California Resources Corp Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was an exceptional year with cost reductions and key targets met. Announced a deal with National Cement validating the carbon terra vault model.
• Conventional oil and gas has a proven cash flow track record, and post-era merger, it's the largest in California with scale unlocking synergies.
• Carbon management business is growing with first EPA class six permits and near 9 million metric tons of projects under consideration. New high-growth opportunities in power and carbon management include pursuing data center agreements.
• Over 70% of era merger-related synergies captured, improving 2025 cost structure. The National Cement deal is a first-of-its-kind brownfield project backed by $500 million DOE funding, aligning with California's decarbonization goals.

Segment Performance

• Conventional Oil and Gas: In 2024, net production was 141,000 BOE per day, realized oil prices at 99% of Brent, adjusted EBITDAX $316 million, and free cash flow $118 million. For 2025, drilling, completions, and workover capital is expected to be $165-$180 million, with annual net production estimated at ~135,000 BOE per day, oil comprising nearly 80% of total. Post-era merger, it's California's largest oil and gas producer with quality reserves.
• Carbon Management: Received the nation's first EPA class six permits, with plans to break ground on California's first TCS project at Elk Hills in Q2 2025 and first injection later that year. Nearly 9 million metric tons per annum of carbon management projects are under consideration, including a deal with National Cement.
• Power: Resource adequacy power capacity payments will increase 50% to $150 million in 2025, with assessments ongoing for new power purchase agreements for spare power capacity.

Guidance

• 2025 adjusted EBITDAX is expected $1.1-$1.2 billion at $73 per barrel Brent.
• 2025 drilling, completions, and workover capital is $165-$180 million, annual net production ~135,000 BOE per day.
• Resource adequacy power capacity payments increase 50% to $150 million.
• Over 70% of 2025 oil hedged at $67/bbl, over 60% of 2025 fuel gas hedged at $3.95 per MMBtu.
• Buyback program with over $550 million remaining.

Risks

• Uncertainty around CO2 pipeline regulations and moratoriums, impacting carbon management project timelines.
• Dependence on regulatory approvals for permits and projects, which could delay progress.
• Commodity price fluctuations despite hedging, affecting cash flow.

Question and Answer

Q: Stock underperforming peers, buyback plans?

A: Believes stock undervalued, buyback program with over $550M remaining, lockup details discussed.

Q: Data center front?

A: Talking to multiple parties, strategic infrastructure advantage, behind-the-meter solution at Elk Hills, looking for long-term PPA.

Q: PPA development and power redundancy?

A: Baseload plant, standby agreements, import/export capacity, long-term value focus.

Q: MOU with National Cement milestones?

A: National Cement working on engineering, pre-feed study, CO2 pipeline regulations and moratoriums a key factor.

Q: CTV JV with Brookfield delay?

A: Timing around project startup, long-term partnership, working on permits and projects.

Q: Cal Capture project spend?

A: Critical to unlocking business opportunity, FEED study ongoing, focus on cost and efficiency.

Q: Oil and gas CapEx trajectory?

A: Capital efficiency from era merger, high-graded workovers and side tracks, second rig addition planned.

Q: Free cash flow return to shareholders in 2025?

A: Intent to return capital, combination of dividend and buybacks, strong balance sheet.