CRC - Earnings call transcript Q3 2021 | California Resources Corporation

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Operator

Good day, and welcome to the California Resources Corporation Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note today’s event is being recorded. I would now turn the conference over to Joanna Park, Vice President, Investor Relations.

Joanna Park

Welcome to California Resources Corporation’s third quarter 2021 conference call. members is Leon, President Chief Executive as as call Officer; Chief Financial today’s Executive well Francisco CRC and Vice several on Mac and McFarland, Executive Officer, Team. Participating the of President and I slides our would website, Investor provided our on of like that section have highlight www.crc.com. to we Relations on additional discussed our have measures operations provide information reconciling website to provided GAAP also most our non-GAAP third comparable quarter slides as earnings These measures well and information into financial the directly we in results, release. as and financial our Today’s conference to Forward-Looking statements actual call risks contains and subject differ. other to certain cause projections are may results Statements and and and uncertainties, These

and of factors We our a as be could you additional cause will the on now following are and available results for information answer these question over at available turn we call end one the reminder, and primary that And A your remarks. company’s our that, website. XX-K. limit And on call follow-up. our XX-days time I prepare Mac. with replay differ Additional XX-Q will that ask provided questions the a for to to in would to the

Mark McFarland

$XXX their to consistent Their of announce the like I free flow possible this the who and strong of for for significant Thank demonstrating good we make performance, and free following. generate low employees afternoon all cash nation. million morning, quarter, men you In Veteran’s Thank and continue our performance us Joanna call. great everyone. joining and pandemic. flow. And to dedication service. investment of our you In we like of for served maintaining good those the the thank to oil, and generating of continued to women enabled thanks would the and serve Day, of carbon intensity CRC to year-to-date has honor strong your third would production our disciplined during thank cash all

are First, a guidance free of million our we $XXX cash to increasing we which million. year, updating range flow $XXX are annual for the to

Zero continue reach incentives for simply available at us Zero and over achieving pleased the Ambitions. expect XXXX we California, emissions. has repurchase opportunity unique Net have And differentiators, I’m of sight Goal has Net to lastly, and opportunity $XXX of shareholders X I our the like CRC our strategy, Second, we intensity table low $X.XX the upon quarter to among the extended in million XXXX, announce position to to the XXXX. a economic CRC’s adopted us until dedication unique the with This industry of X have in we on carbon our approved allow management and is carbon our because for future. second us When clear a of Zero aligns have fuel strong to most, to Net five management with carbon the the commitment economically. returns. Net intensity Said Goal dividend asset Goals, X the the of also the combined CRC’s shareholder end handful That opportunities Full-Scope share to apart energy position cash per a highlighting sector. today cash the Board years Net of and point even year-end. than still the in to program Full-Scope million fourth to XXXX quarter is returns include further, even peers would and us couple out stands with for with fuel emissions our key of we line balance Scope carbon CRCs Building our share are timeframe low a X, production Zero puts Net the Zero Scope to that provides CRC Goal. a of has which sooner our puts state $XXX in California which advance sheet to Zero on transition that

disclosed, towards Carbon of our X metric As to and annum This provides nearly TerraVault direction focused targets meaningful metric previously million XXX five clear near-term potential storage to by or XXXX. emissions a up X and our represents of Scope goals. tons to per progress injection million up double tons

are we achieve, these expect not it before, goals, easy ambitious be are do but committed. we to said I to As are and our they

for our U.S. second have or Hills, when submitted As goal supports project reservoir management. comes mover and EPA XX plan, the at AXAX before, it we combined initial in carbon approximately California these permit Carbon the up reservoirs permit ton makes and for our X, the to committed TerraVault million XXR first advantage we for our metric with to Elk

advancements before these continue on XXXX. and we are and We have announcement stated to targeting we emitters, various with in discussions as

I Poso on XX the employees a dedication previously their On would and our announced fields. more the like front progressing advances of partnership on the project an total XX projects work. megawatts and Shafter to XX announced of SunPower megawatts megawatt addition the behind-the-meter-solar we XX of behind side, is Mount current at with the solar year. for are This to in and megawatts, and hard projects the Again, previously thank

operations expectations our and here I Thank being team to to type Our deliver perspective. for turn programs, cost maintenance strong will curve and from which over the a today you exceeded continues have on call development Francisco. results

Francisco Leon

call. joining us thank And Thanks Good Mac. everyone. on this for afternoon, you

Mac in quarter third and CRC the performance strong XXXX. of As financial highlighted, operational continued

a X,XXX third produced level. we drilling and of wells. to day, Angeles year-to-date XX much has In rigs XX,XXX is new our to and oil and resulting program development able in our net million the were XX and we and address barrels more CRC development September, to maintenance in our third program of online running an of basin quick return Los costs. modest additional In high barrels quarter, brought rig online due while are XXX With to added both of of per the we prices, previously beginning announced bring per net maintenance shift sustaining and projects, day oil production drilling of supported hole our year-to-date. largely per capital year-to-date down allowed XXX,XXX our net the increase return, completion quarter, This backlog an this wells controllable equivalent normalized shift In production. During XX as day, our is to our part QX, us topics a it growth payback from maintenance current additional drilling, only operating BOE also to by are maintenance. oil in we in inventory to gross workover

all are healthy all three the has streams with natural CRC XXX% rising year. rent, hydrocarbon I of expected at across NGLs streams second Our remain The increase operating commodity XXX% realizations of oil half of prices at XX% to gas, of costs, NYMEX. remains at a particularly shortly. natural gas large seen our which increases realizations of which across a natural Realizations rent strong and gas will for further in the discuss

on produce. important the is also increase we higher this gas, we sale that natural since to it from However, prices CRC benefits realize which recall of

now primarily of the quarter, is average rose costs compensation cost business, sequentially on $X.XX G&A and per shown side as Moving XXXX X, increased Slide quarter on BOE. items. due and our over quarter This related the to to third

gas XXXX Our We flood rise steam due plant. third used BOE for purchased the rose per to quarter effects to generate a power Elk fuel of our prices. costs, and quarter primarily operating natural in the from PSC by $X.XX gas, excluding second is natural to electricity which our operations compared Hills XXXX, as

in Through quarter in XXXX, a and cost our margins. that in produced derive internal Excluding than amount per gas largest the on has feet Year-to-date, see we operating average as can of on positive control. first in costs per efforts, for basis two benefit impact the When line third our the purchase quarters our total, costs the team’s effect with million pricing this effects gas ongoing natural cubic prices of an look of and the to that consumption. XXX we at less of CRC testament the California of higher day operation barrel the managed we gas the of we the were our natural structure half year. on producer natural

of XX, every rise to approximately see the operating on for offsetting natural in in the $XX dollar incremental Slide than we price we costs show quarter, million. $X realized million of more gas incremental As expect fourth revenue

requirements flow since quarter. quarter, third million, a highest our modest the an year-ago. this year’s this $XXX quarters million we helped exited of of $XXX CRC to generate in During cash EBITDAX Furthermore, adjusted bankruptcy CapEx free reported

margin pricing Underpinning strong free of million performance, Our so Results electricity best our in strong commodity Hills year-to-date. successful $XXX CRC’s Elk performance far higher reflect our sales higher plants. power operational year this drilling been from program. has flow quarter cash financial and

XXXX Elk Our been about program have margin were the fields. drilling prices, a high previously the the intensity projects rising of these the IRR over improvements focused stronger are we fourth incremental on Vista capital with on and the a opportunities. horizontal and commodity high the has efforts to-date, By Poso, promising workover horizontals, of of XX% program program XX%. combined fourth Hills opportunities, to Mount reflecting economics for scheduled of seen certain value, across our along XXXX, Currently drilling XXXX, adding rig predominantly Shale Due quarter development fields Vista efficiency with on Buena we strength Buena large lower through which focused focusing in and needs. capital the including accelerated

As are in current activity as our account the we our environment adjusting year-ends. for towards to look a our changes result, in price we guidance

continues to was majority Xrd, of guidance liquidity $XXX November in of operating XXX enhance capital of to highest production as of and guidance a million. bringing cash cost flow X% BOE $XXX our Post-closing month, our increasing Earlier are liquidity XXX This of million our range operations, the racing of strength. by million financial already million. of streamlining our our approximately to our was a our by $XXX our on to total asset balance million, million, closed Also area. bolster per forma this to strong investments at position. CRCs to operating helps X% which to day. approximately portfolio pro XXX,XXX Basin strong cash increasing sale Ventura we combination free We point results $XXX approximately a The net the the range

by financial Ventura to sheet Our demonstrate flexibility. like simplifying Street account To our into balance our our held in of operations. guidance the also would takes out interest that I further commitment Partners Benefit continues shareholder returns. September and to CRC updated point sale preferred the Basin redeemed conclude, was to prioritize

average with an financial to for November As per has share price balance sheet, CRC over share million shares in Xth, for million price. XX% of of X.X cash our position our represents further million strong $XXX optionality our discount which return of repurchased shareholder strategy. current $XX.XX $XXX our share, With

As which will payable deals Mac fourth dividend Board quarterly of the equate shareholder to million has approved a in in quarter, returns. $X.XX the per $XX annualized share when mentioned, approximately

healthy capital us generation needs free our cash allow and will to carbon our flow allows fund self continue fund Our to management to activities. us

results continue to in to our we and will XXXX Thanks. quarterly options, over evaluate guidance release. earnings our now turn that operational business. to remarks. deployment closing attachments we the I call detailed Please and analysis alternative for provided of have As benefiting back our Mac the And note capital financial our

Mark McFarland

base, thank the shareholder the you CRC our our needed asset of is resilient goals to uniquely carbon low the business and decline allows committed and which management energy our meet cash future. has flows. continues in flow of asset us investment capital carbon Great, building positioned the provides Zero cash and to that intensity provide priorities of with low remain to and today disciplined Net We Fuel upon exhibit CRC base Francisco. to returns. tomorrow a

joining on open line us We you in Zero a now thank your again the both With commitment and Thank and two interest for important Full-Scope XXXX questions. on have for we will you today’s made with that, dividend. call. to CRC Net quarterly progress for announcements, our

Operator

Thank Scott Hanold you. first comes Capital [Operator from Markets. Instructions] Please RBC Today’s go question from ahead.

Scott Hanold

Thanks.

Net a Zero First the to congratulations target X. Scope on

are that. visibility I the of oil good and you companies to a only think one toward have gas

that. congrats So on

Mark McFarland

Scott. Thanks

Scott Hanold

on to the Mac is but around us your sensitivity in the that question for first and based give sense you looking whatever participate start, terms of My of criteria Chris. in easiest? is some opportunity just the process interest they understand the can what are and, some emitters, solution are they they the from level, you hearing are all interest or key are of any the maybe looking I sense sort in of them discussions for with discussions, to find probably and of and of playing where the just a end looking the the the,

Mark McFarland

is Scott, so us, I will Chris in, that. by let him but So saying me just let with here jump start

as least products overall at we are working who in the that think reducing that consider we are for I make. opportunities with interested of carbon intensity they their people sources,

being or carbon having creating produce And to either to a credits avoid with intensity. able hopefully so that due premium associated therefore, a to it product LCFS lower has

but I in let and additional will So jump that is comments. provide high Chris the level, some

Chris Gould

Yes.

there do renewable are whether price out is going conventional emission vary a of So there, sources are to unique or I attributes. And think are other some to source, at they going start how context. they a any course, that refiner have great downstream you or that their right. is when all product, to There refiner by look source

the encouraged the we the is with allowing with of early their they that to And are able them. sources approached and monetize work in for market, our intensity be these and model each to have of needs to product. the the low and so go speaks tailor with the we the to I’m discussions where these stages carbon that to very need, them it in which can really having that engage they flexibility emissions types And

encouraged Scott advancing that with those much are the and across we very receiving. different So response the ball very sources

Mark McFarland

onto on add me just that. Let

deficiency, for for have the avenue. it one credits construct, So pay view becomes California, will, that if is economics, a in is buy have can you to the obviously, if it system to injection through of caret either the stick that people a as capture eventually the LCFS which with for the penalty somewhat the that or

also we is, addition you the seen that in interest in in that opportunities. in XXQ, you are other changes those to interested we have type tell The one are see included sighting that proposed I Greenfield also to obviously, increased uptick with slide be we non-LCFS the might would a and have XXQ on eligible, XXQ LCFS - see

Greenfield opportunities the opportunities increase there think a the I compliance, that that of Brownfield So LCFS with are in are is to driving the XXQ lot and interest.

Scott Hanold

the some having question was on they you in COX of any could the last interest process, of part then Got capture part you the in capture are it mentioned to opportunity sink and interested just the whether transport that hear from the as actually them and process, doing of there taking and their sinker, is well?

Mark McFarland

I without funding, capital of depends is It variables the of kind it Scott. map. the it it there into it source, any particular a on depends over getting lot discretion one depends the think on on all

work really it So that possibly solution and update are October cut and more there around know deploy say, model, some business And the you business that providing for an really out that “Hey, think a things to that capital, partnership would our does I the put are to there on cetera.” at different like some Xth et we say gamut, like entire what stands I me. on all carbon across laid models. that it as system, cashier those look look it

Scott Hanold

dividend, also but cash just going that return is back, for Got just get buyback, your have projected if of to is of X you it, statement you flow wanting utilize at Maybe a initiated also my a the because a is toward shareholder high go you discuss even half take on leaves to follow lot stock Francisco, that Scope here you it yourself, return. you and of where things billion, on stepped you shareholder question I XX% from one, of have flexibility Mac can you it proposition, free do on $X.X a made the Net understood a couple as a Zero level - still forward. of

your if you part Zero, to the with getting in X question on then second Scope allocated So that? looking like, sources some probably upstream of that of but commentary like more are to is Francisco, the other the if is to but look you what utilize the had to use capital, this flow, of cheaper free shareholders? is that giving into the lean for across Net toward it cash potentially you XX% opportunity maybe And as you to back

Francisco Leon

Yes. Scott. question is the Francisco. This I will take first.

million in we cash to the end the projecting are with, script, of of So as the start year. we $XXX said have by we

So year on we to a but the pay million, really weeks. that and in are SRP over $XXX already and work few that of good out dividend accumulation the a post the cash going this

that invest cash to framework deliver than do regeneration to the of first the to as is cash and core we into cash discretionary we So XX% to business, flow going the flow the core the our in and potential, maintaining business. less business our of earlier, discussed continues are invest

between have carbon then roughly are proposition do the investment would management to we value investor we we the the shareholder repurchase returns dividend but So like share our else are now remaining, going it XX% program will half forward, Right split to put and alive. we you in we keep in a business.

open we at of to dictates. still that buy some putting I market continue be shares. and see we going gives right But repurchase back the stock, we going will So are shareholders. on to But opportunity what like something optionality and them see our different to continue with it now, of past entering to point. that both And is returning value us. assess. pull we the it us of the year will have an to to will are the back two We the a program dollars share we our avenues lot work, gives

XX%, a it to up is is frameworks allocate that or a initial few to go as over or there particular the ramp a get on this for then Right to investments storage the the and business that system go talking business, to the of pads steps we management a as get So going ramp a creating no accordingly years. admitters of to decision are to two now, making we you see now, will you carbon capture making it. pipelines two do segment closer to FID or kind do to we next the the naturally and new closer tanks. up And

going heavier waning progression to are to in a few in up from you first the management. terms of the returns the see carbon and potentially naturally, ramp in years shareholder So then proportions

carbon So there lot seeing government the are with the being a equation business. split is of from bit sources capital. private timing bond is to of a is side equity to to the in loans, we rapidly, the of little the there financing managed good of What is in associated participate the attractive maturing market

negotiate, we have lot carbon have towards able on definitely financial be the we the structure to is cheaper only definitely going Now, we to And cash stage to that to are way for sheet money I stage, will we the to just best said, are on source then this we don’t commit we initiatives, as financing, of we financing this pursue use some by we that this generating us different because business. to to this want and is then leverage and sheet do set doing not management one balance find that. a options the the sources. a to if think potential balance work but cash to put put say forward may much try to of best to of our optimize this me afraid negotiating highest and I that the point are unlocks the of

Scott Hanold

it. Got

So, shareholder I’m the if flow. able all what free find take a source return that that in that to would cheaper Is up portion theory, hearing? you of were over time, larger cash

Francisco Leon

returns of source ultimately, that have discretion we Yes. what incremental I would on cash shareholder to. goes say,

to assets are some but is, is to this avenue I right. very The capital in of the to there will commit instance. trying business “well, will that we happens?” assets given intensity We what feedback, more provide of And of of It kind our see back I’m is but saying see want of kind and our ultimately, it return the best if shareholder be going that own. all shifting type aspect we don’t what you low a to

is the there acquiring there. it and work really going is to that Hills to whether and cash So near Elk be a forward example that see value in, for we put opportunities might bolt-on might good we

of want all to if in in returns. us carbon management, back sources it don’t financing flips get because box to you shareholder So

it. do it. it, we also We to are are If going to going we But things is the powder best explore that avenue, do to we other look it. have at will dry with

Mark McFarland

But what sides, three and are to business cash both. core from So carbon are to perspective, absolutely we and What have maintaining return framework committed flexibility and is and bit reinvest now the in we because that said BOE we is a of we ultimate Scott of business, for production spend just Francisco strong is what of the have E&P sides add have the both shareholder after demonstrated my we true. we quarters. a - to have committed both we flows management

the to are remain think we is return either we shareholders future avenues but see the I opportunities, we of invest And projects saying our as Francisco in have committed, shareholder or remain cash projecting accretive. we to flexible. we think ability that

Scott Hanold

color. the appreciate I Understood,

Operator

comes question ahead. with today Leo next from our Mariani go KeyBanc. Please And

Leo Mariani

Hey, guys.

Just fourth which wanted rig here. on question adding to ask a are the you

flattish roughly here? get do rigs come additional or achieve may to XXXX wanted look you to the you there to think you do into Just guess sense a holding is right think an as to be your four the roughly demand in have or XXXX, in I goals, kind number of rig guys

Francisco Leon

that here XXXX. ramped Yes, as Leo. we like to one up and rig We point is four, entry Francisco. we exited from year This into the

maintenance inventory we about talked dollars this is As $XXX more capital there, going million. backlog guided longer of business to we we see are see once no and it, the we to switch our capital before have about we

five between really feel I Operations. rigs somewhere that know have implies us, don’t Kerns the to now our have anything into here rigs, we the of you going right that is to we if four year. with So Shawn Head four add. good about

Shawn Kerns

want XXX clear is DMC, the it not a number. just be included, to Yes. it is But capital yes. just I

Jay Bys

I very Yes, rig the we been program will what just drilling Francisco, is year XXXX. add consistent with X this have and

And and our so we just will kind program. we plans rig laid four roll of out, have into XXXX that with

Leo Mariani

emitters then how like Okay, down of commercial just of seats tough these the and some having. conversations provide or handful a some number late some then to just thanks. with there these like of of of any is key high-level quantify, get ballpark get have to And sense would like to very negotiations sense like more serious just frame but bit be Is you conversations of characterize, it, wanted around a progressed a it additionally, some maybe How stage. just are way might you fairly road these discussions? far emitters. if wanted you just on a are the XX discussions on like, a a it This little could to to way bit is a the one color progress of industrial the the with

Mark McFarland

that way X. Good for TerraVault would subscribed morning, up, if we Leo, signed some Carbon go we would I said What say is before over probably would statements is be we I everything back it Mac. that to

being of on advancing, type are think the we put with that I out discussions that Xth. the type stick off we still our that we think would that discussions, the see is I October curve. It continuation based of curves

Carbon continued of TerraVault has and been So it interest in affirmation affirmation X. continued

Leo Mariani

from of as at a just be there guess, apartment projects, I’m future also get Okay. of folks potentially I the I have lot apart trying other some be the the you gets fields of look the sites kind guess at obviously in to Is of Carbon to discussions a from just the these to of looking here. the opportunity guys TerraVault down X, of plans size sequestration other classic I that more permanently sense And know what it well? can do road,

Mark McFarland

But because we amount to we or have X metric a thought we convert X, can fair focused the we that? us on I get - is put XXX on some to get before yes, together. assets us Chris what tons. want And TerraVault described would but we And short X. provide that first. but working some said been us we the to next, that XXX here. Carbon Carbon in again, was into TerraVault are and Leo X X, form it get somehow XXX, is on focused our say million opportunities, prioritize it, fashion, do answer the to unique we Chris Chris permits on We go of will we team you the that has back or tons to some filed insight they with are to

Chris Gould

Yes.

conversations CTV think in to addition I those are occurring. X

with those with that discussions CTV active set our committed opportunities promised scoping put we are the or permit different goals where that, out out, But million have we DTA XXX we submitted the in geographies talked the with focus want on we our advancing about, as X. on we parallel have we to next on tons, to are deliver think of XXR, what We in and sources and are. we we across for application prioritizing

to it. is say that we are working So on

at are We next stopping CTV on XXX. that are focused progressing or we but X with the not

Mark McFarland

operations to working that to engineering the concurrent commercial and we where said, concurrent get source project, to teams for either quick as we what that the a and through organization teams finance market. overlay we add the Francisco how to we working at the tons have get opportunities are the X. But and have to XXX. hope permitting structure that to finance on to of just that looking with a equity Chris are to and defining we advancing And of are And us CTV next that and or through also are the debt

we and concurrently are excited on the going all prospects. is it So, about

Leo Mariani

thanks Okay, guys.

Mark McFarland

Leo. Thanks

Operator

Akamine Our today from ahead. go of with Please Kalei question America. Bank next comes

Kalei Akamine

topics Perfect. is Mac, to the me hit I be on of feel carbon moment. business, focused is which Thanks on. the want for perhaps a low I getting these first couple And really will base getting on at the by market. That here. overlooked

So how track trying requires landscape, into CRC to to which is I this E&P market you think understand a the new have fits record.

will want for. capital you the and do very showing out can we and strong commend discipline, to I gates coming it this gap of you but So long for the know the year returns how

hoping that can parameters you cash So the some help free around I’m put capacity.

what for and words, and even is support in other it the capital, how the plateaus so, inventory what looking that is the support break is long? is So deep maintenance production I’m what how is to what

Mark McFarland

Yes.

but So are do. interest great carbon in of it lot I highlight maintaining a and appreciate want going our right. details carbon what level because strategy the type but five-year the some Maybe of to about day, for go maintenance from Francisco we of conversation absolutely those. business, a projection a let around, to There assumptions pick there. lot talk there capital, I is not up I’m production. that some through you the we a of provided of core question. did in this the you here management activities, asked, mean, were is but there. some it you We

Francisco Leon

I would be Yes happy to.

we CRC rich, this came we the had, addressed felt was have of of out with which in been issue since always CRC sheet balance the past what we have inventory we has the and gate year. Kalei, So

very looks attractive. So the inventory

through IPs not Now us that guiding it so are and of moving into is shale, not market. the to hear this way to talk going XX-hour about you in

tanks, of good really through oil really of can rocks oil the a primary ground water steam floods So that or and out we we good process get gas the drilling. have and flood

So it the inventory and is of equation solves attractive how drilling that your is. not for always side the completion

you very injecting by for If get is a us. business that high can return oil the attractive very water

about four we the is in talked past pace. which inventory, about in Now current on rigs, the our what is

We XX-years of about have inventory.

LA zones we Basin. sustain returns some also I of good the shallower really in were a year we mean, shallow Joaquin Joaquin lot are focusing good seeing Basin, pretty the LA is I the that a mean, this but can on a Basin, the on We have expand San Basin. in in of in we level. zones San but really

So we about of inventory. years XX see

view, dynamic about out than in billion at look prices higher XX see a you to and they in much today. at historical you Price are pretty came when talked said our lower that point barrels and reserves. any Now if way we a inventory reserves were of XP filings, significant we this expensive

right breakeven, giving there, floor a lot see a see now we program we of a is have good pretty So protecting, hedging to that terms we of a us with. projects attractive in work nice

range we we a So barrel to have a capital. pull into on $XX per XXXX, before on see breakeven back the

see support capital dividend, runway to So hedging the as here forward. the support we are a to and we attractive we very go

Shawn Kerns

that different lately wells. bit performance that in add really have you is Yes, a of to done Kalei. that the if inventory little a when past we we about are our we And more there. is good because the This is change I California are have from well Francisco horizontal of regard, rock this drilling the good. talking I seeing notable talk And really quality seen Shawn. That is and horizontals these is is than about, so think in doing speaking unstimulated,

with able some forward. the areas targets wells, and drill these are we going to to in capital horizontal So able our are be more we dollars reservoir efficient

Kalei Akamine

the capital the just you hit that this, those going appreciate lead the in to and is that long of add I past seen and response, the longer I a do between spending production could that say flat hold to sustained level, several argue the due you you. what twist on years, haven’t spending time the to and take to it to if throw and Thank period that. inconsistent fact spending but a production will for stabilize Maybe maintenance time? we

Shawn Kerns

though, point an mean year I this three understand multiple year, have consecutive operating Yes. need evidence quarters, has quarters year exceptional you really to I think a from perspective. Kalei been your this the but I

a holding the flat $XXX next mean, guide year. to below to will flat. are capital with lower production we were higher We I number million hold

clarify only point seeing XXX clear, that the Just we oil is are and about production. hold million to to be to

but sure a that barrels - chasing the you comes a to good you more production as CRC your and year production. if make I get But understand a you being drilling a get keep we production. the that tread wells overtime on mill return that point way shale that the this see can where year that cannot back and has wedge So will immediately are that we to production kind that do we conventional into we to or have stop of backlog in, building to don’t back to assets about think those you assets, maintain

slow a OpEx If work of is we important a of out a the tool what ground, that investment both to CapEx declines level invest production of OpEx we industry. and very continue in like putting we getting use is rising to you is have it us see one in the sustained if and For the dollars tide. in lowest

to in the the that high in say very XX% has low time. project teens, business and are allows those you is and over XX% So decline to cash flows you sustainable confidence that

the back without bars about it price model, about to its away the us different assets yes and how and also does production conventional goes to rigs the we then is okay then But less allows to away. work dropped it there. work, and as putting have that market we about reservoir a completion, reeducate is worrying drilling the more to maintaining pressure plan to have has business drilling So

confidence So plan a to of us forward. it gives lot

Mark McFarland

is Mac. this So Kalei

believe offering the say credibility are say and this during this we did the we in strategy year. yield said earlier it build that high Said and me during doing We way. we that this it what we the execute that going that quarter, we to on. are is that we have credibility and we and the discipline a low to one decline We time. are inventory, the have capital believe what have we going build at I way each Let quarter it

Kalei Akamine

up comment fund the the or you been the program balance it philosophy on dip in your I in has behind do wanted so why edge, best is to the is stated drilling growth a think to I ever that about just what in wondering on strategy I’m CRC’s in. Is hedging, low position it? the it as carbon, pick it. sheet

Mark McFarland

Sure a good it is question.

me some try to first So things parse let if I may.

is as that If mark-to-market year realize cash are as are the forward going as the that all to-date in trade that you look stating have what the hedging legacy down if will required Those the we this time, hedging that losses by almost those the at seen of mark-to-market were we going to statement were to they meet, we the well income they the through losses point I and were And as enacted exited before, are XXX. the as called at requirement before associated almost entirely XX/XX/XXXX. dates hedges in RBL. were that bankruptcy entirely

a differences some But have rolled If you the our is of the protect that side. stabilize stable look is to for And Without view done of the floor think it production. are It hedging occurred, et hedges? that know gas management enter production, XX% we of hedge your question, money. hedges up we puts we natural why up done that price there not that I on provides So shaping a so cash effectively have to cash to minimally hedge a you an only we commodity, stable XXX we we allows are year, our We And more those of ever write-ups, which aftermarkets. of flows since rig that if in fruit they mean, effectively but us I or our couple do at also cetera, some investment XXX%. the have then, on market things up into that more prudent is into contracts, and is can think out to revenues. have next a XXX%. and XX% strike still has on is they entire as look we at at is more been to not have I have of to XX% applicable but longer when it there NGLs getting the this production, it, stable revenues. flows. down

provide for time. a coverage like So but decline things hedging we basically assets, investment low helps reinvesting philosophy horizon carbon management, the over of us the our in the have it smooth dividend, a business, longer is adding to doing period

Kalei Akamine

understanding was was is If summer. I sneak feed and perfect. this That in study that My could more the one is in, one the completed on CalCapture.

FID between project? and standing is you what wondering on I’m So, that

Francisco Leon

Yes.

working something. have looking refine had the the with We take pencil gone to into to sharpen is look I it that it, I So gave through through second we the et was phrase will are back through that at we it we to study, are for. X.XX have pencil, costs, still some estimates, fee the it call and things owners our go we the went a we engineers or said, cost back asked go cost And on there and cetera. a

that. through working are we So

there much for is just of are pretty of projection. for third the think everyone a with power are understands, used views clarity, Our because couple but hydrocarbon a of things plant sake I associated that,

on The market California thirds other two ISO. goes out the to

Okay.

interpretation understand of only are that way our So rules the third written the LCFS capture carbon plant is right the the pathway now, we from is as in that eligible. one

Now, recovery it still with is be it. at would enhanced that associated some levels of

get start economics that You make to the sense. could

of combined COX cycle. those eventually the However, have think on sequestered. to time. And is cycles now, regulatory over did emissions have right change the and cycles is a And basically over change there, only regulations grid. we need is there have to necessary get That will have combined incentive an because combined carbon avoidance time, that to cycles combined it to way there some California. Right are now, you that changes. We in off will capturing gas of think if for no greenhouse that

You another ball you which can’t a is COX. are unless essential, do whole it game, as the hydrogen using

that trading ton. offset think in emissions is allowances if we gas COX, the sequestering we greenhouse were right by to direction. a $XX lot So $XX, movement And now, of those that around are for there emissions the full a

to power start add two start you tons, million it on you the because produces roughly to CalCapture. tons so, from economic million plant, returns two And the to

away but feed we regulatory we and we said, changes, would getting FID about So When you invest. project are us we study, that early need stage call ways is and continue think ask you some that question when we to coming about refining it towards asked it a it. that will a a continue to see to dollars. is are I I to development

Kalei Akamine

up that. business with you to week I BMA all answering at on more next and appreciate you I Thank look the catching conference. forward part for the carbon questions the low of the

Mark McFarland

it. We to forward look

Francisco Leon

hosting for us. Thanks

Operator

And from from Ray comes ahead. Please Lotus. our Deacon go Petro question today next

Raymond Deacon

hands gas power fields. My and question Elk much more supplied the plant your would hi. Elk was is how of Hills is on like resources. Yes, that Hills on to put possible? gas from the And And you

Mark McFarland

I the XX expenses, is look standpoint and We XX of from would is that will It look but a tell right. on a gas probably as see energy, floating it supply it price as energy effectively could And a you on of are non-energy costs we and we steam discipline other year, gas mean, generate that it up on XXX% Bcf we costs so gas about Ray it, you go whether at - generators or sourced, being we talk the producer. power I consume the plants. net in a gas thing that our very XXX% Hey our is source. but effective operating are be Bcf whether you the at when just a be we But because it roughly year. the of -

why or quarter gas. give there is that fourth in shows that had the to slide so we again, sensitivity take, and the So

most fields. a is So net XXX% but or us gas a part producer, for the in our behind we give take are

Raymond Deacon

prom more, have just And could one no? shut get I read year. even fairly California this here do the tighter or plant you going where was gas market I nuclear was just wondering, to in big from And that a think

Chris Gould

say. It to is hard

be the I is the that plant market, into its the that shutdown expectation way makes but... if going to think somewhat

Jay Bys

of the in actually you you generation need incremental more more Chris, support The reliable form the resources.

weld that So yes, the price that case to is generation - needed that gas support there gas more is be in. the will so concern if should incremental

Raymond Deacon

very Got it, thanks much.

Mark McFarland

Thanks Ray.

Operator

final question go Seeve comes Please ahead. GoldenTree. today from from Our Eric

Eric Seeve

for is thanks where just the great side story. was off quarter on you should was you great that going maybe trading a expect updated for It guided who in natural cover electricity really building wondering you gas Great forward? view guys and call. for just from profitability guys, sort and a can the on all the what areas historically Hey where I have those of we gross terrific set profit blew businesses, above well on the what ball interest sale a was level give hear guys quarter. to and the those

Mark McFarland

beat So, if with an our natural term I’m gas market prices into rate the electricity unit. of get if with obviously the to - we going higher

dispatching from into unit higher, been our revenues by deplenish a can is been obviously, bit some it there margins demand, our the prices have and so market been expand with here the and electricity higher expand hydro Our has north. higher comes gas and

that been around if then will. agreements is want Jay and have future that there is increased that. contributing the margins electricity not had Anything generally sold is We to And but do we strong. better. into the and far unit Jay? is now, and you so that the margins, a as opportunities right we our that And forward, So, gas to the what job, spreads of but team has move have being as optimize good remains we gas, everything to to being are we transport look repeatable, just increased to you profits been going and able have demand sometimes think as increased that as several energy

Jay Bys

up market in from up last Bcf you lease nearly or straight Bcf. I things to one gas and think No, XX XX two said got capacity the California moved - you you XX-days,

price. be be element stabilizing that and a So on maybe depressing linfield, should should element

MMBtu be XXX,XXX didn’t major greater line the The past second have thing on about had Hill is before. have we to use. Elk It a is restorative you gas In per day.

prices. been a very has unique Unfortunately I has well. received have the got market the lower gas that think, response we seen California the circumstance.

gas got of supply. have limited a We amount

amount have needs gas our gas incremental a from tend to power on got a hinged We of be storage, needs. limited but perspective

this gas is both a likely and market power volatile to for it some time for So will come. be

Francisco Leon

Derek.

I tighter. think announced market the with watching the the of that some a made obviously bit. there relieve market, things were There and Jay, things that should are market couple a

to And that I through think will energy the turbulence And time interesting this of I the the recently. I as transition. out think we an the the think [pinnacle] think of the mixed the that California there transition, effect are was something report tip tell, I title the perhaps was go or thing energy sphere of the through at volatility. as right whatever moves is of this this in state we seeing but (Ph) are creating the it that that forefront, came metaphors,

in come So it is happen years volatility. really what tough to other the to predict than continued

interest thanks So and CRC, Veteran’s with a in that, let me just Day. good say for have everyone’s

Operator

thank today’s today’s attending concludes call. This presentation. conference We all for you

now wonderful may have lines a disconnect your and day. You

California Resources (CRC) 11 Nov 212021 Q3 Earnings call transcript