California Resources (CRC) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net production of 141,000 BOE per day and realized oil prices at 99% of Brent, leading to $316 million in adjusted EBITDAX and $118 million in free cash flow for Q4 2024 [19][20] - For the full year 2024, the company achieved over $1 billion in adjusted EBITDAX and generated $355 million in free cash flow, returning about 85% of free cash flow to shareholders through dividends and share repurchases [24][31] - The company ended 2024 with gross production of 163,000 BOE per day and maintained a low annual gross decline of about 6% [23][24] Business Line Data and Key Metrics Changes - The conventional oil and gas business continues to deliver robust cash flow, supported by quality proved reserves and a deep inventory, with significant synergies from low decline, low capital intensity assets [8][19] - The carbon management business is rapidly expanding, with nearly nine million metric tons per annum of carbon management projects under consideration and the first EPA class six permits received for the Elk Hills project [12][10] Market Data and Key Metrics Changes - The company expects to benefit from enhanced revenue streams in natural gas marketing and power, with resource adequacy power capacity payments projected to increase by 50% to $150 million [28] - More than 70% of expected 2025 oil production is hedged at an average price of $67 per barrel, reducing commodity price risk [27] Company Strategy and Development Direction - The company is focused on sustainable efficiencies and plans to invest $285 million to $335 million in 2025, with a targeted controllable cost structure estimated to be nearly 16% lower than the pro forma combined 2023 organization [25][29] - The company aims to lead California's decarbonization efforts, with significant projects in carbon capture and storage (CCS) and partnerships with industrial players like National Cement [16][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong position and ability to deliver significant near-term value drivers, emphasizing the importance of shareholder returns and maintaining a strong balance sheet [34][36] - The management team highlighted the importance of carbon management as a growing sector, with increasing demand for innovative solutions to complex challenges [10][16] Other Important Information - The company has more than $1 billion in liquidity and has rebuilt cash on hand from nearly zero to over $350 million within six months post-merger [30][90] - The company redeemed roughly half of its 2026 senior notes at par, maintaining a leverage ratio of less than one [31][88] Q&A Session Summary Question: Stock price underperformance compared to peers - Management acknowledged the stock's underperformance but highlighted a strong track record of returning capital to shareholders and emphasized the company's intrinsic value [39][42] Question: Details on the buyback program - Management confirmed a buyback program with over $550 million remaining and noted that they have repurchased 18.5 million shares since the program's inception [45][46] Question: Update on data center agreements - Management discussed ongoing talks with multiple parties for data centers, emphasizing the strategic infrastructure advantage and potential for long-term contracts [49][51] Question: Addressing power redundancy in colocated opportunities - Management confirmed that their plant operates 24/7 and has standby agreements to ensure backup power, enhancing reliability [56][58] Question: Clarification on synergies and financial guidance - Management provided details on the targeted synergies from the merger, indicating that they expect to achieve significant cost improvements in 2025 [60][66] Question: Milestones for the National Cement project - Management expressed excitement about the partnership and outlined the importance of CO2 transportation solutions as part of the project [75][78] Question: Financial priorities of the new CFO - The CFO outlined priorities including maintaining a strong balance sheet, driving sustainable cash flow, and disciplined capital allocation [84][86] Question: Update on the Brookfield JV - Management reported that the JV is progressing well, with a focus on capital allocation and project execution [94][96] Question: Future outlook for oil and gas operations - Management indicated confidence in maintaining production levels and achieving a normalized investment cadence as permitting improves [113][130]