California Resources Corporation Reports Third Quarter 2021 Results, Declares Inaugural Quarterly Dividend and Announces 2045 Full-Scope Net Zero Goal

SANTA CLARITA, Calif.–(BUSINESS WIRE)–California Resources Corporation (NYSE: CRC), an independent oil and natural gas company committed to energy transition in the sector, today reported third quarter 2021 operational and financial results.

“Third quarter results continued to reflect strong operational performance and represented our best quarter this year in terms of free cash flow generation. These financial results enabled CRC to further enhance our shareholder return strategy by initiating a quarterly cash dividend. Additionally, we tightened our full year free cash flow guidance toward the high end of the range to $460 to $510 million,” said Mac McFarland, President and Chief Executive Officer. “Given the strength of our 2021 drilling program and the current commodity environment, we added a fourth rig in Buena Vista Shale in October. Additionally, we expect to have more than $325 million of cash on hand at year end after share repurchases and a cash dividend payment.”

Mr. McFarland continued, “As we continue to make progress on our ESG strategy, we are excited to announce a 2045 Full-Scope Net Zero Goal which targets Scope 1, Scope 2 and Scope 3 emissions. As planned, we also submitted our second permit to the EPA for the 26R reservoir, which when combined with our initial permit for the A1/A2 reservoirs, makes up Carbon TerraVault I, an approximately 40 million metric ton storage capacity project. We are also happy to announce that we are progressing our partnership with SunPower on 24 MW of BTM solar projects at the Kern Front and North Shafter fields, and continue to target projects in other fields to reduce our carbon footprint. With these efforts, CRC remains committed to maximize shareholder value while executing on our ESG strategy.”

Primary Highlights

• Announced a 2045 Full-Scope Net Zero Goal for Scope 1, 2 and 3 emissions
• Adopted and declared a quarterly dividend of $0.17 per share of common stock, totaling approximately $14 million payable in the fourth quarter, with subsequent quarterly dividend payments subject to final determination and Board approval
• Repurchased 3.1 million shares for $104 million through November 5, 2021 under the share repurchase program (SRP) for an average share price of $33.99 per share
• Filed a Class VI permit for the 26R reservoir as part of the Carbon TerraVault I project which is targeting up to 40 million metric ton (MMT) CO₂ permanent CCS storage
• After the quarter-end, closings for the sale of our Ventura basin operations occurred with respect to the majority of the basin’s assets and subsequent closings are expected to occur in the following quarters.

Third Quarter 2021 Highlights

Financial

• Reported net income attributable to common stock of $103 million, or $1.25 per diluted share. Adjusted net income¹ was $151 million, or $1.83 per diluted share
• Generated net cash provided by operating activities of $182 million, adjusted EBITDAX¹ of $242 million and free cash flow¹ of $131 million
• Closed the quarter with $189 million of cash on hand, an undrawn credit facility and $548 million of liquidity²

Operations

• Produced an average of 102,000 net barrels of oil equivalent (BOE) per day, including 62,000 barrels per day of oil, with quarterly capital expenditures of $51 million
• Operated two drilling rigs in the San Joaquin Basin and added one drilling rig in the Los Angeles Basin in September; drilled 27 wells (22 online in 3Q21)
• Operated 35 maintenance rigs
• Completed 76 capital workovers

Transactions

• Completed the wind-up of CRC’s development joint venture (JV) with Macquarie Infrastructure and Real Assets Inc. (MIRA) and the development joint venture with Benefit Street Partners (BSP)
• Progressing the partnership with SunPower on 24 MW of BTM solar projects at the Kern Front and North Shafter fields

Guidance

• Tightened 2021 free cash flow¹ guidance to $460 to $510 million
• Raised 2021 adjusted EBITDAX¹ guidance to $840 to $900 million
• Added a drilling rig in the fourth quarter of 2021 that was planned for 2022 due to success of the drilling program to date and continued strong commodity prices; raising 2021 capital guidance to $180 to $200 million
• Increased 2021 operating costs guidance to $700 to $720 million due to rising natural gas prices, which is more than offset by gas revenues due to CRC’s net long natural gas position

2021 Guidance & Capital Program

CRC tightened its full year 2021 free cash flow¹ guidance to $460 to $510 million from $400 to $500 million, raised its adjusted EBITDAX¹ guidance to $840 to $900 million from $725 to $825 million and raised its production guidance to 99 to 101 MBOE per day from 97 to 100 MBOE per day. Rising natural gas prices are putting upward pressure on operating costs and CRC increased operating guidance to a range of $700 to $720 million for the year, up from $670 to $695 million. Although higher natural gas and electricity prices in 2021 increased CRC’s operating costs, higher prices have a net positive effect on its operating results due to higher revenue from sales of these commodities which CRC also produces.

CRC made $128 million of capital investments in the first nine months of 2021. Success of the drilling program to date, along with the rise in commodity prices, resulted in the addition of a drilling rig in the fourth quarter of 2021 that was planned for 2022. As a result, CRC expects its full year capital program to range from $180 to $200 million, up from $170 to $190 million. The Company’s capital program will be dynamic in response to oil market volatility while focusing on maintaining its oil production, strong liquidity and maximizing its free cash flow.

Acquisitions and Divestitures

After the quarter-end, closings for the sale of our Ventura basin operations occurred with respect to the majority of the basin’s assets and subsequent closings are expected to occur in the following quarters. With the divestitures closed to date, CRC realized $62 million of cash paid at closing (before purchase price adjustments) and its liability for related asset retirement obligations of approximately $100 million which were assumed by the buyer.

During the three months ended September 30, 2021, CRC sold unimproved land for $11 million in proceeds recognizing a $2 million gain.

In August 2021, CRC continued to demonstrate its focus on core areas by acquiring MIRA’s 90% working interest share in the joint venture wells for $53 million, before purchase price adjustments and transaction costs. In September 2021, BSP’s preferred interest in the BSP JV was automatically redeemed in full under the terms of the joint venture agreement. For the three and nine months ended September 30, 2021, CRC distributed $19 million and $50 million, respectively, to BSP.

CRC’s full year guidance accounts for the closing of the sale of CRC’s Ventura basin operations in the fourth quarter of 2021.

Sustainability Update

In October 2021, CRC published its 2020 Sustainability Update. The update provides CRC’s key environmental, social and governance (ESG) performance metrics. Additionally, CRC has also published metrics following the guidance of the Sustainability Accounting Standards Board (SASB) and the American Petroleum Institute (API) to promote sector transparency.

CRC continues to make progress on its ESG initiatives and has announced a Full-Scope Net Zero Goal by 2045. CRC defines Net Zero as achieving permanent storage of captured or removed carbon emissions in a volume equal to all of its scope 1, 2 and 3 emissions by 2045. CRC intends to achieve this goal by prioritizing 50% of its free cash flow to invest in projects that reduce its direct and indirect emissions or achieve sequestration of carbon in volumes necessary to offset these emissions. The Company remains committed to advancing emissions reducing projects that are aligned with California’s climate goals and CRC believes that its Full-Scope Net Zero Goal and its 50% cash flow prioritization are a significant ESG differentiator.

Continuing the Company’s low carbon strategy efforts, CRC filed a Class VI permit for the 26R reservoir as part of the up to 40 million metric ton (MMT) CO2 permanent storage CCS project, Carbon TerraVault I, and are progressing the partnership with SunPower on 24 MW of BTM solar projects at the Kern Front and North Shafter fields. This is in addition to the previously announced 12 MW project at Mount Poso and advances projects on a total of 36 MW, of the up to previously announced 45 MW BTM target.

Fresh Start Accounting and Predecessor and Successor Periods

CRC qualified for and adopted fresh start accounting upon emergence from bankruptcy on October 27, 2020, at which point CRC became a new entity for financial reporting purposes. CRC adopted an accounting convenience date of October 31, 2020 for the application of fresh start accounting. As a result of the application of fresh start accounting and the effects of the implementation of the joint plan of reorganization, the financial statements after October 31, 2020 may not be comparable to the financial statements prior to that date. Accordingly, “black-line” financial statements are presented to distinguish between the Predecessor and Successor companies. References to “Predecessor” refer to the Company for periods ended on or prior to October 31, 2020 and references to “Successor” refer to the Company for periods subsequent to October 31, 2020.

Third Quarter 2021 Results

Nine Month 2021 Results

Review of Operating and Financial Results

Total daily net production volumes decreased 4% from 106,000 BOE per day for the third quarter of 2020 to 102,000 BOE per day for the third quarter of 2021. Total daily net production volumes decreased 11% from 113,000 BOE per day for the nine months ended September 30, 2020 to 101,000 BOE per day for the same period in 2021. The decrease from the same period in 2020 was primarily due to limited drilling activity and capital investment during 2020 and natural decline rates. This decrease was partially offset by improved operational results from CRC’s 2021 drilling program and its acquisition of the working interests in certain joint venture wells held by MIRA in the third quarter of 2021. Production sharing type contracts (PSC-type) at CRC’s Long Beach assets negatively impacted oil production by approximately 1,000 and 3,000 barrels per day in the three and nine months ended September 30, 2021, respectively, compared to the same prior-year period. See Attachment 3 for further information on production.

Realized oil prices, including the effect of settled hedges, increased by $13.27 per barrel from $42.15 per barrel in the third quarter of 2020 to $55.42 per barrel in the third quarter of 2021. For the nine months ended September 30, 2021, realized oil prices, including the effect of settled hedges, increased by $11.16 to $54.43 from $43.27 in the same period of 2020. Realized oil prices were higher in the third quarter of 2021 compared to the same prior-year period as oil demand was bolstered by the re-opening of economies and the easing of mobility restrictions. See Attachment 4 for further information on prices.

Adjusted EBITDAX¹ for the third quarter of 2021 was $242 million and net cash provided by operating activities was $182 million. Internally funded capital invested during the third quarter of 2021 was $51 million. Free cash flow¹ was $131 million. Adjusted EBITDAX¹ for the nine months ended September 30, 2021 was $600 million and net cash provided by operating activities was $456 million. For the first nine months of 2021, internally funded capital invested was $128 million. Free cash flow¹ was $328 million.

The following table provides further detail of CRC’s per BOE operating costs. Energy operating costs consist of purchases of natural gas used to generate electricity, purchased electricity and internal costs to generate electricity used in CRC’s operations. Non-energy operating costs equal total operating costs less energy costs and gas processing costs. Purchases of natural gas to generate steam which is then used in CRC’s steamfloods is included in non-energy operating costs:

Energy operating costs for the three months ended September 30, 2021 were $5.49 per BOE, which was an increase of $1.24 per BOE or 29% from $4.25 per BOE for the same period of 2020. Energy operating costs for the nine months ended September 30, 2021 were $4.97 per BOE, which was an increase of $1.16 per BOE or 30% from $3.81 per BOE for the same period of 2020. This increase was primarily a result of higher prices for purchased natural gas, which CRC used to generate electricity for its operations, and for purchased electricity.

Non-energy operating costs for the three months ended September 30, 2021 were $14.23 per BOE, which was an increase of $4.42 per BOE or 45% from $9.81 per BOE for the same period of 2020. Non-energy operating costs for the nine months ended September 30, 2021 were $13.48 per BOE, which was an increase of $2.98 per BOE or 28% from $10.50 per BOE for the same period of 2020. This increase was primarily a result of higher downhole maintenance activity in 2021 which was deferred in 2020 as we shut-in wells and surface maintenance activity. Additionally, non-energy operating costs increased in 2021 due to higher prices for purchased natural gas which CRC uses to generate steam for its steamfloods. Partially offsetting these increases were lower compensation-related costs from headcount reductions in late 2020 and early 2021 and reduced employee benefits in the second quarter of 2021. CRC’s third quarter 2020 results reflect cost savings for streamlining its operations in response to the industry downturn resulting from the COVID-19 pandemic. Although higher natural gas prices in 2021 increased CRC’s operating costs, higher prices have a net positive effect on its operating results due to higher revenue from sales of this commodity which it also produces.

General and administrative (G&A) expenses were $51 million for the third quarter of 2021, compared to $64 million in the same prior-year period. For the nine months ended September 30, 2021, G&A expenses were $147 million compared to $193 million in the same prior-year period. The decrease in G&A expenses for the three and nine months ended September 30, 2021 reflects lower compensation-related costs as a result of workforce reductions that occurred in the second half of 2020 and the first quarter of 2021, as well as benefit reductions in the second quarter of 2021. The remaining decrease between comparative periods was primarily due to cost saving efforts which resulted in lower spend across a number of cost categories. The decrease was partially offset by non-cash stock-based compensation expense related to awards granted to executives and directors in 2021.

Balance Sheet and Liquidity Update

CRC’s aggregate commitment under the Revolving Credit Facility was $492 million as of September 30, 2021. The borrowing base for the Revolving Credit Facility is redetermined semi-annually and was most recently reaffirmed at $1.2 billion in November 2021.

As of September 30, 2021, CRC had liquidity of $548 million, which consisted of $189 million in unrestricted cash and $359 million of available borrowing capacity under its Revolving Credit Facility after $133 million of outstanding letters of credit.

CRC expects to begin paying income taxes in 2022 if Brent prices remain at current levels for a sustained period. CRC’s tax paying status depends on a number of factors, including but not limited to, commodity prices, the amount and type of CRC’s capital spend, cost structure and activity levels. Potential legislation could change key provisions of the existing U.S. corporate income tax regime and it is uncertain whether some or all of the legislative proposals will be enacted. CRC doesn’t currently expects the proposed modifications will materially impact its income tax liability. CRC believes it has sufficient sources of cash to meet its obligations for the next twelve months.

Operational Update

During the third quarter of 2021, CRC operated an average of two drilling rigs in the San Joaquin Basin and added one drilling rig in the Los Angeles Basin in September. During the quarter, CRC drilled 27 net wells and brought online 22 wells. The San Joaquin basin produced 75,700 net BOE per day. The Los Angeles basin produced 19,300 net BOE per day, the Ventura basin produced 3,600 net BOE per day and the Sacramento basin produced 3,100 net BOE per day.

Conference Call Details

To participate in the conference call scheduled for later today at 1:00 p.m. Eastern Time, please dial (877) 328-5505 (International calls please dial +1 (412) 317-5421) or access via webcast at www.crc.com 15 minutes prior to the scheduled start time to register. Participants may also pre-register for the conference call at https://dpregister.com/sreg/10160036/ed00623af0. A digital replay of the conference call will be archived for approximately 90 days and supplemental slides for the conference call will be available online in the Investor Relations section of www.crc.com.

About California Resources Corporation

California Resources Corporation (CRC) is an independent oil and natural gas company committed to energy transition in the sector. CRC has some of the lowest carbon intensity production in the US and we are focused on maximizing the value of our land, mineral and technical resources for decarbonization by developing carbon capture and storage (CCS) and other emissions reducing projects. For more information about CRC, please visit www.crc.com.

Forward-Looking Statements

This release contains forward-looking statements, including statements relating to the manner in which CRC intends to conduct certain of its activities with respect to developing and implementing carbon capture and storage programs and related efforts based on management’s current plans and expectations. These statements are not promises or guarantees of future conduct, performance or policy and involve risks and uncertainties that could materially affect CRC’s expected results of operations, liquidity, cash flows and business prospects.

Contacts

Joanna Park (Investor Relations)

818-661-3731

Joanna.Park@crc.com

Richard Venn (Media)

818-661-6014

Richard.Venn@crc.com

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