California Resources (US:CRC)2022-11-05 19:43Financial Data and Key Metrics Changes - In Q3 2022, the company produced 92,000 barrels of oil equivalent per day and generated $128 million of after-tax free cash flow, demonstrating strong performance despite external challenges [7][22]. - The average realized price for oil was $62.45 per barrel, while natural gas prices remained strong at $8.58 per mcf, reflecting a 109% realization of NYMEX prices after hedges [18][19]. - The company generated $234 million of adjusted EBITDAX and $235 million in quarterly operating cash flow, indicating significant cash generation capability [20]. Business Line Data and Key Metrics Changes - The company maintained oil production flat year-over-year, projecting approximately $235 million in D&C capital expenditures for 2022 [8][22]. - Non-energy operating costs rose by $0.77 per BOE quarter-over-quarter, primarily due to increased downhole maintenance activity [19]. - The company returned 105% of free cash flow through share repurchases and dividends, increasing the dividend by 66% to $0.2825 per share [11][23]. Market Data and Key Metrics Changes - California natural gas prices have seen five consecutive quarters of increases, benefiting the company as the largest natural gas producer in the state [19]. - The company anticipates a cash income tax rate of 15% to 20% of taxable income in 2023, reflecting its strong financial results [29]. Company Strategy and Development Direction - The company focuses on delivering consistent free cash flow, disciplined capital allocation, and advancing its carbon management business through the Carbon TerraVault JV with Brookfield [6][10]. - The carbon management business is expected to be self-funding through the JV, allowing the company to concentrate on shareholder returns [10]. - The company is exploring new opportunities in the energy economy, including hydrogen and ammonia, which align with its carbon management strategy [12][13]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the favorable court ruling lifting the stay on the current County EIR litigation, which is expected to expedite the permitting process [17][35]. - The company remains cautious but optimistic about returning to normalized drilling activity in 2023 [35][45]. - The management highlighted the importance of maintaining high standards in permit applications to ensure credibility and success in carbon management initiatives [53]. Other Important Information - The company has a significant backlog of permit applications and is focused on refining and defining best-in-class permit applications [15][25]. - The company is evaluating potential real estate developments near its Huntington Beach field, indicating a strategic approach to asset optimization [26][62]. Q&A Session Summary Question: Can you discuss the backlog of permits and the timeline for resuming optimized drilling in 2023? - Management indicated that there is a backlog of permits that needs to be processed, and they are optimistic about returning to normalized activity in 2023 [31][35]. Question: What is the status of the emitter contract (CDMA) and its relation to the permitting process? - Management confirmed they are targeting to sign an emitter contract by the end of the year, which aligns with their permitting timeline [36][38]. Question: How are the permitting constraints affecting production in the L.A. Basin? - Management acknowledged that while there are potential impacts from the step-back rule, they are still evaluating the inventory depth and production capabilities in the L.A. Basin [46][49]. Question: Can you provide updates on the Brookfield deal and new projects? - Management shared that they submitted several new projects to Brookfield and are awaiting their response within a defined timeframe [51]. Question: What are the logistics for moving captured CO2 to sequestration sites? - Management explained that proximity to CO2 sources is crucial for economic feasibility, and they are focusing on opportunities within a 30-mile radius [57]. Question: What is the company's approach to maintaining high standards in permit applications? - Management emphasized their commitment to high-quality permits and the importance of meeting EPA standards as they navigate the permitting process [53].