California Resources (CRC) - 2025 Q2 - Quarterly Report

Part I Financial Information This section provides a comprehensive overview of the company's financial performance and condition, including detailed statements and management analysis Financial Statements This section presents the unaudited condensed consolidated financial statements for California Resources Corporation as of June 30, 2025, and for the three and six-month periods then ended Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $6,712 | $7,135 | | Cash and cash equivalents | $72 | $372 | | Total property, plant and equipment, net | $5,560 | $5,680 | | Total Liabilities | $3,305 | $3,597 | | Long-term debt, net | $888 | $1,132 | | Total Stockholders' Equity | $3,407 | $3,538 | Condensed Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $978 | $514 | $1,890 | $968 | | Operating income | $267 | $38 | $453 | $34 | | Net Income (Loss) | $172 | $8 | $287 | ($2) | | Diluted EPS | $1.92 | $0.11 | $3.18 | ($0.03) | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $351 | $184 | | Net cash used in investing activities | ($130) | ($82) | | Net cash (used in) provided by financing activities | ($521) | $433 | | Decrease in cash and cash equivalents | ($300) | $535 | Note 2: Aera Merger The Aera Merger on July 1, 2024, significantly impacted financial results, adding substantial assets and debt settlement Aera Merger Consideration (in millions) | Component | Value | | :--- | :--- | | Fair value of share consideration | $1,141 | | Settlement of Aera debt | $990 | | Purchase price settlement | ($10) | | Total purchase consideration | $2,121 | - The Aera Merger added significant assets, with a final purchase price allocation of $3.679 billion in assets acquired and $1.558 billion in liabilities assumed[35] - Following the merger, existing CRC stockholders owned 76% of the company, while former Aera owners held 24%[32] Note 4: Debt Total debt decreased to $1.01 billion by June 30, 2025, primarily due to a $123 million redemption of 2026 Senior Notes Long-Term Debt Summary (in millions) | Debt Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Revolving Credit Facility | $— | $— | | 2026 Senior Notes | $122 | $245 | | 2029 Senior Notes | $900 | $900 | | Principal amount | $1,022 | $1,145 | | Total debt, net | $1,010 | $1,132 | - In February 2025, the company redeemed $123 million of its 2026 Senior Notes, resulting in a $1 million loss on extinguishment[51] - As of June 30, 2025, the company had $983 million of availability on its $1.15 billion Revolving Credit Facility[47] Note 6: Derivatives The company uses commodity derivative contracts to hedge price volatility, recognizing a net gain of $163 million for the six months ended June 30, 2025 Net Gain (Loss) from Commodity Derivatives (in millions) | Period | Net Gain (Loss) | | :--- | :--- | | Three months ended June 30, 2025 | $157 | | Three months ended June 30, 2024 | $5 | | Six months ended June 30, 2025 | $163 | | Six months ended June 30, 2024 | ($66) | - As of June 30, 2025, the company held Brent-based swaps covering 45,001 barrels per day for Q3 2025 at a weighted-average price of $70.63 per barrel[56] - The fair value of outstanding commodity derivatives shifted from a net liability of $65 million at year-end 2024 to a net asset of $131 million as of June 30, 2025[60][61] Note 9: Segment Information The company operates two segments, Oil and Natural Gas and Carbon Management, with the former generating significant profit and the latter in early development Segment Profit (Loss) for Six Months Ended June 30, 2025 (in millions) | Segment | Segment Profit (Loss) | | :--- | :--- | | Oil and Natural Gas | $460 | | Carbon Management | ($45) | | Total Reportable Segments | $415 | Capital Investment by Segment (in millions) | Period | Oil and Natural Gas | Carbon Management | Corporate and Other | Total | | :--- | :--- | :--- | :--- | :--- | | Six months ended June 30, 2025 | $93 | $7 | $11 | $111 | | Six months ended June 30, 2024 | $82 | $2 | $4 | $88 | Note 10: Stockholders' Equity The company repurchased 7.8 million shares for $354 million and paid $70 million in dividends under its $1.35 billion share repurchase program Share Repurchases Summary | Period | Total Shares Purchased | Total Value (in millions) | Average Price Paid per Share | | :--- | :--- | :--- | :--- | | Six months ended June 30, 2025 | 7,787,969 | $354 | $45.23 | | Six months ended June 30, 2024 | 1,769,603 | $93 | $51.85 | - A significant portion of the Q2 2025 repurchases consisted of 4.95 million shares bought from IKAV Impact S.a.r.l. in a private transaction for $228 million[85] - The company declared and paid dividends of $0.3875 per share in both Q1 and Q2 2025, totaling $70 million for the first half of the year[89] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes financial condition and operations, highlighting the Aera Merger's impact, commodity price volatility, and liquidity position Business Environment and Industry Outlook Company performance is heavily influenced by commodity price volatility, with Brent crude fluctuating between $60 and $80 per barrel Average Daily Benchmark Prices | Benchmark | Q2 2025 | Q1 2025 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Brent oil ($/Bbl) | $66.76 | $74.92 | $70.84 | $83.42 | | WTI oil ($/Bbl) | $63.74 | $71.42 | $67.58 | $78.77 | | NYMEX Henry Hub ($/MMBtu) | $3.44 | $3.65 | $3.55 | $2.07 | - The company has taken measures to limit the effects of U.S. tariffs by entering into fixed-price contracts and pre-purchasing inventory[116] Statements of Operations Analysis The Aera Merger significantly increased oil and gas sales and operating expenses year-over-year, while Q2 2025 sales decreased due to lower prices - The Aera Merger on July 1, 2024, is the primary driver of significant changes in year-over-year financial comparisons[123] Change in Oil, Gas & NGL Sales (H1 2025 vs H1 2024, in millions) | Factor | Impact | | :--- | :--- | | H1 2024 Sales | $841 | | Change in realized prices | ($93) | | Change in production (primarily Aera) | $782 | | H1 2025 Sales | $1,516 | - Compared to Q1 2025, Q2 2025 oil and gas sales decreased by $112 million, mainly due to a $110 million negative impact from lower realized prices[124][125] - Other operating expenses in Q2 2025 included a $25 million expense related to a payment made to CalGEM regarding orphaned wells[133][54] Results of Our Oil and Natural Gas Operations The Oil and Natural Gas segment saw production nearly double to 139 MBoe/d in H1 2025 due to the Aera Merger, despite lower realized oil prices Average Net Production Sold (MBoe/d) | Period | Total Net Production Sold | | :--- | :--- | | H1 2025 | 139 | | H1 2024 | 76 | Average Realized Prices (without derivative settlements) | Commodity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Oil ($ per Bbl) | $69.34 | $81.63 | | NGLs ($ per Bbl) | $48.60 | $48.76 | | Natural gas ($/Mcf) | $3.46 | $2.81 | Results of Our Carbon Management Segment The Carbon Management segment, Carbon TerraVault, is in early development, reporting an increased loss of $45 million in H1 2025 due to project evaluation costs Carbon Management Segment Results (in millions) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Segment Loss | ($45) | ($38) | | Carbon management expenses | $32 | $23 | - The company's first carbon capture project at its cryogenic gas processing facility is expected to be completed around year-end 2025[166] Liquidity and Capital Resources The company maintained $1.039 billion in liquidity as of June 30, 2025, with a 2025 capital program projected between $280 million and $330 million Liquidity Summary as of June 30, 2025 (in millions) | Component | Amount | | :--- | :--- | | Available cash and cash equivalents | $56 | | Revolving Credit Facility Availability | $983 | | Total Liquidity | $1,039 | - The full-year 2025 capital program is expected to range from $280 million to $330 million[178] - Recent tax law changes are expected to reduce the company's 2025 U.S. federal cash tax obligation by approximately $35 million[173] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are commodity prices, counterparty credit, and interest rates, with no material changes from the 2024 Annual Report - As of June 30, 2025, the company has hedged approximately 70% of its expected oil production for the rest of 2025 at a weighted average floor price of $66.83[195] - The company has also hedged approximately 67% of its expected fuel use for the remainder of 2025 at a fixed price of $3.56[195] - The company had no variable-rate debt outstanding as of June 30, 2025, minimizing its exposure to interest-rate risk[199] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[200] Part II Other Information This section covers legal proceedings, risk factors, equity sales, and other disclosures, providing additional context to the financial statements Legal Proceedings This section refers to Note 5 for detailed information on legal proceedings, including disputes over orphaned wells and offshore platform decommissioning - For detailed information on legal proceedings, the report refers to Note 5 in the financial statements[203] Risk Factors The company reported no material changes to the risk factors disclosed in its 2024 Annual Report during the three months ended June 30, 2025 - There were no material changes to the company's risk factors during the second quarter of 2025[204] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 5.5 million shares for $45.73 per share in Q2 2025 under its $1.35 billion share repurchase program, extended to June 30, 2026 Share Repurchase Activity for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | 328,588 | $42.59 | | June 2025 | 5,187,462 | $45.93 | | Total | 5,516,050 | $45.73 | - The Board of Directors extended the Share Repurchase Program through June 30, 2026[205] Other Disclosures No directors or officers adopted or terminated Rule 10b5-1 trading arrangements, and executive employment agreements were amended effective August 4, 2025 - The company entered into amended and restated employment agreements with executives Jay A. Bys and Michael L. Preston, effective August 4, 2025[209] - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2025[208]