California Resources (US:CRC)2025-05-07 20:30Part I - Financial Information Financial Statements The company's Q1 2025 financial statements reflect a significant revenue increase and a shift to net income from a prior-year loss, driven by the Aera Merger Condensed Consolidated Balance Sheets Total assets decreased to $6.83 billion as of March 31, 2025, primarily due to a reduction in cash, while total liabilities also decreased, driven by lower long-term debt Condensed Consolidated Balance Sheet (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $799 | $1,024 | | Cash and cash equivalents | $214 | $372 | | Total Assets | $6,827 | $7,135 | | Total Current Liabilities | $961 | $980 | | Long-term debt, net | $888 | $1,132 | | Total Liabilities | $3,311 | $3,598 | | Total Stockholders' Equity | $3,516 | $3,538 | Condensed Consolidated Statements of Operations For Q1 2025, the company reported a net income of $115 million, a significant turnaround from a $10 million net loss in Q1 2024, driven by the Aera Merger Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total operating revenues | $912 | $454 | | Oil, natural gas and NGL sales | $814 | $429 | | Net gain (loss) from commodity derivatives | $6 | $(71) | | Total operating expenses | $726 | $464 | | Operating Income (Loss) | $186 | $(4) | | Net Income (Loss) | $115 | $(10) | | Diluted EPS | $1.26 | $(0.14) | Condensed Consolidated Statements of Cash Flows Net operating cash flow more than doubled to $186 million in Q1 2025, while significant financing outflows for debt redemption and stock buybacks led to a $158 million cash decrease Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $186 | $87 | | Net cash used in investing activities | $(79) | $(49) | | Capital investments | $(55) | $(54) | | Net cash used in financing activities | $(265) | $(131) | | Repurchases of common stock | $(101) | $(58) | | Debt redemption | $(123) | $— | | Decrease in cash and cash equivalents | $(158) | $(93) | | Cash and cash equivalents—end of period | $214 | $403 | Notes to the Condensed Consolidated Financial Statements The notes detail the significant impact of the Aera Merger on financial comparability, key accounting policies, and segment reporting for Oil & Gas and Carbon Management - The Aera Merger, closed on July 1, 2024, significantly impacted the comparability of financial results for Q1 2025 versus Q1 202424 - The company's business is conducted through two reportable segments: (1) oil and natural gas and (2) carbon management (Carbon TerraVault)68 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved Q1 2025 performance to the Aera Merger, discusses the commodity price environment, and outlines its new 'Responsible Net Zero' goal Business Environment and Industry Outlook The business environment is marked by commodity price volatility from OPEC+ actions and potential cost increases from U.S. tariffs on imported goods - OPEC+ began unwinding production cuts in early 2025, adding supply and contributing to a decline in global oil prices during Q1 2025100 - New U.S. tariffs on imported goods, including steel and aluminum, could increase the cost of oilfield goods and delivery lead times100107 - The planned closures of two California refineries are not expected to negatively impact CRC's ability to market its crude oil production102 Regulatory Updates The company faces ongoing delays from CalGEM for new well permits but holds sufficient permits for its 2025 capital program and one drilling rig through 2026 - In Q1 2025, CRC received permits for 53 workovers and 21 sidetracks, but continued to face delays from CalGEM for new well and deepening permits103104 - The company holds enough permits to maintain its 2025 capital program and operate one active drilling rig throughout 2026105 Responsible Net Zero Goal The Board adopted a new 'Responsible Net Zero' goal to reduce absolute Scope 1 and 2 GHG emissions by 80% by 2045, driven by the Aera Merger - A new 'Responsible Net Zero' goal was adopted in May 2025, aiming for an 80% reduction in absolute Scope 1 and 2 GHG emissions by 2045 and neutralizing the remainder108 - The change from the previous goal was primarily driven by the Aera Merger, which nearly doubled the asset base and altered the company's carbon intensity profile109 Statements of Operations Analysis Quarter-over-quarter, operating revenues and net income increased, driven by higher derivative gains and lower G&A expenses from post-merger synergies Consolidated Results of Operations (in millions) | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Total operating revenues | $912 | $877 | | Total operating expenses | $726 | $813 | | Operating income | $186 | $68 | | Net income | $115 | $33 | - G&A expenses decreased by $23 million from Q4 2024 to Q1 2025, primarily due to lower compensation-related expenses following the Aera Merger117 - Non-energy operating costs decreased by $16 million quarter-over-quarter due to lower maintenance activity and more favorable vendor pricing116 Results of Our Oil and Natural Gas Operations The oil and gas segment maintained stable production of 141 MBoe/d in Q1 2025 with a segment profit of $266 million and an average realized oil price of $73.57 per barrel Oil and Natural Gas Segment Key Data | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net production sold (MBoe/d) | 141 | 141 | | Segment profit (in millions) | $266 | $268 | | Operating costs ($ per Boe) | $25.60 | $25.35 | Realized Prices (Q1 2025) | Commodity | Realized Price (w/o derivatives) | Realization vs. Brent | | :--- | :--- | :--- | | Oil ($/Bbl) | $73.57 | 98% | | NGLs ($/Bbl) | $54.64 | 73% | | Natural Gas ($/Mcf) | $4.12 | 113% of NYMEX | Results of Our Carbon Management Segment The early-stage Carbon TerraVault segment reported no revenue and a segment loss of $25 million for Q1 2025, an improvement from the prior quarter - The carbon management segment is in its early development stages and had no revenue for Q1 2025138 Carbon Management Segment Results (in millions) | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Segment loss | $(25) | $(31) | | Carbon management expenses | $18 | $20 | | Segment G&A expenses | $3 | $5 | Liquidity and Capital Resources The company maintained total liquidity of $1.18 billion, redeemed $123 million in debt, repurchased $101 million in stock, and projects a 2025 capital program of $285-$335 million Liquidity Summary (as of March 31, 2025, in millions) | Component | Amount | | :--- | :--- | | Available cash and cash equivalents | $199 | | Revolving Credit Facility Availability | $983 | | Total Liquidity | $1,182 | - In February 2025, the company redeemed $123 million of its 7.125% senior notes due 2026145 - The 2025 capital program is expected to be $285 million to $335 million, with the majority allocated to the oil and natural gas segment150 - Integration of Aera is expected to result in approximately $80 million of annual savings ($50M in G&A, $30M in operating costs)154 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are commodity prices, counterparty credit, and interest rates, which are managed through extensive hedging and fixed-rate debt - As of March 31, 2025, the company has hedged approximately 70% of its expected oil production for the rest of 2025 at a weighted average floor price of $67.07168 - Approximately 70% of expected fuel use in oil and gas operations for the remainder of 2025 is hedged at a fixed price of $3.41168 - Interest-rate risk is minimal as the company had no variable-rate debt outstanding as of March 31, 2025; both the 2026 and 2029 Senior Notes are fixed-rate172 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025173 - No material changes were made to the company's internal controls over financial reporting during the first quarter of 2025174 Part II - Other Information Legal Proceedings The company is involved in various routine lawsuits and claims, referring to Note 5 and its 2024 Annual Report for details - For information on legal proceedings, the company refers to Note 5 in the financial statements and its 2024 Annual Report177 Risk Factors No material changes to the risk factors disclosed in the company's 2024 Annual Report occurred during the first quarter of 2025 - No material changes to the company's risk factors occurred during the first quarter of 2025178 Unregistered Sales of Equity Securities and Use of Proceeds The company issued deferred consideration shares for the Aera merger and repurchased approximately $101 million of its common stock in Q1 2025 - On February 24, 2025, the company issued 107,265 shares of common stock to former Aera owners as deferred consideration for the merger179 Share Repurchase Activity (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 336,665 | $52.74 | | Feb 2025 | — | $— | | Mar 2025 | 1,935,254 | $42.47 | | Total | 2,271,919 | $44.00 | - As of March 31, 2025, $457 million remained available for purchase under the authorized Share Repurchase Program181 Other Disclosures No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025182 Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - Lists various filed exhibits, including officer certifications and Inline XBRL documents184