For the three months ended September 30, 2021, other operating expenses were $4 million and mainly consisted of expensing $3 million of unamortized debt issuance costs related to the termination of the 2017 RBL Facility.

For the nine months ended September 30, 2022, other operating expenses were $5 million and mainly consisted of over $2 million in royalty audit charges incurred prior to our emergence and restructuring in 2017, and approximately $2 million loss on the divestiture of the Piceance properties. For the nine months ended September 30, 2021, other operating expenses were $5 million and mainly consisted of approximately $3 million of unamortized debt issuance costs related to the termination of the 2017 RBL Facility, approximately $3 million of supplemental property tax assessments, royalty audit charges and tank rental costs and $1 million of various other costs such as abandonment costs and legal fees, partially offset by $2 million of income from employee retention credits.

Supplemental Cash Flow Information

Supplemental disclosures to the condensed consolidated statements of cash flows are presented below:




	Nine Months Ended September 30,
	2022		2021
	(in thousands)


Supplemental Disclosures of Significant Non-Cash Investing Activities:
Material inventory transfers to oil and natural gas properties	$	1,494	$	2,916
Supplemental Disclosures of Cash Payments (Receipts):
Interest, net of amounts capitalized	$	29,481	$	29,114
Income taxes payments	$	2,805	$	294

Note 7—Earnings Per Share

We calculate basic earnings (loss) per share by dividing net income (loss) by the weighted-average number of common shares outstanding for each period presented. Common shares issuable upon the satisfaction of certain conditions pursuant to a contractual agreement, are considered common shares outstanding and are included in the computation of net income (loss) per share.

The RSUs and PSUs are not a participating security as the dividends are forfeitable. For the three months ended September 30, 2022 and September 30, 2021, 4,001,000 and 2,656,000 incremental RSU and PSU shares were included in the diluted EPS calculation. For the nine months ended September 30, 2022, 4,168,000 incremental RSU and PSU shares were included in the diluted EPS calculation. For the nine months ended September 30, 2021, no incremental RSU or PSU shares were included in the diluted EPS calculation as their effect was anti-dilutive under the “if converted” method.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)




	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands except per share amounts)
Basic EPS calculation
Net income (loss)	$	191,660	$	9,836	$	178,204	$	(24,367)




Weighted-average shares of common stock outstanding	78,044		80,242		79,304		80,277
Basic income (loss) per share	$	2.46	$	0.12	$	2.25	$	(0.30)
Diluted EPS calculation
Net income (loss)	$	191,660	$	9,836	$	178,204	$	(24,367)




Weighted-average shares of common stock outstanding	78,044		80,242		79,304		80,277
Dilutive effect of potentially dilutive securities(1)	4,001		2,656		4,168		—
Weighted-average common shares outstanding - diluted	82,045		82,898		83,472		80,277
Diluted income (loss) per share