California Resources Corporation Announces Fourth Quarter 2018 and Full Year Results

LOS ANGELES–(BUSINESS WIRE)–California Resources Corporation (NYSE: CRC), an independent
California-based oil and gas exploration and production company, today
reported net income attributable to common stock (CRC net income) of
$346 million, or $7.00 per diluted share, for the fourth quarter of
2018. Adjusted net income1 for the fourth quarter of 2018 was
$26 million, or $0.53 per diluted share. For the full year of 2018, CRC
net income was $328 million, or $6.77 per diluted share. Adjusted net
income1 for the full year of 2018 was $61 million, or $1.27
per diluted share.

Adjusted EBITDAX1 for the fourth quarter of 2018 was $314
million and $1,117 million for the full year of 2018. Cash provided by
operating activities was $68 million for the fourth quarter of 2018 and
$461 million for the full year of 2018, or an 86% increase over the full
year $248 million in 2017.

Quarterly Highlights

  • Produced an average of 136,000 barrels of oil equivalent (BOE) per
    day, an increase of 8% over the prior year period
  • Produced an average of 86,000 barrels of oil per day, an increase of
    8% over the prior year period
  • Generated core adjusted EBITDAX1 of $352 million, which
    excludes $50 million of net settlement payments on commodity
    derivative contracts offset by $12 million related to cash-settled
    stock-based compensation
  • Reported adjusted EBITDAX1 of $314 million and an adjusted
    EBITDAX margin1 of 41%
  • Invested $197 million of total capital, including internally funded
    capital of $174 million with the remainder funded by joint venture
    (JV) partners
  • Drilled 86 wells with internally funded capital and five wells with JV
    capital

Full Year Highlights

  • Produced an average of 132,000 BOE per day, an increase of 2% over the
    prior year
  • Generated core adjusted EBITDAX1 of $1,374 million, which
    excludes $228 million of net settlement payments on commodity
    derivative contracts and $29 million related to cash-settled
    stock-based compensation
  • Reported adjusted EBITDAX1 of $1,117 million and an
    adjusted EBITDAX margin1 of 39%
  • Invested $747 million of total capital, including internally funded
    capital of $641 million with the remainder funded by JV partners
  • Drilled 237 wells with internally funded capital and 106 wells with JV
    capital
  • Implemented $34 million of annualized synergies in the nine months
    following the Elk Hills acquisition, significantly exceeding the
    initial target of $20 million in a shorter time frame than expected

Todd A. Stevens, CRC’s President and Chief Executive Officer, said, “In
2018, our strategic approach focused on capturing the full value of our
portfolio, driving operational excellence, efficiently and effectively
allocating capital, and strengthening the balance sheet. We made good
progress on each priority, increasing the impact of our investment
program and delivering 8% growth in oil production from the fourth
quarter of 2017 to the fourth quarter of 2018. We invested in
value-driven activity to develop our core and growth areas with the
support of strategic JV capital, in addition to successfully resuming
our exploration program. We also harnessed our operating expertise to
generate more synergies than expected around the consolidation of our
flagship Elk Hills asset. We are entering 2019 with a internally funded
capital program of $300 to $385 million, which we will adjust to align
our financial and operating plans to market conditions. We are also in
discussions to obtain additional investments from new and existing JV
partners that could increase our capital program by $100-$150 million to
support a total capital budget of approximately $500 million. This will
allow us to maintain activity and efficiency gains, while retaining a
high degree of operational flexibility. Supported by our diverse asset
base, high level of operating control and dynamic business model, we
expect to continue to deliver meaningful value for our shareholders in
2019 and beyond.”

Fourth Quarter 2018 Results

For the fourth quarter of 2018, CRC net income was $346 million, or
$7.00 per diluted share, compared to a net loss attributable to common
stock (CRC net loss) of $138 million, or $3.23 per diluted share for the
same period of 2017. Adjusted net income1 for the fourth
quarter of 2018 was $26 million, or $0.53 per diluted share, compared
with an adjusted net loss1 of $14 million, or $0.33 per
diluted share for the same prior year period. The 2018 results reflected
increased production and higher realized commodity prices for oil and
natural gas compared to 2017. The fourth quarter of 2018 adjusted net
income1 excluded $295 million of non-cash derivative gains on
commodity contracts, a $6 million non-cash derivative loss from
interest-rate contracts and a net gain of $31 million on debt
repurchases.

Total daily production volumes averaged 136,000 BOE per day for the
fourth quarter of 2018, compared to 126,000 BOE per day for the fourth
quarter of 2017, an increase of 8%, largely driven by the Elk Hills
acquisition in the second quarter of 2018. For the fourth quarter of
2018, oil volumes averaged 86,000 barrels per day, NGL volumes averaged
16,000 barrels per day and gas volumes averaged 204,000 thousand cubic
feet (MCF) per day. Organically, oil production grew over 1,000 barrels
per day from the third quarter of 2018 to the fourth quarter of 2018,
excluding the effects of production sharing-type contracts (PSCs) and
acquisitions.

Realized crude oil prices, including the effect of settled hedges,
increased by $3.05 per barrel for the fourth quarter of 2018 to $59.97
per barrel from the same prior year period. Settled hedges decreased
realized crude oil prices by $6.15 per barrel for the fourth quarter of
2018. Average realized NGL prices registered $43.56 per barrel,
reflecting a realized price that was 64% of Brent prices. Realized
natural gas prices were $3.77 per MCF for the fourth quarter of 2018,
$1.00 higher than the same prior year period. The increase in realized
gas prices resulted from the effects of limited third-party storage and
pipeline constraints.

Production costs for the fourth quarter of 2018 were $233 million, or
$18.61 per BOE, compared to $227 million, or $19.64 per BOE, for the
fourth quarter of 2017. In line with industry practice for reporting
PSCs, CRC reports gross field operating costs, but only CRC’s share of
production volumes, which results in higher production costs per barrel.
Excluding this PSC effect, per unit production costs1 for the
fourth quarter of 2018 would have been $17.44 per BOE compared to $18.31
for the same prior year period. The decrease in production costs per BOE
was primarily driven by higher production between comparative periods,
largely related to the Elk Hills acquisition. Elk Hills’ production
costs are lower than the average CRC-wide production cost per barrel. As
a result, the Elk Hills acquisition had a favorable effect on production
cost per barrel. General and administrative expenses (G&A) were $65
million for the fourth quarter of 2018 compared to $66 million for the
prior year period.

CRC reported taxes other than on income of $29 million for the fourth
quarter of 2018 compared to $33 million for the same prior year period.
Exploration expense was $16 million for the fourth quarter of 2018, $11
million higher than the same prior year period due to exploration dry
holes.

CRC’s internally funded capital investment for the fourth quarter of
2018 totaled $174 million, of which $119 million was directed to
drilling and capital workovers. CRC’s JV partner Benefit Street Partners
LLC (BSP) funded $12 million, which is included in CRC’s consolidated
results, while JV partner Macquarie Infrastructure and Real Assets Inc.
(MIRA) funded an additional $11 million of investment, which is excluded
from our consolidated results.

Cash provided by operating activities was $68 million for the fourth
quarter of 2018, which included interest payments of $157 million.

Full Year 2018 Results

For the full year of 2018, CRC net income was $328 million, or $6.77 per
diluted share, compared to a CRC net loss of $266 million, or $6.26 per
diluted share, for the full year of 2017. Adjusted net income1
for 2018 was $61 million, or $1.27 per diluted share, compared with an
adjusted net loss1 of $187 million, or $4.40 per diluted
share, for 2017. The 2018 results reflected significantly higher
realized prices and higher production, partially offset by increased
production costs, as well as higher G&A and interest expense. The 2018
adjusted net income1 excluded $224 million of non-cash
derivative gains on commodity contracts, a net gain of $57 million on
debt repurchases, a $6 million non-cash derivative loss from interest
rate contracts, a $5 million gain on asset divestitures and a net $13
million charge related to other unusual and infrequent items. The 2017
adjusted net loss1 excluded $78 million of non-cash
derivative losses, $21 million of gains from asset divestitures, a $4
million net gain on debt repurchases and a $26 million net charge from
other unusual and infrequent items.

Total daily production volumes averaged 132,000 BOE per day for the full
year of 2018 compared with 129,000 BOE per day for 2017. This net
increase included a 1,300 barrel per day negative PSC effect on
production volumes due to higher realized prices for 2018. Oil volumes
averaged 82,000 barrels per day, NGL volumes averaged 16,000 barrels per
day and gas volumes averaged 202,000 MCF per day.

Realized crude oil prices, including the effect of settled hedges,
increased $11.36 per barrel to $62.60 per barrel for the full year 2018
from $51.24 per barrel for 2017. Settled hedges reduced 2018 realized
crude oil prices by $7.51 per barrel compared with a $0.23 decrease per
barrel for 2017. Realized NGL prices increased 22% to $43.67 per barrel
for 2018 from $35.76 per barrel for 2017. Realized natural gas prices
increased 12% to $3.00 per MCF for 2018 compared with $2.67 per MCF for
2017.

Production costs for the full year of 2018 were $912 million, or $18.88
per BOE, compared to $876 million, or $18.64 per BOE, for 2017. The Elk
Hills acquisition and cash-settled stock-based compensation added $38
million and $4 million to full year production costs for 2018,
respectively. Synergies captured from the Elk Hills consolidation
reduced production costs by $17 million, partially offset by an increase
in energy costs. Per unit production costs, excluding the effect of PSC
contracts1, were $17.47 and $17.48 per BOE for the full year
of 2018 and 2017, respectively. G&A expenses were $299 million and $249
million for the full year of 2018 and 2017, respectively, with the
difference primarily related to increased equity compensation expense
resulting from CRC’s higher stock price, as well as additional G&A
expense as a result of lower cost recovery following the Elk Hills
acquisition.

Taxes other than on income of $149 million for 2018 were $13 million
higher than 2017, primarily due to higher greenhouse gas (GHG) costs
related to annual price increases, in addition to a reduction in the
number of allowances granted to CRC between periods. CRC reported
exploration expenses of $34 million for the full year of 2018, or $12
million higher than 2017, due to exploration dry holes.

CRC’s internally funded capital investment for 2018 totaled $641
million, of which $445 million was directed to drilling and capital
workovers. CRC’s JV partner BSP funded an additional $49 million, which
is included in CRC’s consolidated results, while JV partner MIRA funded
an additional $57 million of investment, which is excluded from our
consolidated results.

Cash provided by operating activities for the full year of 2018 was $461
million, which included interest payments of $441 million and $98
million of GHG payments related to prior years’ allowances.

Operational Update

CRC operated an average of 10 drilling rigs during the fourth quarter of
2018 with five rigs focused on waterfloods, three on conventional
primary production, one on steamfloods and one on unconventional
production. CRC drilled 90 development wells and one exploration well
with CRC and JV capital (33 steamflood, 38 waterflood, 13 primary and 7
unconventional). Steamfloods and waterfloods have different production
profiles and longer response times than typical conventional wells and,
as a result, the full production contribution may not be experienced in
the same period that the well is drilled. In the San Joaquin basin, CRC
produced approximately 99,000 BOE per day and operated six rigs during
the fourth quarter of 2018. The Los Angeles basin contributed 26,000 BOE
per day of production and operated three rigs directed toward waterflood
projects during the fourth quarter of 2018. The Ventura basin produced
6,000 BOE per day and operated one rig directed toward waterflood
projects during the fourth quarter of 2018. The Sacramento basin
produced 5,000 BOE per day and had no active drilling program during the
fourth quarter of 2018.

2019 Capital Budget

With current oil prices slightly above $60 per barrel Brent, CRC
estimates its 2019 internally funded capital program will range from
$300 million to $385 million, which may be adjusted during the course of
the year depending on commodity prices. CRC is also in discussion to
obtain additional investments from new and existing JVs that could
increase the 2019 capital program by $100 to $150 million, to support a
total capital budget of approximately $500 million. CRC’s internally
funded investments will be largely directed to quick payback projects,
such as primary drilling and capital workovers, and low-risk projects
including waterflood and steamflood investments that maintain base
production.

Balance Sheet Strengthening Update

For the fourth quarter of 2018, CRC repurchased a total of $55 million
in aggregate principal amount of CRC’s outstanding debt for $50 million.
In 2018, CRC repurchased a total of $232 million in aggregate principal
amount of CRC’s outstanding debt for $199 million. The majority of CRC’s
debt repurchases focused on CRC’s Second Lien Notes.

Year-End 2018 Reserves

CRC’s proved reserves totaled 712 million barrels of oil equivalent
(MMBOE), an increase from 618 MMBOE in 2017. Excluding positive price
revisions, proved undeveloped reserves downgraded at management’s
discretion and acquisitions, CRC organically replaced 127% of proved
reserves. CRC achieved this strong organic reserve replacement ratio
through well-executed capital programs in its Buena Vista, South Valley,
Huntington Beach and Long Beach areas of operations. In 2018, total
additions to proved reserves from all sources were 142 MMBOE, resulting
in an all-in reserve replacement ratio of 296%.

Hedging Update

CRC continues to opportunistically implement a hedging program to
protect its cash flow, operating margins and capital program, while
maintaining adequate liquidity. For the first and second quarters of
2019, CRC has protected the downside price risk of approximately 45,000
and 40,000 barrels per day at approximately $66 Brent and $70 Brent per
barrel, respectively. For the third and fourth quarters of 2019, CRC has
protected the downside price risk of approximately 40,000 and 35,000
barrels per day at approximately $73 Brent and $76 Brent per barrel,
respectively. Except for a small portion primarily in the first quarter
of 2019, the 2019 hedges do not contain caps, thereby providing upside
to oil price movements. See Attachment 10 for more details.

1 See Attachment 3 for how CRC calculates and uses the
non-GAAP measures of adjusted EBITDAX, core adjusted EBITDAX, adjusted
EBITDAX margin, free cash flow, production costs (excluding the effects
of PSC-type contracts) and adjusted net income (loss), and for
reconciliations of the foregoing to their nearest GAAP measure.

Conference Call Details

To participate in today’s conference call scheduled for 5:00 P.M.
Eastern Standard Time, either dial (877) 328-5505 (International calls
please dial +1 (412) 317-5421) or access via webcast at www.crc.com,
fifteen minutes prior to the scheduled start time to register.
Participants may also pre-register for the conference call at http://dpregister.com/10127347.
A digital replay of the conference call will be archived for
approximately 30 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 is the largest oil and natural gas
exploration and production company in California on a gross-operated
basis. CRC operates its world-class resource base exclusively within the
State of California, applying complementary and integrated
infrastructure to gather, process and market its production. Using
advanced technology, California Resources Corporation focuses on safely
and responsibly supplying affordable energy for California by
Californians.

Forward-Looking Statements

This presentation contains forward-looking statements that involve risks
and uncertainties that could materially affect CRC’s expected results of
operations, liquidity, cash flows and business prospects. Such
statements include those regarding CRC’s expectations as to its future:

  • financial position, liquidity, cash flows and results of operations
  • business prospects
  • transactions and projects
  • operating costs
  • Value Creation Index (VCI) metrics, which are based on certain
    estimates including future production rates, costs and commodity prices
  • operations and operational results including production, hedging and
    capital investment
  • budgets and maintenance capital requirements
  • reserves
  • type curves
  • expected synergies from acquisitions and joint ventures

Actual results may differ from anticipated results, sometimes
materially, and reported results should not be considered an indication
of future performance. While CRC believes assumptions or bases
underlying its expectations are reasonable and make them in good faith,
they almost always vary from actual results, sometimes materially. CRC
also believes third-party statements it cites are accurate, but has not
independently verified them and does not warrant their accuracy or
completeness. Factors (but not necessarily all the factors) that could
cause results to differ include:

  • commodity price changes
  • debt limitations on CRC’s financial flexibility
  • insufficient cash flow to fund planned investments, debt repurchases
    or changes to CRC’s capital plan
  • inability to enter desirable transactions, including acquisitions,
    asset sales and joint ventures
  • legislative or regulatory changes, including those related to
    drilling, completion, well stimulation, operation, maintenance or
    abandonment of wells or facilities, managing energy, water, land,
    greenhouse gases or other emissions, protection of health, safety and
    the environment, or transportation, marketing and sale of our products
  • joint ventures and acquisitions and CRC’s ability to achieve expected
    synergies
  • the recoverability of resources and unexpected geologic conditions
  • incorrect estimates of reserves and related future cash flows and the
    inability to replace reserves
  • changes in business strategy
  • PSC effects on production and unit production costs
  • effect of stock price on costs associated with incentive compensation
  • insufficient capital, including as a result of lender restrictions,
    unavailability of capital markets or inability to attract potential
    investors
  • effects of hedging transactions
  • equipment, service or labor price inflation or unavailability
  • availability or timing of, or conditions imposed on, permits and
    approvals
  • lower-than-expected production, reserves or resources from development
    projects, joint ventures or acquisitions, or higher-than-expected
    decline rates
  • disruptions due to accidents, mechanical failures, transportation or
    storage constraints, natural disasters, labor difficulties, cyber
    attacks or other catastrophic events
  • factors discussed in “Risk Factors” in CRC’s Annual Report on Form
    10-K available on its website at crc.com.

Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,”
“potential,” “project,” “seek,” “should,” “target, “will” or “would” and
similar words that reflect the prospective nature of events or outcomes
typically identify forward-looking statements. Any forward-looking
statement speaks only as of the date on which such statement is made and
CRC undertakes no obligation to correct or update any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by applicable law.

 
Attachment 1
SUMMARY OF RESULTS        
Fourth Quarter Twelve Months
($ and shares in millions, except per share amounts) 2018 2017 2018 2017
 
Statement of Operations Data:
Revenues and Other
Oil and gas sales (a) $ 658 $ 549 $ 2,590 $ 1,936
Net derivative gain (loss) from commodity contracts 260 (141 ) 1 (90 )
Other revenue (a) 160   47   473   160  
Total revenues and other 1,078   455   3,064   2,006  
 
Costs and Other
Production costs 233 227 912 876
General and administrative expenses 65 66 299 249
Depreciation, depletion and amortization 130 132 502 544
Taxes other than on income 29 33 149 136
Exploration expense 16 5 34 22
Other expenses, net (a) 140   30   399   106  
Total costs and other 613   493   2,295   1,933  
 
Operating Income (Loss) 465 (38 ) 769 73
 
Non-Operating (Loss) Income
Interest and debt expense, net (98 ) (91 ) (379 ) (343 )
Net gain on early extinguishment of debt 31 57 4
Gain on asset divestitures 1 5 21
Other non-operating expenses (7 )   (6 )   (23 )   (17 )  
 
Income (Loss) Before Income Taxes 392 (135 ) 429 (262 )
Income tax        
Net Income (Loss) 392 (135 ) 429 (262 )
Net income attributable to noncontrolling interests (46 )   (3 )   (101 )   (4 )  
Net Income (Loss) Attributable to Common Stock $ 346   $ (138 )   $ 328   $ (266 )  
 
Net income (loss) attributable to common stock per share – basic (b) $ 7.00 $ (3.23 ) $ 6.77 $ (6.26 )
Net income (loss) attributable to common stock per share – diluted $ 7.00 $ (3.23 ) $ 6.77 $ (6.26 )
 
Adjusted net income (loss) $ 26 $ (14 ) $ 61 $ (187 )
Adjusted net income (loss) per share – basic (b) $ 0.53 $ (0.33 ) $ 1.27 $ (4.40 )
Adjusted net income (loss) per share – diluted $ 0.53 $ (0.33 ) $ 1.27 $ (4.40 )
 
Weighted-average common shares outstanding – basic $ 48.6 $ 42.7 $ 47.4 $ 42.5
Weighted-average common shares outstanding – diluted $ 48.6 $ 42.7 $ 47.4 $ 42.5
 
Adjusted EBITDAX $ 314 $ 231 $ 1,117 $ 779
Effective tax rate 0 % 0 % 0 % 0 %
 
(a) We adopted a new revenue recognition standard on January 1, 2018
which required certain sales-related costs to be reported as expense
as opposed to being netted against revenue. The adoption of this
standard does not affect net income. Results for reporting periods
beginning January 1, 2018 are presented under the new accounting
standard while prior periods are not adjusted and continue to be
reported under accounting standards in effect for the applicable
period. Under prior accounting standards, for the three and twelve
months ended December 31, 2018, oil and gas sales would have been
$653 million and $2,568 million, respectively, other revenue would
have been $150 million and $392 million, respectively, and other
expenses, net would have been $125 million and $296 million,
respectively.
 
(b) In calculating Net income (loss) attributable to common stock
per share – basic, income of $6 million and $7 million for the three
and twelve months ended December 31, 2108, respectively, was
allocated to unvested participating securities with the balance of
undistributed earnings allocated to common shares. In calculating
Adjusted net income (loss) per share – basic, none and $1 million
for the three and twelve months ended December 31, 2018,
respectively, was allocated to unvested participating securities
with the balance of undistributed earnings allocated to common
shares. For periods of losses no allocation is made to participating
securities.
 

Contacts

Scott Espenshade (Investor Relations)
818-661-6010
Scott.Espenshade@crc.com

Margita Thompson (Media)
818-661-6005
Margita.Thompson@crc.com

Read full story here

error: Content is protected !!