California Resources Q2 FY26 earnings call CRC

California Resources Corporation significantly expanded its midstream footprint with two key acquisitions. The purchase of the Line 100 pipeline from P66 added 120 miles of crude pipelines and over 1 million barrels of storage capacity. This was followed by the acquisition of Crimson Midstream, a 2,000-mile network of California crude oil pipelines. These strategic moves aim to enhance market access, improve price realizations, diversify cash flows, and drive new efficiencies by connecting CRC's production directly to California's highest value markets. The Crimson acquisition is financially accretive and is pending final PUC approval, expected later this month.

The company demonstrated strong operational execution, with drilling efficiency improving significantly. Days to total depth decreased by approximately 25%, and about 80% of wells drilled year-to-date outperformed their type curve by more than 10%. These gains allowed CRC to reduce its planned 2026 D&C and workover capital by $10 million, redeploying savings into facilities. The company now expects to operate with 5 rigs in California during H2 2026, down from 6, while maintaining production, and anticipates a normalized annual maintenance rig count of 6 rigs for 2027, leading to approximately 5% lower D&C and workover maintenance capital.

CRC achieved a significant milestone in its carbon management strategy by commencing CO2 injection and generating first revenue at California's first commercial-scale CCS project at Elk Hills. The project is currently capturing and injecting approximately 270 tonnes of CO2 per day, with an annualized target of 100,000 tons per year. This operational success is expected to increase engagement with potential partners and emitters, while the company tracks the CPUC's Reliable and Clean Power Procurement Program (RCPPP) as a potential market for natural gas with CCS, identifying a near-term opportunity of 2.4 gigawatts in the Central Valley.

In partnership with Beacon data centers, CRC is advancing the Golden Valley Technology Hub, a proposed 275-megawatt data center campus adjacent to Elk Hills. This behind-the-meter design leverages CRC's existing infrastructure and firm power, aiming to minimize power and water usage through closed-loop cooling. The project has submitted a conditional use permit, with environmental review expected later this year. This initiative positions CRC to meet the rapidly growing demand for power and AI from hyperscale data center operators, with Beacon funding early-stage development.

California Resources Corporation is re-evaluating its strategy for the Uinta assets, classifying them as noncore. While the company is currently drilling 4 wells in the region ahead of schedule and below cost, the Uinta position (100,000 acres) is characterized by higher capital intensity, higher breakevens, lower crude quality, higher transportation and operating costs, and steeper declines compared to its California assets. Management does not foresee allocating significant long-term capital to Uinta and plans to maximize the value of the asset going forward^⏳, indicating a potential divestiture.

The company maintained a strong balance sheet, operating at approximately 1x leverage with no meaningful debt maturities for the next 7 years and an undrawn revolving credit facility. CRC proactively refinanced its 2029 senior notes with new 2035 notes, extending its weighted average debt maturity from 5.5 to 8 years, reducing annual expenses by $5.5 million, and achieving the lowest credit spread in its history. This move enhances financial flexibility, supporting a balanced capital allocation framework that prioritizes high-return organic growth, strategic opportunities, and shareholder returns through dividends and opportunistic buybacks.

CRC has substantially completed the Berry integration, exceeding its 2026 synergy target by over 100% six months early, resulting in approximately $103 million of annualized savings. The company has delivered about $400 million of its broader target of up to $470 million in cumulative synergies and structural cost reductions through 2028, representing approximately 85% of the total. The focus is now shifting from integration to optimizing the combined footprint, including infrastructure consolidation, NGL recovery, oil blending, and transportation, which are expected to drive further structural improvements in the business economics.