California Resources (CRC) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported flat net production quarter over quarter at 141,000 barrels of oil equivalent per day, with realized prices at 98% of Brent [11] - Adjusted EBITDAX was $328 million, net cash flow before changes in working capital was $252 million, and free cash flow totaled $131 million, all exceeding consensus expectations [11] - Operating and G&A costs were $388 million, approximately 5% better than guidance, with expectations to reduce operating costs by nearly 10% in the first half of 2025 compared to the second half of 2024 [12] Business Line Data and Key Metrics Changes - The company achieved over 70% of its total $235 million in announced annual synergies from the Era merger, with full target expected by early 2026 [6][8] - The integrated strategy in power and natural gas marketing is delivering meaningful margins, supporting debt service and shareholder returns [6] Market Data and Key Metrics Changes - Approximately 70% of oil production and natural gas consumption is hedged at attractive levels relative to current market prices [6] - The company can generate free cash flow at Brent prices down to approximately $34 per barrel, indicating resilience against commodity price fluctuations [6] Company Strategy and Development Direction - The company is focused on mitigating commodity price volatility, generating cash flow, maintaining a strong balance sheet, and sustainably returning cash to shareholders [4] - The strategic steps taken to strengthen the business include achieving critical scale through the Era merger, which has provided opportunities for cost savings and improved returns [5] - The company is pursuing multiple new opportunities in carbon management and power generation, including California's first CCS project at the Elk Hills Cryogenic Gas Plant [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to withstand macroeconomic uncertainties and highlighted the strength of its business model [5][20] - The company is optimistic about the progress in permitting and regulatory environments, which are expected to support future growth [94] Other Important Information - The company returned a record $258 million to stakeholders through dividends, share buybacks, and debt redemption in the first quarter [8] - The company has more than $1 billion in liquidity and nearly $200 million in available cash, indicating strong financial health [14] Q&A Session Summary Question: How is the company achieving similar EBITDA with lower Brent assumptions? - Management highlighted that synergy targets and cost savings from the Era merger are key factors, with ongoing integration efforts exceeding expectations [23][25] Question: What does the breakeven look like on an unhedged basis? - The corporate breakeven is around $34 Brent or about $30 WTI, supported by low decline, predictable assets and proactive cost management [28] Question: Is there concern about refinery shutdowns affecting sales? - Management indicated no concern, as existing refineries are built for California crude, and the company is positioned to meet local demand [32] Question: What progress is being made on CO2 pipeline regulation and permitting? - Management reported encouraging progress in both Sacramento and Washington, with constructive engagement on CO2 pipelines and oil and gas permitting [40] Question: Update on Huntington Beach real estate marketing and remediation timeline? - The company is preparing to market the property for mixed-use development, with a timeline of approximately three years for approvals [46] Question: Insights on the Elk Hills PPA and funding for carbon capture? - Management emphasized the importance of securing a long-term partner for the Elk Hills project, with ongoing discussions to optimize costs and funding [50][56] Question: What is the outlook for maintenance capital in an unconstrained permitting environment? - Management stated that while they are not ready to guide on unconstrained scenarios, they are seeing strong performance with low capital expenditures [82] Question: Clarification on the potential PPA discussions? - The company is engaged with multiple large-scale industrial customers for PPAs, expanding interest beyond data centers [99]