California Resources Corp ((CRC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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California Resources Corp (CRC) recently held its earnings call, revealing a robust financial and operational performance. The sentiment was largely positive, highlighting significant improvements in base decline rates, strategic mergers, and advancements in carbon capture projects. However, the company also acknowledged challenges related to regulatory approvals and permitting constraints.
Strong Financial Performance
CRC reported a net production of 137,000 barrels of oil equivalent (BOE) per day, generating an adjusted EBITDAX of $338 million and free cash flow of $231 million before changes in working capital. This strong financial performance underscores the company’s effective operational strategies and financial management.
Improved Base Decline Rate
The company announced a reduction in their annual base decline assumption to 8% to 13% from the previous 10% to 15%. This improvement is expected to enhance cash flow generation and reduce capital intensity, providing a more stable financial outlook.
Strategic Merger with Berry Corporation
CRC has entered into a merger agreement with Berry Corporation, which will add assets adjacent to their current positions. This strategic move is anticipated to create meaningful synergies and strengthen CRC’s market position.
Carbon TerraVault Progress
CRC’s first carbon capture and sequestration (CCS) project at Elk Hills is progressing well, with construction underway. The first CO2 injection is expected in early 2026, marking a significant step in CRC’s carbon management initiatives.
Strong Balance Sheet and Liquidity
CRC maintains a strong balance sheet with a net leverage of 0.6x and total liquidity exceeding $1.1 billion, including $196 million in cash and an undrawn revolver. This financial stability positions the company well for future investments and growth.
Positive Regulatory Environment
Recent legislation in California has been favorable for CRC, supporting oil and gas permitting and extending the Cap-and-Invest program through 2045. This regulatory environment is expected to benefit CRC’s operations in the long term.
Pending Regulatory Approvals
The CCS project at Elk Hills is awaiting regulatory approval, which is crucial for maintaining the project’s timeline. CRC is actively working to secure the necessary permissions to proceed.
Permitting Constraints
Since the beginning of 2023, CRC has faced a permitting constrained environment, affecting new well bores. This challenge highlights the ongoing regulatory hurdles in the oil and gas sector.
Forward-Looking Guidance
Looking ahead, CRC outlined its preliminary 2026 plan, which includes maintaining an average of four rigs, supported by a strong hedge position with Brent floor prices at $64 per barrel. The company is also advancing its power business through a new partnership with Capital Power, aimed at developing carbon management solutions for the La Paloma power facility.
In conclusion, California Resources Corp’s earnings call reflected a strong operational and financial performance, with positive sentiment driven by strategic initiatives and advancements in carbon capture projects. Despite facing regulatory challenges, CRC’s robust financial position and strategic mergers position the company well for future growth and success.