“Berry Corp.” refers to Berry Corporation (bry), a Delaware corporation, which is the sole member of each of its 3 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 (“CJWS”).

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 wholly-owned subsidiary,3 wholly owned subsidiaries. Berry LLC. OurLLC owns and operates our oil and gas assets (D&P segment). In January 2022, we divested our natural gas properties are located onshore in the United States (the “U.S.”),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, (primarily in the San Joaquin basin), Utah (in the Uinta basin),which now constitutes our well servicing and Colorado (in the Piceance basin)abandonment segment, also referred to as “CJWS”.

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. SecuritySecurities 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, 2020.2021.

The following table summarizes our outstanding debt:

We incurred legal and bank fees related to the issuance of debt. At June 30, 20212022 and December 31, 2020,2021, debt issuance costs for the 2021 RBL Facility (as defined below) reported in “other noncurrent assets” on the balance sheet were approximately $5$4 million and $7$5 million net of amortization, respectively. At June 30, 20212022 and December 31, 2020,2021, 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 werewas approximately $6 million and $7 million, respectively.$5 million.

For each of the three monthsmonth periods ended June 30, 20212022 and 2020,2021, 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 six month periods ended June 30, 2022 and 2021, the amortization expense for the 2021 RBL Facility, the 2017 RBL Facility and the 2026 Notes, were bothcombined, was approximately $1 million and was included$3 million, respectively. The amortization of debt issuance costs is presented in “interest expense” in the condensed consolidated statements of operations. For each of the six month periods ended June 30, 2021 and 2020, the amortization expense for both the RBL Facility and 2026 Notes was approximately $3 million.

Our debt is recorded at the carrying amount on the balance sheets. The carrying amount of the 2021 RBL Facility approximates 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 $408$389 million and $337$400 million at June 30, 20212022 and December 31, 2020,2021, respectively.

On July 31, 2017, weAugust 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 $1.5 billion$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 $25$20 million. 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 each of usthe borrower and the administrative agentlenders may each make one interim redetermination between scheduled redeterminations. The RBL Facility has an elected commitment feature that allows us to increase commitments to the amount of our borrowing base with lender approval. In AprilDecember 2021, we completed ourthe first scheduled semi-annual borrowing base redetermination under our RBL Facility, which resulted in a reaffirmed borrowing base and the Company's elected commitment at $200 million with no further borrowing restrictions beyond the covenants noted below.

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 doesdo not obligate Berry Corp. to purchase the 2026 Notes during any period or at all. We have not yet repurchased any bondsnotes under this program.

We utilize derivatives, such as swaps, puts, calls and calls,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. WeIn 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 twothree 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 twothree 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 barrel and per mmbtu, respectively, and receive settlement payments for prices below the indicated weighted-average price per barrel and per mmbtu, respectively.

For fixed-priceour purchased oil puts, we would receive settlement payments for prices below the indicated weighted-average price per barrel of Brent. 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 June 30, 2022 we have net payable deferred premiums of approximately $7 million, which is reflected in the mark-to-market valuation and will be payable beginning in 2022 through 2024.

For our purchased gas purchase swaps,calls, we arewould receive settlement payments for prices above the buyer soindicated weighted-average price. No payment would be received for prices below the indicated weighted-average price.

For our sold oil and gas puts, we would make settlement payments for prices below the indicated weighted-average price per mmbtu and receive settlement paymentsprice. No payment would be due for prices above the indicated weighted-average price per mmbtu.price.

We use oil and gas swaps and putsproduction hedges to protect our sales against decreases in oil and gas prices. We also use swapsnatural 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 June 30, 20212022, we also had open swap positions that are excluded from the table above where we are both buyerfollowing hedges for our crude oil production and seller of equal notional volumes of 12,500 mmbtu/d of fixed pricenatural gas sales swaps each indexed to Northwest Pipeline Rocky Mountains and CIG, for the period July 1, 2021 through December 31, 2021. These swap positions effectively cancel each other while resulting in a mark-to-market gain of $1 million. This gain will be cash settled in 2021 as the positions expire.purchases.

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 June 30, 20212022 and December 31, 2020:2021:

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-A or A3A2 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.

In the normal course of business, we, or our subsidiary,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.

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 a material balanceany reserve balances at June 30, 2021 or2022 and December 31, 2020.2021. 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 subsidiary,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 June 30, 2021,2022, we are not aware of material indemnity claims pending or threatened against us.

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 (the(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,

Our Board of Directors approved a regular fixed cash dividenddividends of $0.04$0.06 per share on our common stock for each of the first and secondtwo quarters of 2021. We2022, which were paid the first and the second quarter cash dividend in April and July 2021, respectively.2022. The Board of Directors approved a $0.13 per share variable dividend based on our first quarter results, which was paid in June 2022. In July 2022, the Board of Directors approved a $0.06 per share regular fixed cash dividend, as well as a variable dividend of $0.56 based on our common stock for the thirdsecond quarter results, each of 2021, which is expected to be paid in October 2021.August 2022.

In December 2018, our BoardThe Company repurchased 2,000,000 shares during the three months ended June 30, 2022 for approximately $23 million. As of Directors adopted a program forJune 30, 2022, the opportunistic repurchase of up to $100 million of our common stock. Based on the Board’s evaluation of market conditions for our common stock at the time, they authorized repurchases of up to $50 million under the program. The Company had repurchased a total of 5,057,6827,528,704 shares under the stock repurchase program for approximately $50$75 million in 2018 and 2019. aggregate. 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.

The RSUs awarded in February 20212022 are solely time-based awards. Of the PSUs awarded to certain Berry employees (excluding CJWS employee awards) in February 2021,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

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

Other non-current assets at June 30, 2021 and December 31, 2020,2022 included approximately $5$7 million of operating lease right-of-use assets, net of amortization and $7$4 million of deferred financing costs, net of amortization, respectively.

For the three months ended June 30, 2022, other operating expenses were less than $1 million. For the three months ended June 30, 2021, other operating expenseexpenses mainly consisted of $2 million of supplemental property tax assessments and royalty audit charges, mostly offset by $2 million of employee retention credits. For three months ended June 30, 2020, other operating income was $1 million and mainly consisted of sales tax and bankruptcy-related refunds, partially offset by excess abandonment costs and drilling rig standby charges.

For the six months ended June 30, 2021 and 20202022, other operating expenses were $4 million and mainly consisted of over $2 million in royalty audit charges incurred prior to our emergence and restructuring in 2017, and approximately $1 million.million loss on the divestiture of the Piceance properties. For the six months ended June 30, 2021, other operating expenses were approximately $1 million and mainly consisted of approximately $3 million of supplemental property tax assessments and royalty audit charges and tank rental costs, partially offset by $2 million of employee retention credits. For the six months ended June 30, 2020, other operating expense mainly consist

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

Cash and cash equivalents consist primarily of highly liquid investments with original maturities of three months or less and are stated at cost, which approximates fair value. As part of our cash management system, we use a controlled disbursement account to fund cash distribution checks presented for payment by the holder. Checks issued but not yet presented to banks may result in overdraft balances for accounting purposes and have been included in “accounts payable and accrued expenses” in the condensed consolidated balance sheets,sheets. Such amounts are approximately $2 millionimmaterial as of June 30, 20212022 and December 31, 2020.2021.

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 June 30, 2022, 3,419,000 incremental RSU and sixPSU shares were included in the diluted EPS calculation. For the three months ended June 30, 2021 and 2020, 0the six months ended June 30, 2022 and 2021, no incremental RSUsRSU or PSUsPSU shares were included in the diluted EPS calculation as their effect was anti-dilutive under the “if converted” method.