California Resources (US:CRC)2025-11-05 19:00Financial Data and Key Metrics Changes - For Q3 2025, the company reported net production of 137,000 boe per day, with 78% being oil, remaining roughly flat quarter over quarter [12] - Adjusted EBITDAX was $338 million, and free cash flow before changes in working capital was $231 million, indicating strong cash flow generation [12] - The company raised $400 million to refinance Berry's debt ahead of the merger, demonstrating financial agility [13] - Net leverage stood at 0.6 times, with total liquidity exceeding $1.1 billion, showcasing a robust balance sheet [14] - The company increased its dividend by 5%, reflecting confidence in its business and cash generation [15] Business Line Data and Key Metrics Changes - The exploration and production (E&P) business continues to perform well, with a revised annual base decline assumption of 8%-13%, down from 10%-15% [4][12] - The carbon capture and storage (CCS) business is advancing, with the first CO2 injection expected in early 2026 at the Elk Hills project [6][8] Market Data and Key Metrics Changes - California's energy and regulatory environment is improving, with new legislation supporting oil and gas permitting and extending the Cap and Invest program through 2045 [3][4] - The California Public Utilities Commission estimates that power capacity needs to double by 2035 to meet demand, indicating a significant opportunity for the company [8][10] Company Strategy and Development Direction - The company is focused on disciplined growth, operational efficiency, and capital allocation to enhance shareholder value [15][19] - The merger with Berry Corporation is expected to create meaningful synergies and enhance operational scale [5][17] - The company aims to play a leading role in California's energy transition, focusing on clean, reliable power solutions [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's position in California's energy revival, citing improved regulatory frameworks and strong production performance [3][4] - The company anticipates continued stable production and lower costs in Q4 2025, with a modest increase in capital spending [16][17] - The preliminary 2026 plan includes hedging two-thirds of expected production at a Brent floor price of $64 per barrel, ensuring cash flow stability [17] Other Important Information - The company has seven Class VI permits under active review with the EPA, aiming to expand its statewide storage network for CCS [8] - The company is exploring partnerships to develop carbon management solutions and enhance its power generation capabilities [11][60] Q&A Session Summary Question: Can you discuss the MOU with Capital Power and the next steps for the PPA? - Management noted that the market is heating up with more opportunities, and they are focused on building a hub to serve data centers and the grid at scale [23][24] Question: What is driving the improvement in PDP decline rates? - The improvement is attributed to owning high-quality conventional assets and effective management practices, including injection and surveillance technologies [28][29] Question: Can you elaborate on the decarbonized power opportunity in Kern County? - Management highlighted the potential for retrofitting existing power plants for CCS and the ability to connect these plants with storage sites, creating a decarbonized power hub [34][35] Question: How does the company plan to ramp up production for gas assets? - The focus will primarily be on oil production, with natural gas being a secondary priority depending on market demand and capital allocation [68][69] Question: What is the capital plan for 2026? - The preliminary plan includes running four rigs with a capital expenditure of $280 million-$300 million, focusing on workovers and sidetracks [72][74]