California Resources Q4 FY25 earnings call CRC

California Resources Corporation delivered record financial performance in 2025, achieving nearly $1.25 billion in adjusted EBITDAX and $543 million in free cash flow, marking the highest levels since 2021. Net production saw a significant 25% year-over-year increase, reaching 138,000 barrels of oil equivalent per day, driven by consistent capital execution and value-accretive transactions. The company demonstrated a strong commitment to shareholder returns, distributing approximately 94% of its free cash flow through dividends and share repurchases.

The company's conventional reservoir base is highlighted as a core strength, characterized by low natural declines, high recovery factors, and predictable performance, enabling sustained production with reduced capital intensity and risk compared to shale-focused peers. CRC's expanded 2P disclosure now stands at nearly 1.2 billion barrels of oil equivalent, providing over 20 years of development inventory at current production rates. The Belridge field, in particular, is noted for its similar recovery potential to Elk Hills but at an earlier development stage, underscoring the strategic value of the Aera merger.

Regulatory progress has been significant, with the resumption of new drill permitting and a steady flow of approvals through the system. This improved visibility has allowed CRC to secure the majority of permits required for its 2026 capital program, enhancing flexibility in planning and high-grading capital across its portfolio. The company has consequently returned to drilling new wells in 2026, positioning it to stabilize production and contribute to California's energy affordability objectives.

Carbon TerraVault, CRC's carbon capture and storage platform, has transitioned from concept to execution. Construction of California's first commercial-scale CCS project at Elk Hills is complete, and the facility is now in the commissioning and testing phase. The company has successfully captured CO2 from its gas processing plant and is awaiting final EPA approval to commence injection. Furthermore, CRC has filed for CTV II, an adjacent project that would add another 27 million tons of CO2 storage capacity, advancing a hub concept in the Elk Hills area.

CRC is actively advancing its integrated power platform, engaging in discussions with multiple high-quality counterparties for its power-to-CCS offering. The company identifies a compelling demand signal from the second wave of data center growth, particularly for inference and edge compute, which requires proximity to users. Leveraging its Elk Hills power plant, permitted CO2 storage, and a 'Land Now' concept (permitted and powered land) in partnership with a leading data center developer, CRC aims to provide reliable, low-carbon power solutions for hyperscalers in California.

The 2026 capital program is strategically designed to reduce the corporate decline rate to approximately 2%, effectively maintaining flat production quarter-over-quarter. This program, with a development cost of $9 per barrel of oil equivalent, is expected to generate a nearly 4x multiple on invested capital and mid-40% returns at $65 Brent. The integration of Berry assets has significantly enhanced capital efficiency, allowing CRC to absorb an additional 25,000 boe/d of production without increasing its capital intensity or rig count, demonstrating a structural improvement in its cost base.

Acquired through the Berry merger, the Uinta Basin asset comprises 100,000 contiguous net acres with promising horizontal drilling results in the Uteland Butte and potential in other benches like Castle Peak and Wasatch. While considered a high-quality option, the asset must demonstrate full-cycle returns competitive with CRC's California operations, which currently offer a 4x multiple on invested capital, to scale up development. The company is currently optimizing the asset and exploring various value-creation paths, including development or partnership.

CRC is progressing with the optimization of its 90-acre Huntington Beach property, located in a high-value area. The asset is cash flow positive, with current production funding plugging and abandonment activities. The company anticipates formal entitlement review in late 2026, followed by approximately two years of review by the Coastal Commission. CRC aims to maximize shareholder value from this asset, with significant value creation opportunities expected in a few years following remediation and potential redevelopment.