California Resources (US:CRC)2025-05-07 18:02Financial 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 [12] - 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 [12] - 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 [13] 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 [7] - The integrated strategy of power and natural gas marketing is delivering meaningful margins, supporting cash generation and shareholder returns [8] 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 [7] - The company can generate free cash flow at Brent prices down to approximately $34 per barrel, indicating resilience against commodity price fluctuations [8] 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 [5] - 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 [6] - The company is pursuing multiple new opportunities in carbon management and power generation, with a focus on integrating gas to power and carbon capture strategies [17][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute its strategy despite macroeconomic uncertainties, highlighting a strong balance sheet and quality assets [22] - The management noted that the regulatory environment in California is improving, which supports the company's growth and permitting efforts [20][100] Other Important Information - The company returned a record $258 million to stakeholders through dividends, share buybacks, and debt redemption in the first quarter [10] - The company is actively working on California's first carbon capture and storage project at the Elk Hills Cryogenic Gas Plant, with construction expected to begin in the second quarter [20] Q&A Session Summary Question: How is the company achieving similar EBITDA with a lower Brent assumption? - Management attributed the achievement to synergy targets and strong execution in integrating Era assets, along with cost savings from supply chain advantages and infrastructure consolidation [25][26] Question: What does the breakeven look like on an unhedged basis? - The corporate breakeven is around $34 Brent or about $30 WTI, achieved through low decline, predictable assets and proactive cost management [31] Question: What is the political landscape regarding CO2 pipeline regulation and gas permitting? - Management noted encouraging progress in California and Washington, with constructive engagement on CO2 pipelines and oil and gas permitting [41][43] Question: Update on Huntington Beach real estate marketing and remediation timeline? - The company is preparing to market the property for optimal use, with a timeline of about three years for approvals [49] Question: Thoughts on the Elk Hills PPA and funding for carbon capture? - Management is focused on securing a long-term partner for the Elk Hills project, with various clean energy incentives in play [53][56] Question: Update on synergies and potential for pulling them forward? - Management indicated that while some synergies may be realized earlier, there are timing components tied to specific projects [64][70] Question: Will the company pursue bolt-on acquisitions in California? - Management is open to bolt-on acquisitions if they are significantly accretive to cash flow, but the focus remains on executing the current business strategy [77] Question: Recent advancements in carbon capture technology? - The company is agnostic to technology advancements but focuses on land and mineral ownership for carbon capture opportunities [81] Question: Update on base decline and maintenance capital? - Management highlighted that maintenance capital could potentially decrease in an unconstrained permitting environment, but specific guidance is not yet available [85][87] Question: Clarification on the potential PPA discussions? - Management confirmed ongoing discussions with multiple large-scale industrial customers for power purchase agreements, emphasizing the interest in clean baseload power [102]