DEF 14A: California Resources Corporation Reports Strong 2023 Financial Results and Advances Carbon Management Business

California Resources Corporation (CRC) achieved robust financial results in 2023, driven by strong performance in its conventional energy business and advancements in its carbon management business, Carbon TerraVault (CTV).

Summary

• California Resources Corporation (CRC) had a strong financial year in 2023.
• The company generated $653 million in net cash from operating activities and $468 million in free cash flow.
• Net income was $564 million, or $7.78 per diluted share, while adjusted net income was $372 million, or $5.13 per diluted share.
• Average net production was 86 thousand barrels of oil equivalent per day (MBoe/d), with oil production averaging 52 thousand barrels of oil per day (MBo/d).
• CRC expects approximately $65 million of sustainable annual savings in non-energy operating costs and G&A expenses.
• The company returned $279 million to shareholders through share repurchases, debt repurchases, and dividends.
• CRC is expecting the EPAs issuance of California's first Class VI well permits for its 26R reservoir later this year, which will allow it to move forward with projects totaling up to 655 thousand metric tons per year (KMTPA) of carbon dioxide (CO 2 ) injection.
• The company advanced carbon management EPA Class VI permit applications totaling a combined 51 million metric tons (MMT) of CO 2 storage potential.
• New Carbon Development Management Agreements and projects totaling 860 KMTPA were announced.
• CRC eliminated 269 gas venting pneumatics and delivered more than 113 million barrels of water for agricultural use.
• More than 600 idle wells were abandoned and remediated.
• The company achieved its second-best total recordable incident rate (TRIR) in its history.
• The company's annual meeting of stockholders will be held on May 3, 2024.
• The company announced a pending merger with Aera Energy, LLC, in February 2024, with the targeted deal close in the second half of 2024.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for California Resources Corporation, highlighting strong financial performance, strategic advancements in carbon management, and a commitment to shareholder returns. The pending merger with Aera Energy further enhances the company's position in the California energy market.

Positives

• CRC achieved robust financial results in 2023, outperforming nearly all its peers, as well as the S&P 500 and the S&P Exploration and Production Index (XOP).
• The company is leading the energy transition in California through Carbon TerraVault (CTV).
• CRC is uniquely positioned near key markets with high-quality conventional energy assets and a growing carbon management business.
• The company took steps to enhance future profitability and reduce general and administrative (G&A) and non-energy operating costs.
• Returning significant cash to shareholders is paramount to the company's investment proposition.
• The company has five active greenfield and brownfield CCS projects underway today.
• The company achieved several key targets related to Environmental, Social and Governance initiatives in 2023.
• The company has an active and engaged Board of Directors and frequent dialogue with its shareholders.
• The company added new leadership to key roles within CRC, including the CEO and CFO.

Risks

• The letter and the Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects.
• Readers are urged to carefully review and consider the various disclosures made in the Form 10-K and in other documents filed from time to time with the SEC that disclose risks and uncertainties that may affect the business.

Future Outlook

With the targeted deal close in the second half of 2024, CRC will be California's leading energy company with the country's most advanced carbon management platform.

Management Comments

• At all levels, we continue to prove that CRC is a different kind of energy company.
• We are leading the energy transition in California and, through CTV, we are providing innovative solutions to help California achieve its ambitious decarbonization goals.
• Returning significant cash to shareholders is paramount to our investment proposition.
• We are very encouraged by the markets interest in our carbon management solutions and look forward to reporting on our progress throughout the year.
• With the targeted deal close in the second half of 2024, CRC will be California's leading energy company with the country's most advanced carbon management platform, in our view.

Industry Context

CRC's focus on carbon management and energy transition aligns with the growing global emphasis on decarbonization and sustainable energy solutions. The merger with Aera Energy, LLC, positions CRC as a leader in the California energy market.

Comparison to Industry Standards

• The document mentions that CRC's common stock outperformed nearly all its peers, as well as the S&P 500 and the S&P Exploration and Production Index (XOP).
• The company's Full-Scope 2045 Net Zero goal places CRC among a select few industry peers to include Scope 3 GHG emissions in their Net Zero goal.
• The 2045 goal targets a timeframe five years sooner than many other companies' Net Zero goals and aligns CRC with the State of California's 2045 net zero ambitions and is sooner than the 2050 goal set out by the Paris Agreement.

Management Changes

Corporate Governance

Related Party Transactions

• There are no transactions or relationships with related persons since the beginning of our most recently completed fiscal year that are required to be disclosed.

Stakeholder Impact

• The company returned $279 million to shareholders through share repurchases, debt repurchases, and dividends.
• The company is committed to the transition in the energy sector.
• The company delivered more than 113 million barrels of water for agricultural use.
• The company abandoned and remediated more than 600 idle wells across the Company's portfolio, exceeding stringent local and state requirements.
• The company achieved its second-best total recordable incident rate (TRIR) in the Company's history or CRC's best since the 2020 COVID period.

Next Steps

• The company will hold its 2024 annual meeting of stockholders on May 3, 2024.
• The company is targeting a deal close for the merger with Aera Energy, LLC, in the second half of 2024.
• The company looks forward to reporting on its progress throughout the year.

Key Dates

Keywords

Carbon TerraVault, Carbon Management, Shareholder Returns, Energy Transition, Free Cash Flow, Net Zero, Sustainability, Decarbonization, Production, Merger, CRC, Aera