Message From The CEO

California Resources Corporation (CRC) is a different kind of energy company. We are committed to providing innovative energy solutions that will continue to deliver the reliable energy Californians need while finding pathways to advance California’s decarbonization initiatives. During 2023 we made remarkable progress to advance our business objectives. CRC has a leading market position with a clear path to address today’s complex energy challenges and create real value for our shareholders. 

We accomplished a lot in 2023: 

• Achieved strong financial, operating and safety results. We had strong net income, improved capital efficiency, low reservoir declines, and delivered sound capital discipline. Net income was $564 million, or $7.78 per diluted share, net cash provided by operating activities was $653 million and free cash flow¹ was $468 million. Results reflected total net production of 86 thousand barrels of oil equivalent per day (MBoe/d), of which 60% was oil. We also achieved the second-best total recordable incident rate in our Company’s history, highlighting our strong safety culture. 
  
  
• Delivered robust returns to shareholders. We funded our capital projects with less than half of our annual cash flow. The other half was returned to shareholders, approximately $225 million in 2023, and approximately $760 million over the last three years. 
  
  
• Maintained premier balance sheet. CRC has an exceptional capital structure; it’s the financial foundation for all that we do. We reduced our debt by $55 million during 2023, exiting the year with a nearly zero leverage ratio¹. 
  
  
• Enhanced future profitability. We implemented $65 million in annual, sustainable cost savings. Our talented workforce found additional safe and innovative ways to streamline our processes and strengthen our margins. This tremendous effort will pay dividends in 2024 and beyond. 
  
  
• Advanced California’s decarbonization efforts. Recent progress has allowed us to scale our carbon management business, which we refer to as Carbon TerraVault (CTV). Through CTV, we have entered into several Carbon Dioxide Management Agreements (CDMA)² to date allowing for the capture and sequestration of nearly 900,000 metric tons of carbon dioxide (CO₂) per year. Our California Direct Air Capture (DAC) Hub was selected to receive nearly $12 million in funding from the U.S. Department of Energy (DOE), highlighting federal support for the consortium of organizations across industry, technology, academia, national labs, community, government, and labor. We are proud to be California’s carbon capture and storage (CCS) leader.

CRC is “all in” for advancing the energy transition and providing lower carbon solutions to California. As we continue to help the state achieve its carbon neutrality goal, reality tells us this won’t happen overnight. Today, California tops the list of the largest U.S. economies, consuming nearly 1.5 million barrels of oil every day³. With less than 25% of this oil produced in our Golden state³, demand is met with more expensive, higher-carbon intensive foreign barrels that are not produced according to the leading environmental regulations that we adhere to. CRC is also California’s largest natural gas producer providing a local option that competes with imported volumes from other parts of the U.S. 

During the year, our CTV business has grown significantly as we expanded our CO₂ storage capacity in proximity to major California markets by 36%. We are anticipating reaching important milestones, including the Environmental Protection Agency’s (EPA) release of California’s first final Class VI well permits for the 26R reservoir, located within the CTV I CCS vault at the Elk Hills Field. With these anticipated permits, we remain on track for the first CO₂ injection by year end 2025. Today, California stakeholders and market participants are showing tremendous interest in our growing carbon management business and solutions for hard-to-abate industries. We look forward to reporting on our progress in the coming months. 

In early 2024, we announced a transaction to merge with Aera Energy, LLC. The transaction, which is expected to close in the second half of 2024, will enhance our shareholder returns, strengthen our conventional energy business, and continue to provide local, low carbon intensity production to fuel California. Importantly, it also expands our CO₂ sequestration pore space portfolio and helps decarbonize high emissions sectors of the Golden State’s economy. This is a win for all stakeholders. We are confident in our ability to integrate Aera’s assets following closing and expect to capture significant operational synergies to create a more durable new energy business. 

As we look to the remainder of 2024, we are focused on maximizing our free cash flow through continued discipline of our capital investments. We intend to run at one rig for the remainder of the year. This will allow us to return significant cash to shareholders through our dividends and recently expanded share repurchase program, while continuing to further reduce debt. We understand the importance of sustainable returns to shareholders and our commitment to a strong balance sheet is unwavering. 

It is an honor and privilege to work side-by-side each day with the incredibly talented and driven team at CRC. I am confident that our workforce is aligned with our business strategy. We are executing our plan to generate long-term value for shareholders while providing needed solutions to meet California’s present and future energy needs.   

Sincerely, 

Francisco J. Leon
President and Chief Executive Officer
California Resources Corporation

 

¹ Represents a non-GAAP measure. For all historical non-GAAP financial measures please see the Investor Relations page at www.crc.com for a reconciliation to the nearest GAAP equivalent and other additional information. Free cash flow is equal to net cash provided (used) by operating activities less capital investments. 
² The CDMA frames the contractual terms between parties by outlining the material economics and terms of the project and includes conditions precedent to close. The CDMA provides a path for the parties to reach final definitive documents and final investment decision. 
³ Source: CalGEM