Company Overview and History
California Resources Corporation (CRC) is an independent energy and carbon management company committed to providing responsible, local energy solutions while leading the charge towards a more sustainable future. With a proven track record of robust financial performance and an innovative approach to energy transition, CRC is poised to capitalize on the growing demand for cleaner energy alternatives in the Golden State.
Established in 2014 following its spin-off from Occidental Petroleum, CRC has become the largest oil and gas producer in California, with a diverse asset base spanning the state's premier hydrocarbon basins. The company's journey has been marked by both challenges and significant achievements. In its early years, CRC faced substantial obstacles, including a sharp decline in oil prices during 2015-2016, which led to financial difficulties. These challenges culminated in a Chapter 11 bankruptcy filing in 2020. However, CRC emerged from bankruptcy later that same year with a restructured balance sheet and a renewed focus on operational efficiency and cost management.
The company's resilience and strategic vision were further demonstrated through its transformative acquisition of Aera Energy LLC in 2024. This merger not only solidified CRC's position as the dominant player in California's oil and gas sector but also unlocked significant operational synergies and cost efficiencies. The integration of Aera's assets has been a resounding success, with CRC's teams capturing over 70% of the targeted $235 million in sustainable synergies by the end of 2024 through various cost-saving initiatives.
Throughout its history, CRC has successfully navigated California's challenging regulatory environment, including delays in obtaining drilling permits and evolving environmental regulations. The company's ability to maintain operational excellence and financial discipline amid these headwinds has been crucial to its success and growth over the years.
Financials
In 2024, CRC delivered an exceptional financial performance, generating $3.20 billion in total operating revenues and $376 million in net income. The company's adjusted EBITDAX for the year exceeded $1 billion, underscoring the strength and resilience of its conventional oil and gas operations. CRC's net production averaged 110,000 barrels of oil equivalent per day (BOE/d) in 2024, with an impressive single-digit annual gross decline rate of approximately 6%.
For the most recent fiscal year (2024), CRC reported revenue of $2.54 billion, net income of $376 million, and operating cash flow of $610 million. The company's free cash flow for the year also stood at $610 million. In the fourth quarter of 2024, CRC generated revenue of $924 million and net income of $33 million.
CRC's oil and natural gas segment, which represents the core of its business operations, generated total operating revenues of $2.57 billion in 2024. This segment's total net production averaged 110 MBoed (thousands of barrels of oil equivalent per day) in 2024, a significant increase from 86 MBoed in 2023 due to the acquisition of Aera Energy's assets in July 2024.
As of the end of 2024, CRC's total proved reserves stood at 545 MMBoe (million barrels of oil equivalent), of which 81% were oil and NGLs. Proved developed reserves made up 93% of the total, providing a stable production base.
The oil and natural gas segment's operating costs, which include energy, non-energy, and gas processing costs, totaled $983 million in 2024, or $24.51 per Boe of production. This represents a decrease from $26.24 per Boe in 2023, reflecting cost savings initiatives and synergies realized from the Aera acquisition. Depreciation, depletion, and amortization (DD&A) expenses for this segment were $354 million in 2024, or $8.83 per Boe, higher than the prior year's $6.61 per Boe due to the increase in asset base from the Aera transaction.
CRC's carbon management segment, referred to as Carbon TerraVault, is focused on the development of carbon capture and sequestration (CCS) projects. This segment is still in the early stages of development, with no revenues generated in 2024. Carbon management expenses, which include operating costs and general and administrative expenses, totaled $71 million in 2024, compared to $49 million in 2023, as the company continued to invest in the advancement of its CCS initiatives.
Liquidity
CRC has maintained a strong financial position, with more than $1 billion in liquidity as of December 31, 2024. The company's cash position stood at $372 million, with an additional $983 million available under its Revolving Credit Facility after accounting for $167 million in outstanding letters of credit. CRC's debt-to-equity ratio was 0.35, while its current ratio and quick ratio were 1.04 and 0.95, respectively, indicating a healthy short-term liquidity position.
Shareholder Returns
Recognizing the importance of shareholder returns, CRC has consistently rewarded its investors through a combination of dividends and share repurchases. In 2024, the company returned approximately 85% of its free cash flow to shareholders, totaling over $300 million. This commitment to capital discipline and shareholder value creation has earned CRC a reputation as a trusted steward of investor capital.
Energy Transition and Carbon Management
However, CRC's story extends beyond its conventional oil and gas operations. The company is at the forefront of the energy transition, with its Carbon TerraVault (CTV) business driving innovative solutions to reduce greenhouse gas emissions and address the complex challenges facing California's industrial sectors.
In 2024, CRC made significant strides in its carbon management initiatives, receiving the nation's first EPA Class VI permits to advance the state's first carbon capture and storage (CCS) project at its Elk Hills field. The company also announced a landmark Memorandum of Understanding (MOU) with National Cement, a leading cement producer, to establish California's first net-zero cement facility. This partnership underscores CRC's ability to provide tailored carbon management solutions for hard-to-abate industries, solidifying its position as a trusted partner in the state's decarbonization efforts.
Power Business
Beyond CCS, CRC's power business continues to generate stable, reliable cash flows, with the company's 550 MW cogeneration plant at Elk Hills and its 50% interest in the Midway Sunset Power Plant delivering consistent returns. Moreover, the company is actively pursuing opportunities to unlock additional value from its existing power infrastructure, including new agreements with AI data center providers that could further enhance the platform's contribution to CRC's bottom line.
Regulatory Environment and Future Outlook
Despite the challenges posed by California's complex regulatory environment, CRC has demonstrated its ability to navigate these waters and secure the necessary permits to support its growth initiatives. The company's strategic focus on strengthening its conventional oil and gas operations, expanding its carbon management capabilities, and optimizing its power assets has positioned it as a unique energy player with a diversified and resilient business model.
As CRC looks to the future, the company remains committed to delivering sustainable value for its shareholders, while playing a pivotal role in California's transition to a low-carbon economy. With a strong balance sheet, a talented and experienced management team, and a diverse portfolio of energy solutions, CRC is well-positioned to capitalize on the dynamic and evolving energy landscape in the Golden State and beyond.
Industry Trends and Guidance
The oil and gas exploration and production industry in the United States has seen a compound annual growth rate (CAGR) of 3.33% over the past 3 years. CRC has consistently outperformed industry averages, demonstrating its ability to navigate market challenges and capitalize on growth opportunities.
Looking ahead to 2025, CRC has provided robust guidance for its operations and financial performance. The company expects to invest between $285 million and $335 million in capital expenditures, with $165 million to $180 million allocated to drilling, completions, and workover capital. CRC plans to run a single rig in the first half of 2025 and add an additional rig in the second half.
CRC's annual net production for 2025 is estimated at about 135,000 BOE per day, with oil comprising nearly 80% of the total. To mitigate price volatility, the company has hedged more than 70% of its expected 2025 oil production at an average price of $67 per barrel and more than 60% of its 2025 fuel gas at an average price of $3.95 per MMBtu.
The company's power resource adequacy payments are expected to increase by 50% to $150 million in 2025, further diversifying its revenue streams. With these factors in mind, CRC expects to generate between $1.1 billion and $1.2 billion in adjusted EBITDAX in 2025, assuming a Brent crude oil price of $73 per barrel.
CRC's management team remains focused on cost optimization and operational efficiency. The company has already actioned approximately 70% of its targeted $235 million in Aera-related synergies and expects to achieve the remainder in 2025. Compared to the pro forma combined 2023 organization, CRC's 2025 targeted controllable cost structure is estimated at $220 million, nearly 16% lower, demonstrating the company's commitment to maintaining a lean and efficient operation.
As CRC continues to execute its strategic initiatives and capitalize on the opportunities presented by the energy transition, the company is well-positioned to deliver long-term value for its shareholders while contributing to California's sustainable energy future.