Analysts recommend oil producer California Resources amid acquisition of smaller peer

Investors may want to take advantage of easing environmental rules for drilling in California by buying shares of small-cap oil producer California Resources, several Wall Street analysts have flagged. Yesterday, September 15, the company announced it would buy smaller peer Berry Corporation. 

Several Wall Street analysts recommend investors buy shares of California Resources, Barron's reports. While California has long been considered hostile to oil companies because of its strict environmental policies, a new, "sunnier" attitude toward oil drilling should boost a handful of companies, including California Resources.

Production in the state has fallen steadily for decades, Barron's writes, from about 750,000 barrels of oil a day in 2000 to about 250,000 a day this year. But the state legislature passed a bill over the weekend that eases environmental rules for drilling in one section of the state. 

California Resources will also benefit from its acquisition of Berry Corporation, announced yesterday. Under the terms of the deal, California Resources will acquire Berry shares at a market premium, paying with its own stock and assuming Berry’s net debt. The transaction will create a company valued at about $6 billion, with existing California Resources shareholders retaining roughly 94% of the equity.

The deal, expected to close in the first quarter of 2026, has already been approved by the boards of both companies and now requires regulatory clearance and approval from Berry shareholders.

The combined company should be able to pump 161,000 barrels of oil and oil equivalents a day, up from the 137,000 barrels a day that California Resources pumped in the second quarter. 

California Resources has been seeing “modest declines” in production in recent years, according to Roth Capital Partners analyst Leo Mariani, as quoted by Barron's. Both Berry and California Resources have enough reserves to produce consistently at current rates for more than a decade, according to Jefferies.

For investors looking to play the trend, several analysts recommend California Resources, Barron's writes. “While California is likely to remain a tough regulatory environment for oil and gas producers, on the margin, we believe the regulatory environment may be easing,” wrote JPMorgan analyst Zach Parham. He raised his price target to $64 per share, for about 14% upside versus the September 15 close.

Yesterday, when the deal was announced, Berry shares surged more than 21%. Today, September 16, they have extended the gains slightly as of this writing.

California Resources stock climbed 6.3% yesterday and has added another 0.5% today. According to MarketWatch, it has 14 "buy" recommendations from Wall Street analysts versus one "hold" rating. The average target price of $65.20 per share implies nearly 16% upside to yesterday's close.

The AI translation of this story was reviewed by a human editor.