California Resources Reports Third Quarter 2024 Financial and Operating Results

LONG BEACH, Calif., Nov. 05, 2024 (GLOBE NEWSWIRE) -- California Resources Corporation (NYSE: CRC) today reported financial and operating results for the third quarter of 2024. The Company plans to host a conference call and webcast at 1 p.m. ET (10 a.m. PT) on Wednesday, November 6, 2024. Participation details can be found within this release. In addition, supplemental slides are available on CRC’s website at www.crc.com.

Highlights

• Generated $345 million of net income, $137 million of adjusted net income¹ and $402 million of adjusted EBITDAX¹
• Generated $220 million of net cash provided by operating activities, $249 million of net cash provided by operating activities before changes in operating assets and liabilities¹ and $141 million of free cash flow¹
• Strong third quarter 2024 average net production sold of 145 thousand barrels of oil equivalent per day (MBoe/d) and average net oil production sold of 113 thousand barrels of oil per day (MBo/d). Drilling and workover capital investments were $38 million
• On-track to deliver approximately $235 million in targeted Aera merger-related synergies by the third quarter of 2025 with $135 million of synergies actioned to date including a reduction of $60 million² in annual interest expense
• Returned 54% of quarterly free cash flow¹, or $76 million, to shareholders including $42 million in share repurchases and $34 million in dividends
• Optimized capital structure and extended maturities through recent $300 million follow-on offering of 8.250% senior notes due 2029 (2029 Senior Notes) and subsequent tender of $300 million 7.125% senior notes due 2026 (2026 Senior Notes)
• Exited the quarter with $213 million in cash and cash equivalents and $1,138 million of liquidity³
• Received California's first conditional use permits for Carbon TerraVault I CCS project in Kern County and signed a memorandum of understanding⁴ (MOU) to develop carbon capture and storage (CCS) solutions with Hull Street Energy LLC, a leading California power partner. See Carbon TerraVault's Third Quarter 2024 Update for additional information

"Our performance this year has been strong and we have positioned CRC for long term value creation into the future," said Francisco Leon, CRC's President and Chief Executive Officer. "Today, CRC is bigger, stronger, and more sustainable. We continue to demonstrate that we are a different kind of energy company. I am really proud of our teams and the Aera integration. We are capturing meaningful synergies, enhancing operating efficiencies and advancing new growth opportunities. The Kern County Board of Supervisors’ approval of the conditional use permits for our CTV I project and a recent MOU with a leading power partner are a testament to our team's relentless pursuit of growing our carbon business. As we look to 2025, our hedge positions underpin near-term cash flows and will allow for continued debt reduction and cash returns to shareholders."

Third Quarter 2024 Financial and Operating Summary

CRC reported net income of $345 million, or $3.78 per fully diluted share of common stock, and adjusted net income¹ of $137 million, or $1.50 per fully diluted share. Net cash provided by operating activities was $220 million.

Transaction and integration costs related to the Aera merger decreased third quarter 2024 cash flow from operations by $57 million. Employee severance and related costs during the three months ended September 30, 2024 were $27 million. CRC expects to pay severance costs of approximately $25 million in the fourth quarter of 2024 and the remaining amounts throughout 2025 as the workforce reduction will be achieved in stages due to transition periods.

Gross production averaged 165 MBoe/d and net production sold averaged 145 MBoe/d, including net oil production sold of 113 MBo/d. Net oil production was positively impacted by approximately 1 MBo/d, as compared to the second quarter of 2024, a result CRC's production-sharing contracts (PSCs). Average realized oil prices were 98% of Brent.

Operating costs of $311 million reflected reduced activity levels, lower natural gas prices and the early realization of Aera merger-related synergies.

Capital investments of $79 million were lower than guidance primarily due to high-grading of workover capital.

Guidance

The following table provides guidance for key fourth quarter financial and operating metrics. For the balance of 2024, CRC expects to run a one-rig program.

CRC has actioned $135 million in Aera merger related synergies during the second half of 2024 and remains on-track to deliver approximately $235 million in estimated synergies by the third quarter of 2025. A reduction of $60 million² in annual interest expense was achieved in the second quarter of 2024 and third quarter results reflect approximately $8 million of run rate savings. Looking forward, fourth quarter guidance includes $22 million of actioned synergies and the next $45 million of actioned Aera merger synergies are expected to be gradually reflected throughout 2025.

CRC plans to implement the final $100 million of projected operational and general and administrative Aera merger related synergies next year, with the benefits expected to be realized throughout 2025 and 2026. Projected operational synergies are expected to reduce operating costs, ARO, and capital. CRC plans to provide additional details of these operations synergies with its full year 2025 guidance during its fourth quarter 2024 earnings call. See Attachment 2 for additional information.

Shareholder Returns

CRC is committed to returning cash to shareholders through dividends and repurchases of common stock. During the third quarter of 2024, CRC repurchased 0.835 million shares for $42 million at an average price of $50.23 per share.

On November 5, 2024, CRC's Board of Directors declared a quarterly cash dividend of $0.3875 per share of common stock. The dividend is payable to shareholders of record on December 2, 2024 and will be paid on December 16, 2024.

Since May 2021, CRC has returned approximately $1,022 million of cash to its stakeholders, including $736 million⁸ in share repurchases, $231 million in dividends and redemption of $55 million in principal of its 2026 Senior Notes which reduced overall leverage.

In October 2020, CRC reserved an aggregate 4.384 million shares of its common stock for warrants, which were exercisable at $36 per share through October 28, 2024.

Since the issuance date of the warrants in October 2020, 3.857 million shares have been issued upon the exercise of warrants and, 0.469 million shares were cancelled due to net settlement. On October 28, 2024, any unexercised warrants expired in accordance with their terms and 57,920 shares underlying such warrants were never issued.

Balance Sheet and Liquidity

On August 22, 2024, CRC completed a follow-on offering of $300 million in aggregate principal amount of 2029 Senior Notes. The net proceeds of $298 million from the issuance, which included $3 million of premium and $5 million of issuance costs, were used to repurchase $300 million of CRC's 2026 Senior Notes in a tender offer.

As of September 30, 2024, CRC had liquidity of $1,138 million³, which consisted of $213 million in available cash and cash equivalents³ plus $925 million of availability under the Revolving Credit Facility which reflects $1,100 million of borrowing capacity, less $175 million of outstanding letters of credit.

On November 1, 2024, CRC reaffirmed its $1.5 billion borrowing base and amended its existing Revolving Credit Facility. The amendments included extending the maturity date of the facility to March 16, 2029, amending the springing maturity to permit its 2026 Senior Notes to remain outstanding past October 31, 2025 under certain circumstances, increasing the amount of elected commitments by $50 million, and other technical amendments.

Upcoming Investor Conference Participation

CRC plans to participate in the following events in November and December 2024:

• Bank of America Global Energy Conference 2024 on November 12 to 13 in Houston, TX
• TD Securities Energy Conference on November 19 to 20 in New York, NY
• Wolfe Research Inaugural Oil & Gas Conference on November 21, Virtual
• 2024 Stephens Annual Investment Conference on November 22 in Nashville, TN
• Mizuho Power, Energy & Infrastructure Conference 2024 on December 9 in New York, NY
• 23rd Annual Wells Fargo Midstream, Energy & Utilities Symposium on December 10 in New York, NY
• Capital One Securities Energy Conference on December 10 in Houston, TX
  

CRC’s presentation materials will be available on the day of the event on its website. See the Events and Presentations page under the Investor Relations section on www.crc.com.

Conference Call Details

A conference call is scheduled for 1 p.m. ET (10 a.m. PT) on Wednesday, November 6, 2024. To participate in the call, dial (877) 328-5505 (International calls please dial +1 (412) 317-5421) or access via webcast at www.crc.com. Participants may also pre-register for the conference call at https://dpregister.com/sreg/10192326/fd6685ad6e. A digital replay of the conference call will be archived for approximately 90 days and supplemental slides will be available online in the Investor Relations section of www.crc.com.

¹ See Attachment 3 for the non-GAAP financial measures of operating costs per BOE (excluding effects of PSCs), adjusted net income (loss), adjusted net income (loss) per share - basic and diluted, net cash provided by operating activities before changes in operating assets and liabilities, net, adjusted EBITDAX, free cash flow and adjusted general and administrative expenses, including reconciliations to their most directly comparable GAAP measure, where applicable. For the 4Q24 estimates of the non-GAAP measures of adjusted EBITDAX and adjusted general and administrative expenses, including reconciliations to its most directly comparable GAAP measure, see Attachment 3.
² As of June 30, 2024. When accounting for estimated cash interest income, CRC’s net interest savings were ~$36 million.
³ Excludes restricted cash of $28 million.
⁴ The MOU is non-binding and subject to negotiation of definitive agreements.
⁵ Margin from Marketing of Purchased Commodities is calculated as the difference between Revenue from Marketing of Purchased Commodities and Costs Related to Marketing of Purchased Commodities
⁶ Electricity Margin is calculated as the difference between Electricity Sales and Electricity Generation Expenses
⁷ 4Q24 guidance assumes Brent price of $71.48 per barrel of oil, NGL realizations as a percentage of Brent consistent with prior years and a NYMEX gas price of $2.95 per mcf. CRC's share of production under PSC contracts decreases when commodity prices rise and increases when prices fall.
⁸ The total value of shares purchased excludes approximately $3 million related to excise taxes and commissions paid on share repurchases.

About California Resources Corporation

California Resources Corporation (CRC) is an independent energy and carbon management company committed to energy transition. CRC is committed to environmental stewardship while safely providing local, responsibly sourced energy. CRC is also focused on maximizing the value of its land, mineral ownership, and energy expertise for decarbonization by developing carbon capture and storage (CCS) and other emissions-reducing projects. For more information about CRC, please visit www.crc.com.

About Carbon TerraVault

Carbon TerraVault Holdings, LLC (CTV), a subsidiary of CRC, is developing services that include the capture, transport and storage of carbon dioxide for its customers. Through its subsidiaries, CTV is developing a series of proposed CCS projects to inject CO₂ captured from industrial sources into depleted underground reservoirs for permanent storage deep underground. For more information about CTV, please visit www.carbonterravault.com.

Forward-Looking Statements

This document contains statements that CRC believes to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than historical facts are forward-looking statements, and include statements regarding CRC's future financial position, business strategy, projected revenues, earnings, costs, capital expenditures and plans and objectives of management for the future. Words such as “expect,” “could,” “may,” “anticipate,” “intend,” “plan,” “ability,” “believe,” “seek,” “see,” “will,” “would,” “estimate,” “forecast,” “target,” “guidance,” “outlook,” “opportunity” or “strategy” or similar expressions are generally intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements.

Although CRC believes the expectations and forecasts reflected in its forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond its control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time. Particular uncertainties that could cause CRC's actual results to be materially different than those expressed in its forward-looking statements include:

• fluctuations in commodity prices, including supply and demand considerations for CRC's products and services, and the impact of such fluctuations on revenues and operating expenses;
• decisions as to production levels and/or pricing by OPEC or U.S. producers in future periods;
• government policy, war and political conditions and events, including the military conflicts in Israel, Lebanon, Ukraine, Yemen and the Red Sea;
• the ability to successfully execute integration efforts in connection with CRC's merger with Aera Energy LLC, and achieve projected synergies and ensure that such synergies are sustainable;
• regulatory actions and changes that affect the oil and gas industry generally and CRC in particular, including (1) the availability or timing of, or conditions imposed on, EPA and other governmental permits and approvals necessary for drilling or development activities or its carbon management business; (2) the management of energy, water, land, greenhouse gases (GHGs) or other emissions, (3) the protection of health, safety and the environment, or (4) the transportation, marketing and sale of CRC's products;
• the efforts of activists to delay or prevent oil and gas activities or the development of CRC's carbon management business through a variety of tactics, including litigation;
• the impact of inflation on future expenses and changes generally in the prices of goods and services;
• changes in business strategy and CRC's capital plan;
• lower-than-expected production or higher-than-expected production decline rates;
• changes to CRC's estimates of reserves and related future cash flows, including changes arising from its inability to develop such reserves in a timely manner, and any inability to replace such reserves;
• the recoverability of resources and unexpected geologic conditions;
• general economic conditions and trends, including conditions in the worldwide financial, trade and credit markets;
• production-sharing contracts' effects on production and operating costs;
• the lack of available equipment, service or labor price inflation;
• limitations on transportation or storage capacity and the need to shut-in wells;
• any failure of risk management;
• results from operations and competition in the industries in which CRC operates;
• CRC's ability to realize the anticipated benefits from prior or future efforts to reduce costs;
• environmental risks and liability under federal, regional, state, provincial, tribal, local and international environmental laws and regulations (including remedial actions);
• the creditworthiness and performance of CRC's counterparties, including financial institutions, operating partners, CCS project participants and other parties;
• reorganization or restructuring of CRC's operations;
• CRC's ability to claim and utilize tax credits or other incentives in connection with its CCS projects;
• CRC's ability to realize the benefits contemplated by its energy transition strategies and initiatives, including CCS projects and other renewable energy efforts;
• CRC's ability to successfully identify, develop and finance carbon capture and storage projects and other renewable energy efforts, including those in connection with the Carbon TerraVault JV, and its ability to convert its CDMAs and MOUs to definitive agreements and enter into other offtake agreements;
• CRC's ability to maximize the value of its carbon management business and operate it on a stand alone basis;
• CRC's ability to successfully develop infrastructure projects and enter into third party contracts on contemplated terms;
• uncertainty around the accounting of emissions and its ability to successfully gather and verify emissions data and other environmental impacts;
• changes to CRC's dividend policy and share repurchase program, and its ability to declare future dividends or repurchase shares under its debt agreements;
• limitations on CRC's financial flexibility due to existing and future debt;
• insufficient cash flow to fund CRC's capital plan and other planned investments and return capital to shareholders;
• changes in interest rates;
• CRC's access to and the terms of credit in commercial banking and capital markets, including its ability to refinance its debt or obtain separate financing for its carbon management business;
• changes in state, federal or international tax rates, including CRC's ability to utilize its net operating loss carryforwards to reduce its income tax obligations;
• effects of hedging transactions;
• the effect of CRC's stock price on costs associated with incentive compensation;
• inability to enter into desirable transactions, including joint ventures, divestitures of oil and natural gas properties and real estate, and acquisitions, and CRC's ability to achieve any expected synergies;
• disruptions due to earthquakes, forest fires, floods, extreme weather events or other natural occurrences, accidents, mechanical failures, power outages, transportation or storage constraints, labor difficulties, cybersecurity breaches or attacks or other catastrophic events;
• pandemics, epidemics, outbreaks, or other public health events, such as the COVID-19 pandemic; and
• other factors discussed in Part I, Item 1A – Risk Factors in CRC's Annual Report on Form 10-K and its other SEC filings available at www.crc.com.
  

CRC cautions you not to place undue reliance on forward-looking statements contained in this document, which speak only as of the filing date, and it undertakes no obligation to update this information. This document may also contain information from third party sources. This data may involve a number of assumptions and limitations, and CRC has not independently verified them and does not warrant the accuracy or completeness of such third-party information.

Contacts:

⁽¹⁾ Margin from Marketing of Purchased Commodities is calculated as the difference between Revenue from Marketing of Purchased Commodities and Costs Related to Marketing of Purchased Commodities.
⁽²⁾ Electricity Margin is calculated as the difference between Electricity Sales and Electricity Generation Expenses.
⁽³⁾ Other Operating Revenue & Expenses, net is calculated as the difference between Other Revenue and Other Operating Expenses, net.
See Attachment 3 for management's disclosure of its use of these non-GAAP measures and how these measures provide useful information to investors about CRC's results of operations and financial condition.

ESTIMATED ADJUSTED GENERAL AND ADMINISTRATIVE EXPENSES RECONCILIATION

ESTIMATED ADJUSTED EBITDAX RECONCILIATION