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Rating Action: Moody's affirms Berry Petroleum Company's B2 CFR; outlook is stableGlobal Credit Research - 09 Apr 2021New York, April 09, 2021 -- Moody's Investors Service, ("Moody's") changed Berry Petroleum Company, LLC's (Berry) outlook to stable from negative. At the same time, Moody's affirmed Berry's B2 Corporate Family Rating (CFR), B2-PD Probability of Default Rating (PDR) and the B3 rating on its unsecured notes. Moody's also assigned a Speculative Grade Liquidity rating of SGL-2 to Berry.Assignments:..Issuer: Berry Petroleum Company, LLC.... Speculative Grade Liquidity Rating, Assigned SGL-2Affirmations:..Issuer: Berry Petroleum Company, LLC.... Probability of Default Rating, Affirmed B2-PD.... Corporate Family Rating, Affirmed B2....Senior Unsecured Notes, Affirmed B3 (LGD4) from (LGD5)Outlook Actions:..Issuer: Berry Petroleum Company, LLC....Outlook, Changed To Stable From NegativeRATINGS RATIONALEBerry's B2 CFR reflects its modest size, limited asset diversification, and relatively high cost production using thermal oil recovery. The company benefits from low absolute debt levels and moderate leverage, and a steady production profile in its low-decline oil assets in California's San Joaquin Basin. In response to the severe drop in oil prices in early 2020 brought on by the Covid-19 pandemic Berry suspended its dividend and cut capital spending sharply. The company has reinstated its dividend and has guided to a 2021 capital budget that will result in outspending cash flow under Moody's assumed 2021 oil price of $50/barrel for Brent, though the company has significant cash balances from which to fund any outspending. Berry's credit profile is supported by management's conservative financial policies, underpinned by the company's long-term, through the cycle debt/EBITDA target of between 1.0x and 2.0x.The $400 million senior unsecured notes due 2026 are rated B3, one notch below the B2 CFR, reflecting the notes' more junior priority of claim on assets relative to borrowings under the secured revolving credit facility.Moody's expects Berry will maintain good liquidity through mid-2022, as indicated by its SGL-2 rating. Liquidity is supported by the company's undrawn revolving credit facility, which has a borrowing base of $200 million. Berry was able to build cash in 2020 due to its limited spending and suspension of its dividend and at December 31, 2020 had $80 million of cash on its balance sheet. Based on its guidance for capital spending, the resumption of its dividend (albeit at a lower level than before it was suspended) and applying Moody's assumed 2021 Brent price of $50/bbl, Berry is likely to outspend cash flow. However, outspending will be well within the amount of cash held on its balance sheet.The revolving credit facility expires in July 2022 and has two maintenance financial covenants -- a maximum leverage ratio of 4.0x and minimum current ratio of 1.0x. We expect Berry to remain well within the stated covenant limits into early 2021. The company's next debt maturity is on its senior unsecured notes in 2026.The stable outlook reflects Moody's expectation that Berry will continue to maintain a balanced approach to returning cash to shareholders and leverage and return to free cash flow generation in 2022.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be upgraded if the company can grow production to in excess of 40 Mboe/d while maintaining strong financial metrics.Ratings could be downgraded if RCF/debt falls below 15%, capital efficiency deteriorates, or the company begins purchasing its unsecured notes at deeply discounted prices.Berry Petroleum Company, LLC, based in Dallas, Texas and a wholly-owned subsidiary of Berry Corporation (NASDAQ: BRY), is an independent oil and gas exploration and production company with its primary operations focused in California's San Joaquin Basin.The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1056808. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. John Thieroff VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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