10-Q 1 crc-20240331.htm 10-Q crc-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
Commission file number 001-36478
California Resources Corporation
(Exact name of registrant as specified in its charter)
Delaware46-5670947
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
1 World Trade Center, Suite 1500
Long Beach, California 90831
(Address of principal executive offices) (Zip Code)

(888) 848-4754
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common StockCRCNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes    No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes    No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated FilerAccelerated FilerNon-Accelerated Filer
Smaller Reporting CompanyEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes    No



Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes    No   

Indicate the number of shares outstanding for each of the issuer's classes of common stock, as of the latest practicable date.
The number of shares of common stock outstanding as of March 31, 2024 was 68,530,744.



California Resources Corporation and Subsidiaries

Table of Contents
Page
Part I 
Item 1
Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive (Loss) Income
Condensed Consolidated Statements of Stockholders' Equity
Condensed Consolidated Statements of Cash Flows
Notes to the Condensed Consolidated Financial Statements
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Pending Aera Merger
Business Environment and Industry Outlook
Regulatory Updates
Results of Oil and Gas Operations
Statements of Operations Analysis
Liquidity and Capital Resources
Divestitures and Acquisitions
Lawsuits, Claims, Commitments and Contingencies
Critical Accounting Estimates and Significant Accounting and Disclosure Changes
Forward-Looking Statements
Item 3
Quantitative and Qualitative Disclosures About Market Risk
Item 4
Controls and Procedures
Part II
Item 1
Legal Proceedings
Item 1A
Risk Factors
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
Item 5
Other Disclosures
Item 6
Exhibits

1


GLOSSARY AND SELECTED ABBREVIATIONS

The following are abbreviations and definitions of certain terms used within this Form 10-Q:

ABR - Alternate base rate.
ASC - Accounting Standards Codification.
ARO - Asset retirement obligation.
Bbl - Barrel.
Bbl/d - Barrels per day.
Bcf - Billion cubic feet.
Bcfe - Billion cubic feet of natural gas equivalent using the ratio of one barrel of oil, condensate, or NGLs converted to six thousand cubic feet of natural gas.
Boe - We convert natural gas volumes to crude oil equivalents using a ratio of six thousand cubic feet (Mcf) to one barrel of crude oil equivalent based on energy content. This is a widely used conversion method in the oil and natural gas industry.
Boe/d - Barrel of oil equivalent per day.
Btu - British thermal unit.
CalGEM - California Geologic Energy Management Division.
CCS - Carbon capture and storage.
CDMA - Carbon Dioxide Management Agreement.
CEQA - California Environmental Quality Act.
CO2 - Carbon dioxide.
DAC - Direct air capture.
DD&A - Depletion, depreciation, and amortization.
EOR - Enhanced oil recovery.
EPA - United States Environmental Protection Agency.
ESG - Environmental, social and governance.
E&P - Exploration and production.
Full-Scope Net Zero - Achieving permanent storage of captured or removed carbon emissions in a volume equal to all of our scope 1, 2 and 3 emissions by 2045.
GAAP - United States Generally Accepted Accounting Principles.
G&A - General and administrative expenses.
GHG - Greenhouse gases.
JV - Joint venture.
LCFS - Low Carbon Fuel Standard.
LIBOR - London Interbank Offered Rate.
MBbl - One thousand barrels of crude oil, condensate or NGLs.
MBbl/d - One thousand barrels per day.
MBoe/d - One thousand barrels of oil equivalent per day.
MBw/d - One thousand barrels of water per day
Mcf - One thousand cubic feet of natural gas equivalent, with liquids converted to an equivalent volume of natural gas using the ratio of one barrel of oil to six thousand cubic feet of natural gas.
MHp - One thousand horsepower.
MMBbl - One million barrels of crude oil, condensate or NGLs.
MMBoe - One million barrels of oil equivalent.
MMBtu - One million British thermal units.
MMcf/d - One million cubic feet of natural gas per day.
MMT - Million metric tons.
MMTPA - Million metric tons per annum.
MW - Megawatts of power.
NGLs - Natural gas liquids. Hydrocarbons found in natural gas that may be extracted as purity products such as ethane, propane, isobutane and normal butane, and natural gasoline.
NYMEX - The New York Mercantile Exchange.
OCTG - Oil country tubular goods.
Oil spill prevention rate - Calculated as total Boe less net barrels lost divided by total Boe.
OPEC - Organization of the Petroleum Exporting Countries.
OPEC+ - OPEC together with Russia and certain other producing countries.
PHMSA - Pipeline and Hazardous Materials Safety Administration.
2


Proved developed reserves - Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.
Proved reserves - The estimated quantities of natural gas, NGLs, and oil that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic conditions, operating methods and government regulations.
Proved undeveloped reserves - Proved reserves that are expected to be recovered from new wells on undrilled acreage that are reasonably certain of production when drilled or from existing wells where a relatively major expenditure is required for recompletion.
PSCs - Production-sharing contracts.
PV-10 - Non-GAAP financial measure and represents the year-end present value of estimated future cash flows from proved oil and natural gas reserves, less future development and operating costs, discounted at 10% per annum and using SEC Prices. PV-10 facilitates the comparisons to other companies as it is not dependent on the tax-paying status of the entity.
Scope 1 emissions - Our direct emissions.
Scope 2 emissions - Indirect emissions from energy that we use (e.g., electricity, heat, steam, cooling) that is produced by others.
Scope 3 emissions - Indirect emissions from upstream and downstream processing and use of our products.
SDWA - Safe Drinking Water Act.
SEC - United States Securities and Exchange Commission.
SEC Prices - The unweighted arithmetic average of the first day-of-the-month price for each month within the year used to determine estimated volumes and cash flows for our proved reserves.
SOFR - Secured overnight financing rate as administered by the Federal Reserve Bank of New York.
Standardized measure - The year-end present value of after-tax estimated future cash flows from proved oil and natural gas reserves, less future development and operating costs, discounted at 10% per annum and using SEC Prices. Standardized measure is prescribed by the SEC as an industry standard asset value measure to compare reserves with consistent pricing, costs and discount assumptions.
TRIR - Total Recordable Incident Rate calculated as recordable incidents per 200,000 hours for all workers (employees and contractors).
Working interest - The right granted to a lessee of a property to explore for and to produce and own oil, natural gas or other minerals in-place. A working interest owner bears the cost of development and operations of the property.
WTI - West Texas Intermediate.
3


PART I    FINANCIAL INFORMATION
 

Item 1Financial Statements (unaudited)

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of March 31, 2024 and December 31, 2023
(in millions, except share data)

March 31,December 31,
 20242023
CURRENT ASSETS  
Cash and cash equivalents$403 $496 
Trade receivables192 216 
Inventories70 72 
Assets held for sale13 13 
Receivable from affiliate66 19 
Other current assets, net95 113 
Total current assets839 929 
PROPERTY, PLANT AND EQUIPMENT
3,514 3,437 
Accumulated depreciation, depletion and amortization
(721)(667)
Total property, plant and equipment, net2,793 2,770 
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY16 19 
DEFERRED INCOME TAXES
139 132 
OTHER NONCURRENT ASSETS123 148 
TOTAL ASSETS$3,910 $3,998 
CURRENT LIABILITIES  
Accounts payable251 245 
Liabilities associated with assets held for sale5 5 
Accrued liabilities338 366 
Total current liabilities594 616 
NONCURRENT LIABILITIES
Long-term debt, net541 540 
Asset retirement obligations429 422 
Other long-term liabilities253 201 
STOCKHOLDERS' EQUITY  
Preferred stock (20,000,000 shares authorized at $0.01 par value) no shares outstanding at March 31, 2024 and December 31, 2023
  
Common stock (200,000,000 shares authorized at $0.01 par value) (84,460,423 and 83,557,800 shares issued; 68,530,744 and 68,693,885 shares outstanding at March 31, 2024 and December 31, 2023)
1 1 
Treasury stock (15,929,679 shares held at cost at March 31, 2024 and 14,863,915 shares held at cost at December 31, 2023)
(662)(604)
Additional paid-in capital1,295 1,329 
Retained earnings1,387 1,419 
Accumulated other comprehensive income72 74 
Total stockholders' equity2,093 2,219 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$3,910 $3,998 



The accompanying notes are an integral part of these condensed consolidated financial statements.


4


CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three months ended March 31, 2024 and 2023
(dollars in millions, except share and per share data; shares in millions)
Three months ended
March 31,
 20242023
REVENUES  
Oil, natural gas and NGL sales$429 $715 
Net (loss) gain from commodity derivatives
(71)42 
Revenue from marketing of purchased commodities
74 187 
Electricity sales15 68 
Interest and other revenue
7 12 
Total operating revenues454 1,024 
OPERATING EXPENSES  
Operating costs176 254 
General and administrative expenses57 65 
Depreciation, depletion and amortization53 58 
Asset impairment 3 
Taxes other than on income38 42 
Exploration expense1 1 
Costs related to marketing of purchased commodities
54 124 
Electricity generation expenses8 49 
Transportation costs20 17 
Accretion expense12 12 
Carbon management business expenses
8 5 
Other operating expenses, net37 8 
Total operating expenses464 638 
Gain on asset divestitures
6 7 
OPERATING (LOSS) INCOME
(4)393 
NON-OPERATING (EXPENSES) INCOME
Interest and debt expense(13)(14)
Loss from investment in unconsolidated subsidiary(3)(2)
Other non-operating income (loss)
1 (1)
(LOSS) INCOME BEFORE INCOME TAXES
(19)376 
Income tax benefit (provision)
9 (75)
NET (LOSS) INCOME
$(10)$301 
Net (loss) income per share
Basic $(0.14)$4.22 
Diluted$(0.14)$4.09 
Weighted-average common shares outstanding
Basic69.0 71.3 
Diluted69.0 73.5 

The accompanying notes are an integral part of these condensed consolidated financial statements.


5



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive (Loss) Income
For the three months ended March 31, 2024 and 2023
(in millions)

Three months ended
March 31,
 20242023
Net (loss) income
$(10)$301 
Other comprehensive income:
Amortization of prior service cost credit included in net periodic benefit cost, net of tax(a)
(2) 
Comprehensive (loss) income attributable to common stock
$(12)$301 
(a) Tax effects of the amortization of prior service cost credit were insignificant for the three months ended March 31, 2024.
The accompanying notes are an integral part of these condensed consolidated financial statements.


6



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
For the three months ended March 31, 2024 and 2023
(in millions)

Three months ended March 31, 2024
 Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other
Comprehensive
Income
Total
Equity
Balance, December 31, 2023
$1 $(604)$1,329 $1,419 $74 $2,219 
Net loss
— — — (10)— (10)
Share-based compensation— — 7 — — 7 
Repurchases of common stock— (58)— — — (58)
Cash dividend ($0.31 per share)
— — — (22)— (22)
Shares cancelled for taxes— — (41)— — (41)
Other comprehensive income, net of tax
— — — — (2)(2)
Balance, March 31, 2024
$1 $(662)$1,295 $1,387 $72 $2,093 
Three months ended March 31, 2023
 Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other
Comprehensive
Income
Total
Equity
Balance, December 31, 2022
$1 $(461)$1,305 $938 $81 $1,864 
Net income— — — 301 — 301 
Share-based compensation— — 7 — — 7 
Repurchases of common stock— (59)— — — (59)
Cash dividend ($0.2825 per share)
— — — (20)— (20)
Shares cancelled for taxes— — (1)— — (1)
Balance, March 31, 2023
$1 $(520)$1,311 $1,219 $81 $2,092 



The accompanying notes are an integral part of these condensed consolidated financial statements.


7



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2024 and 2023
(in millions)
Three months ended March 31,
 20242023
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income
$(10)$301 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and amortization53 58 
Deferred income tax (benefit) provision
(9)47 
Asset impairment 3 
Net loss (gain) from commodity derivatives
72 (42)
Net payments on settled commodity derivatives(14)(65)
Gain on asset divestitures
(6)(7)
Other non-cash charges to income, net6 21 
Changes in operating assets and liabilities, net(5)(6)
Net cash provided by operating activities87 310 
CASH FLOW FROM INVESTING ACTIVITIES
Capital investments(54)(47)
Changes in accrued capital investments(4)(13)
Proceeds from asset divestitures, net10  
Other, net(1)(1)
Net cash used in investing activities(49)(61)
CASH FLOW FROM FINANCING ACTIVITIES
Repurchases of common stock(58)(59)
Common stock dividends(21)(20)
Payments on equity-settled awards
(4) 
Issuance of common stock1 1 
Bridge loan commitment and debt amendment costs
(8) 
Shares cancelled for taxes(41)(1)
Net cash used in financing activities(131)(79)
(Decrease) increase in cash and cash equivalents
(93)170 
Cash and cash equivalents—beginning of period496 307 
Cash and cash equivalents—end of period$403 $477 

The accompanying notes are an integral part of these condensed consolidated financial statements.


8



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
March 31, 2024

NOTE 1    BASIS OF PRESENTATION

We are an independent oil and natural gas exploration and production and carbon management company operating properties exclusively within California. We are committed to energy transition and have some of the lowest carbon intensity production in the United States. We are in the early stages of permitting several carbon capture and storage (CCS) projects in California. Our carbon management business, which we refer to as Carbon TerraVault, is expected to build, install, operate and maintain CO2 capture equipment, transportation assets and storage facilities in California. In August 2022, we entered into a joint venture with BGTF Sierra Aggregator LLC (Brookfield) to pursue carbon management and storage activities (Carbon TerraVault JV). See Note 3 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV.

Except when the context otherwise requires or where otherwise indicated, all references to ‘‘CRC,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to California Resources Corporation and its subsidiaries.

In the opinion of our management, the accompanying unaudited financial statements contain all adjustments necessary to fairly present our financial position, results of operations, comprehensive income, equity and cash flows for all periods presented. We have eliminated all significant intercompany transactions and accounts. We account for our share of oil and natural gas producing activities, in which we have a direct working interest, by reporting our proportionate share of assets, liabilities, revenues, costs and cash flows within the relevant lines on our condensed consolidated financial statements. In applying the equity method of accounting, our investment in an unconsolidated subsidiary (Carbon TerraVault JV HoldCo, LLC) was initially recognized at cost and then adjusted for our proportionate share of income or loss in addition to contributions and distributions.

We have prepared this report in accordance with generally accepted accounting principles (GAAP) in the United States and the rules and regulations of the U.S. Securities and Exchange Commission applicable to interim financial information which permit the omission of certain disclosures to the extent they have not changed materially since the latest annual financial statements. We believe our disclosures are adequate to make the information presented not misleading.

The preparation of financial statements in conformity with GAAP requires management to select appropriate accounting policies and make informed estimates and judgments regarding certain types of financial statement balances and disclosures. Actual results could differ. Management believes that these estimates and judgments provide a reasonable basis for the fair presentation of our condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report).

The carrying amounts of cash, cash equivalents and on-balance sheet financial instruments, other than debt, approximate fair value. Refer to Note 4 Debt for the fair value of our debt.

Certain prior period balances related to natural gas liquid (NGL) marketing activities have been reclassified to conform to our 2024 presentation. For the three months ended March 31, 2023, we reclassified $3 million related to NGL storage activities from other revenue to revenue from marketing of purchased commodities on our condensed consolidated statement of operations.

NOTE 2    PENDING AERA MERGER

On February 7, 2024, we entered into a definitive agreement and plan of merger (Merger Agreement) to combine with Aera Energy, LLC (Aera) in an all-stock transaction (Aera Merger) with an effective date of January 1, 2024. Aera is a leading operator of mature fields in California, primarily in the San Joaquin and Ventura basins, with high oil-weighted production.

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Pursuant to the Merger Agreement, we have agreed to issue 21,170,357 shares of common stock (subject to customary adjustments in the event of stock splits, dividend paid in stock and similar items) plus an additional number of shares determined by reference to the dividends declared by us having a record date between the effective date and closing as more fully described in the Merger Agreement. Upon closing, Aera's $950 million outstanding long-term debt will become due as a result of a change in control provision within their legacy debt agreement. We expect to repay a significant portion of this indebtedness with cash on hand and borrowings under our Revolving Credit Facility. We intend to refinance the balance through one or more debt capital markets transactions and, only to the extent necessary, borrowings under a bridge loan facility provided by Citigroup Global Markets, Inc. (the Bank). Under the terms of our debt commitment letter with the Bank, it has committed, subject to satisfaction of customary conditions, to provide us with an unsecured 364-day bridge loan facility in an aggregate principal amount of $500 million (Bridge Loan Facility). Additionally, we have amended our Revolving Credit Facility as described in Note 4 Debt in connection with the pending Aera Merger. During the three months ended March 31, 2024, we incurred $8 million related to the bridge loan commitment and amending our Revolving Credit Facility which is reported in other current assets, net on our condensed consolidated balance sheet.

Closing of the Aera Merger is subject to certain conditions, including, among others, approval of the stock issuance by our stockholders, expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), prior authorization by the Federal Energy Regulatory Commission under Section 203 of the Federal Power Act and other customary closing conditions. The required waiting period under the HSR Act expired on March 25, 2024.

Upon completion of the transaction, we currently expect our existing stockholders to own approximately 77% of the combined company and the existing Aera owners to own approximately 23% of the combined company, on a fully diluted basis.

NOTE 3    INVESTMENT IN UNCONSOLIDATED SUBSIDIARY AND RELATED PARTY TRANSACTIONS

In August 2022, our wholly-owned subsidiary Carbon TerraVault I, LLC entered into a joint venture with Brookfield for the further development of a carbon management business in California. We hold a 51% interest in the Carbon TerraVault JV and Brookfield holds a 49% interest. We determined that the Carbon TerraVault JV is a variable interest entity (VIE); however, we share decision-making power with Brookfield on all matters that most significantly impact the economic performance of the joint venture. Therefore, we account for our investment in the Carbon TerraVault JV under the equity method of accounting. Transactions between us and the Carbon TerraVault JV are related party transactions.

Brookfield has committed an initial $500 million to invest in CCS projects that are jointly approved through the Carbon TerraVault JV. As part of the formation of the Carbon TerraVault JV, we contributed rights to inject CO2 into the 26R reservoir in our Elk Hills field for permanent CO2 storage (26R reservoir) and Brookfield committed to make an initial investment of $137 million, payable in three installments with the last two installments subject to the achievement of certain milestones. We achieved the milestone for the second installment in March 2024. The third installment will be sized based on permitted storage capacity.

Brookfield contributed the first $46 million installment of their initial investment to the Carbon TerraVault JV in 2022 and the second $46 million installment was recorded as a receivable from affiliate on our condensed consolidated balance sheet as of March 31, 2024. The remaining balance of the initial installment plus the second installment may, at our sole discretion, be distributed to us or used to satisfy future capital contributions, among other items. Because the parties have certain put and call rights (repurchase features) with respect to the 26R reservoir if certain milestones are not met, the first and second installment of the initial investment by Brookfield is reflected as a contingent liability included in other long-term liabilities on our condensed consolidated balance sheets. The contingent liability was $99 million and $52 million at March 31, 2024 and December 31, 2023, respectively.

10


The tables below present the summarized financial information related to our equity method investment in the Carbon TerraVault JV (and do not include amounts we have incurred related to development of our carbon management business, Carbon TerraVault) along with related party transactions for the periods presented.

March 31,
December 31,
20242023
(in millions)
Investment in unconsolidated subsidiary(a)
$16 $19 
Receivable from affiliate(b)
$66 $19 
Other long-term liabilities - Contingent liability (related to Carbon TerraVault JV put and call rights)
$99 $52 
(a)Reflects our investment less losses allocated to us of $3 million and $9 million for the three months ended March 31, 2024 and the year ended December 31, 2023, respectively.
(b)The amount of Brookfield's contributions available to us and amounts due to us under the MSA (described further below) are reported as receivable from affiliate. At March 31, 2024, the amount of $66 million includes the remaining $63 million of Brookfield's first and second installments of their initial investment which is available to us and $3 million related to the MSA and vendor reimbursements. At December 31, 2023, the amount of $19 million includes $17 million remaining of Brookfield's initial contribution available to us and $2 million related to the MSA and vendor reimbursements.

Three months ended March 31,
20242023
(in millions)
Loss from investment in unconsolidated subsidiary
$3 $2 
General and administrative expenses(a)
$2 $1 
(a)General and administrative expenses on our condensed consolidated statements of operations have been reduced by this amount which we have invoiced to the Carbon TerraVault JV under the MSA for back-office operational and commercial services.

We are also performing well abandonment work at our Elk Hills field as part of the permitting process for injection of CO2 at the 26R reservoir. During the three months ended March 31, 2024 and 2023, we performed abandonment work and sought reimbursement in the amounts of $4 million and $1 million, respectively, from the Carbon TerraVault JV.

The Carbon TerraVault JV has an option to participate in certain projects that involve the capture, transportation and storage of CO2 in California. This option expires upon the earlier of (1) August 2027, (2) when a final investment decision has been approved by the Carbon TerraVault JV for storage projects representing in excess of 5 million metric tons per annum (MMTPA) in the aggregate, or (3) when Brookfield has made contributions to the joint venture in excess of $500 million (unless Brookfield elects to increase its commitment).

We entered into a Management Services Agreement (MSA) with the Carbon TerraVault JV whereby we provide administrative, operational and commercial services under a cost-plus arrangement. Services may be supplemented by using third parties and payments to us under the MSA are limited to the amount in an approved budget. The MSA may be terminated by mutual agreement of the parties, among other events.

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NOTE 4    DEBT

As of March 31, 2024 and December 31, 2023, our long-term debt consisted of the following:

March 31,December 31,
20242023Interest RateMaturity
(in millions)
Revolving Credit Facility$ $ 
SOFR plus 2.50%-3.50%
ABR plus 1.50%-2.50%(a)
July 31, 2027(b)
Senior Notes545 545 7.125%February 1, 2026
Principal amount$545 $545 
Unamortized debt issuance costs(4)(5)
Long-term debt, net$541 $540 
(a)At our election, borrowings under the amended Revolving Credit Facility may be alternate base rate (ABR) loans or term SOFR loans, plus an applicable margin. ABR loans bear interest at a rate equal to the highest of (i) the federal funds effective rate plus 0.50%, (ii) the administrative agent prime rate and (iii) the one-month SOFR rate plus 1%. Term SOFR loans bear interest at term SOFR, plus an additional 10 basis points per annum credit spread adjustment. The applicable margin is adjusted based on the commitment utilization percentage and will vary from (i) in the case of ABR loans, 1.50% to 2.50% and (ii) in the case of term SOFR loans, 2.50% to 3.50%.
(b)The Revolving Credit Facility is subject to a springing maturity to August 4, 2025 if any of our Senior Notes are outstanding on that date.

On April 26, 2023, we entered into an Amended and Restated Credit Agreement (Revolving Credit Facility) with Citibank, N.A., as administrative agent, and certain other lenders, which amended and restated in its entirety the prior credit agreement dated October 27, 2020. As of March 31, 2024, our Revolving Credit Facility consisted of a senior revolving loan facility with an aggregate commitment of $630 million. Our Revolving Credit Facility also included a sub-limit of $250 million for the issuance of letters of credit. As of March 31, 2024, $153 million letters of credit were issued to support ordinary course marketing, insurance, regulatory and other matters. As of March 31, 2024, we had $477 million of availability on our Revolving Credit Facility after taking into account the $153 million letters of credit outstanding.

In connection with the Merger Agreement in February 2024, we entered into a second amendment to our Revolving Credit Facility to, among other things, permit the incurrence of indebtedness under the Bridge Loan Facility. In March 2024, we entered into the third amendment to our Revolving Credit Facility. The amendment facilitated certain matters with respect to the Aera Merger, including the postponement of the regular spring borrowing base redetermination until the fall of 2024 and certain other amendments.

In March 2024, we obtained commitments from our existing lenders and certain new lenders to amend our Revolving Credit Facility upon the closing of the Aera Merger. These commitments include increasing our borrowing base from $1.2 billion to $1.5 billion, increasing the aggregate commitment amount from $630 million to $1.1 billion and other matters. These commitments are subject to certain conditions prior to becoming effective, including the closing of the Aera Merger.

The borrowing base is redetermined semi-annually and was reaffirmed at $1.2 billion on October 30, 2023. The regular spring borrowing base redetermination for 2024 was postponed until the fall of 2024. The borrowing base takes into account the estimated value of our proved reserves, total indebtedness and other relevant factors consistent with customary reserves-based lending criteria. The amount we are able to borrow under our Revolving Credit Facility is limited to the amount of the commitment described above.

As of March 31, 2024, we were in compliance with all financial and other debt covenants under our Revolving Credit Facility and Senior Notes. For more information on our Senior Notes, see Part II, Item 8 – Financial Statements and Supplementary Data, Note 4 Debt in our 2023 Annual Report.

Fair Value

The fair value of our fixed-rate debt at March 31, 2024 and December 31, 2023 was approximately $549 million and $554 million, respectively. We estimate fair value based on known prices from market transactions (using Level 1 inputs on the fair value hierarchy).

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NOTE 5    LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES

We are involved, in the normal course of business, in lawsuits, environmental and other claims and other contingencies that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties or injunctive or declaratory relief.

We accrue reserves for currently outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Reserve balances for these items at March 31, 2024 and December 31, 2023 were not material to our condensed consolidated balance sheets as of such dates. We also evaluate the amount of reasonably possible losses that we could incur as a result of these matters. We believe that reasonably possible losses that we could incur in excess of reserves cannot be accurately determined.

In October 2020, Signal Hill Services, Inc. defaulted on its decommissioning obligations associated with two offshore platforms. The Bureau of Safety and Environmental Enforcement (BSEE) determined that former lessees, including our former parent, Occidental Petroleum Corporation (Oxy) with a 37.5% share, are responsible for accrued decommissioning obligations associated with these offshore platforms. Oxy sold its interest in the platforms approximately 30 years ago and it is our understanding that Oxy has not had any connection to the operations since that time and was challenging BSEE's order. Oxy notified us of the claim under the indemnification provisions of the Separation and Distribution Agreement between us and Oxy. In September 2021, we accepted the indemnification claim from Oxy and are challenging the order from BSEE. In March 2024, we entered into a cost sharing agreement with former lessees to share in ongoing maintenance costs during the pendency of the challenge to the BSEE order. We estimate our ongoing share of maintenance costs for the platforms could approximate $5 million to $8 million per year. Due to the preliminary stage of the process, no cost estimates to abandon the offshore platforms have been determined.

NOTE 6    DERIVATIVES

We continue to maintain a commodity hedging program primarily focused on crude oil to help protect our cash flows, margins and capital program from the volatility of commodity prices. We also enter into natural gas swaps for the purpose of hedging our fuel consumption at one of our steamfloods as well as swaps for natural gas purchases and sales related to our marketing activities. We did not have any derivative instruments designated as accounting hedges as of and for the three months ended March 31, 2024 and 2023. Unless otherwise indicated, we use the term "hedge" to describe derivative instruments that are designed to implement our hedging strategy.

Summary of Derivative Contracts

We held the following Brent-based contracts as of March 31, 2024:

Q2
2024
Q3
2024
Q4
2024
1H
2025
2H
2025
Sold Calls
Barrels per day30,000 30,000 29,000 28,000 27,500 
Weighted-average price per barrel$90.07 $90.07 $90.07 $86.88 $86.90 
Purchased Puts
Barrels per day30,000 30,000 29,000 28,000 27,500 
Weighted-average price per barrel$65.17 $65.17 $65.17 $61.43 $61.45 
Swaps
Barrels per day8,875 8,875 5,500 3,500 3,250 
Weighted-average price per barrel$79.28 $80.10 $77.45 $72.81 $72.50 

The outcomes of the derivative positions are as follows:

Sold calls – we make settlement payments for prices above the indicated weighted-average price per barrel.
13


Purchased puts – we receive settlement payments for prices below the indicated weighted-average price per barrel.
Swaps – we make settlement payments for prices above the indicated weighted-average price per barrel and receive settlement payments for prices below the indicated weighted-average price per barrel.

At March 31, 2024, we also held the following swaps to hedge purchased natural gas used in our operations as shown in the table below.

Q2
2024
Q3
2024
Q4
2024
Swaps:
MMBtu per day
10,000 10,000 10,000 
Weighted-average price per MMBtu
$5.65 $5.65 $5.65 

We also have a limited number of derivative contracts related to our natural gas marketing activities are intended to lock in locational price spreads. These derivative contracts are not significant to our results of operations or financial statements taken as a whole.

Fair Value of Derivatives

Derivative instruments not designated as hedging instruments are required to be recorded on the balance sheet at fair value. We report gains and losses on our derivative contracts which hedge commodity price risk related to our oil production and our marketing activities in operating revenue on our consolidated statements of operations as shown in the table below:

Three months ended March 31,
20242023
(in millions)
Non-cash commodity derivative (loss) gain
$(59)$107 
Settlements and premiums
(12)(65)
Net (loss) gain from commodity derivatives
$(71)$42 

We report gains and losses on our derivative contracts for purchased natural gas used to generate steam for our steamflood operations as a component of operating expense on our consolidated statement of operations. For the three months ended March 31, 2024, we recognized a net loss of $1 million (which includes a non-cash gain of $1 million and $2 million of settlement payments) in other operating expenses, net on our consolidated statement of operations. We did not have derivative contracts related to purchased natural gas for the three months ended March 31, 2023.

Our derivative contracts are measured at fair value using industry-standard models with various inputs, including quoted forward prices, and are classified as Level 2 in the required fair value hierarchy for the periods presented.

The following tables present the fair values of our outstanding commodity derivatives as of March 31, 2024 and December 31, 2023:
March 31, 2024
ClassificationGross Amounts at Fair ValueNettingNet Fair Value
(in millions)
  Other current assets, net
$11 $(11)$ 
  Other noncurrent assets24 (24) 
Current liabilities
(46)11 (35)
Noncurrent liabilities(38)24 (14)
$(49)$ $(49)
14



December 31, 2023
ClassificationGross Amounts at Fair ValueNettingNet Fair Value
(in millions)
  Other current assets, net
$39 $(18)$21 
  Other noncurrent assets38 (32)6 
Current liabilities
(26)18 (8)
Noncurrent liabilities(34)32 (2)
$17 $ $17 

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NOTE 7    INCOME TAXES

The following table presents the components of our total income tax provision:

 
Three months ended
March 31,
 20242023
(in millions)
(Loss) income before income taxes
$(19)$376 
Current income tax provision 28 
Deferred income tax (benefit) provision
(9)47 
Total income tax (benefit) provision
$(9)$75 

Our income tax provision or benefit for interim periods is determined by applying an estimated annual effective tax rate to (loss) income before income taxes with the result adjusted for discrete items, if any, in the relevant period. A reconciliation of the U.S. federal statutory tax rate to effective tax rate, including discrete items, for the three months ended March 31, 2024 and 2023 is shown below:

 
Three months ended
March 31,
 20242023
U.S federal statutory tax rate
21 %21 %
State income taxes, net
7 7 
Other
3  
Annual effective tax rate
31 %28 %
Discrete items:
Stock compensation and other
16  
Change in the valuation allowance
 (8)
Effective tax rate
47 %20 %

Our annual effective tax rate of 31% differed from the U.S. federal statutory tax rate of 21% for the three months ended March 31, 2024 primarily due to state taxes and disallowed executive compensation expense. During the three months ended March 31, 2024, we recognized an income tax benefit related to the settlement of certain equity-settled stock-based compensation awards, which have the effect of increasing our effective tax rate by 16%.

Our annual effective tax rate of 28% differed from the U.S. federal statutory tax rate of 21% for the three months ended March 31, 2023 due to state taxes. During the three months ended March 31, 2023 we recognized a tax benefit for the release of a valuation allowance which was recorded in 2022 related to a capital loss generated from the divestiture of oil and gas assets. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 7 Income Taxes in our 2023 Annual Report for additional information.

Management expects to realize the recorded deferred tax assets primarily through future income and reversal of taxable temporary differences. Realization of our existing deferred tax assets is not assured and depends on a number of factors including our ability to generate sufficient taxable income in future periods.

NOTE 8    DIVESTITURES AND ACQUISITIONS

Divestitures

Fort Apache in Huntington Beach

In March 2024, we sold our 0.9-acre Fort Apache real estate property in Huntington Beach, California for a purchase price of $10 million and recognized a $6 million gain.
16



Ventura Basin Transactions

During 2021 and 2022, we entered into transactions to sell our Ventura basin assets. The transaction contemplates multiple closings that are subject to customary closing conditions. The closing of the sale of our remaining assets in the Ventura basin is subject to final approval from the State Lands Commission, which we expect could occur in 2024. These remaining assets, consisting of property, plant and equipment, and associated asset retirement obligations are classified as held for sale on our condensed consolidated balance sheets at March 31, 2024 and December 31, 2023. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 8 Divestitures and Acquisitions in our 2023 Annual Report for additional information on the Ventura basin transactions.

Other

During the three months ended March 31, 2023, we sold a non-producing asset in exchange for the assumption of liabilities, recognizing a $7 million gain related to the liability reduction.

Acquisitions

In 2022, we acquired properties for carbon management activities for approximately $17 million. We intend to divest a portion of these assets and recorded these assets at fair value recognizing an impairment of $3 million in the first quarter of 2023. The fair value, using Level 3 inputs in the fair value hierarchy, declined during the first quarter of 2023 due to market conditions (including inflation and rising interest rates). The assets being divested are classified as held for sale as of March 31, 2024 on our condensed consolidated balance sheet.

NOTE 9    STOCKHOLDERS' EQUITY

Share Repurchase Program

Our Board of Directors has authorized a Share Repurchase Program to acquire up to $1.35 billion of our common stock through December 31, 2025. The repurchases may be effected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, derivative contracts or otherwise in compliance with Rule 10b-18, subject to market conditions. The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares and our Board of Directors may modify, suspend or discontinue authorization of the program at any time. The following is a summary of our share repurchases, which is held as treasury stock, for the periods presented:

Total Number of Shares PurchasedTotal Value of Shares PurchasedAverage Price Paid per Share
(number of shares)(in millions)($ per share)
Three months ended March 31, 2023
1,423,764 $59 $41.25 
Three months ended March 31, 2024
1,065,764 $58 $53.26 
Inception of Program (May 2021) through March 31, 2024
15,929,679 $662 $41.39 
Note: The total value of shares purchased includes approximately $1 million in both the three months ended March 31, 2024 and 2023 related to excise taxes on share repurchases, which was effective beginning on January 1, 2023. Commissions paid on share repurchases were not significant in all periods presented.
17



Dividends

Our Board of Directors declared the following cash dividends for each of the periods presented.

Total Dividend
Rate Per Share
(in millions)
($ per share)
Three months ended March 31, 2024
$21 $0.31 
Three months ended March 31, 2023$20 $0.2825 

In addition to dividends on our common stock shown in the table above, we paid $4 million on equity-settled stock-based compensation awards in the three months ended March 31, 2024. Future cash dividends, and the establishment of record and payment dates, are subject to final determination by our Board of Directors each quarter after reviewing our financial performance and position. See Note 14 Subsequent Events for information on future cash dividends.

Warrants

In October 2020, we reserved an aggregate 4,384,182 shares of our common stock for warrants which are exercisable at $36 per share through October 26, 2024.

As of March 31, 2024, we had outstanding warrants exercisable into 4,163,670 shares of our common stock (subject to adjustments pursuant to the terms of the warrants). During the three months ended March 31, 2024, we issued 18,851 shares of our common stock in exchange for warrants. During the three months ended March 31, 2023, we issued an insignificant number of shares of our common stock in exchange for warrants.

See Part II, Item 8 – Financial Statements and Supplementary Data, Note 10 Stockholders' Equity in our 2023 Annual Report for additional information on the terms of our warrants.

NOTE 10    EARNINGS PER SHARE

Basic and diluted earnings per share (EPS) were calculated using the treasury stock method for the three months ended March 31, 2024 and 2023. Our restricted stock unit (RSU) and performance stock unit (PSU) awards are not considered participating securities since the dividend rights on unvested shares are forfeitable.

For basic EPS, the weighted-average number of common shares outstanding excludes shares underlying our equity-settled awards and warrants. For diluted EPS, the basic shares outstanding are adjusted by adding potential common shares, if dilutive.

18


The following table presents the calculation of basic and diluted EPS, for the three months ended March 31, 2024 and 2023:

Three months ended
March 31,
20242023
(in millions, except per-share amounts)
Numerator for Basic and Diluted EPS
Net (loss) income
$(10)$301 
Denominator for Basic EPS
Weighted-average shares69.0 71.3 
Potential common shares, if dilutive:
Warrants 0.5 
Restricted stock units
 0.9 
Performance stock units
 0.8 
Denominator for Diluted EPS
Weighted-average shares69.0 73.5 
EPS
Basic $(0.14)$4.22 
Diluted$(0.14)$4.09 

The following table presents potentially dilutive weighted-average common shares which were excluded from the denominator for diluted EPS in periods of losses:
Three months ended March 31,
20242023
(in millions)
Shares issuable upon exercise of warrants
4.2  
Shares issuable upon settlement of RSUs
0.9  
Shares issuable upon settlement of PSUs1.1  
Total antidilutive shares6.2  

NOTE 11    SUPPLEMENTAL ACCOUNT BALANCES

Revenues — We derive most of our revenue from sales of oil, natural gas and NGLs, with the remaining revenue primarily generated from sales of electricity and marketing activities related to storage and managing excess pipeline capacity.

The following table provides disaggregated revenue for sales of produced oil, natural gas and NGLs to customers:

Three months ended March 31,
20242023
(in millions)
Oil$348 $390 
Natural gas32 263 
NGLs49 62 
Oil, natural gas and NGL sales$429 $715 

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From time-to-time, we enter into transactions for third-party production, which we report as revenue from marketing of purchased commodities on our condensed consolidated statement of operations. Revenues from marketing of purchased commodities primarily results from the storage or transportation of natural gas to take advantage of differences in pricing or location or in the quality of other products. The following table provides disaggregated revenue for sales to customers related to our marketing activities:

Three months ended March 31,
20242023
(in millions)
Oil$20 $ 
Natural gas48 184 
NGLs6 3 
Revenue from marketing of purchased commodities
$74 $187 

Inventories — Materials and supplies, which primarily consist of well equipment and tubular goods used in our oil and natural gas operations, are valued at weighted-average cost and are reviewed periodically for obsolescence. Finished goods include produced oil and NGLs in storage, which are valued at the lower of cost or net realizable value. Inventories, by category, are as follows:
March 31,December 31,
20242023
(in millions)
Materials and supplies$68 $68 
Finished goods2 4 
Inventories$70 $72 

Other current assets, netOther current assets, net include the following:
March 31,December 31,
20242023
(in millions)
Net amounts due from joint interest partners(a)
$40 $43 
Fair value of commodity derivative contracts 21 
Prepaid expenses29 19 
Greenhouse gas allowances6 12 
Income tax receivable4  
Other16 18 
Other current assets, net$95 $113 
(a)Included in the March 31, 2024 and December 31, 2023 net amounts due from joint interest partners are allowances of $3 million.

Other noncurrent assets Other noncurrent assets include the following:
March 31,December 31,
20242023
(in millions)
Operating lease right-of-use assets$85 $73 
Deferred financing costs - Revolving Credit Facility10 11 
Emission reduction credits 11 11 
Prepaid power plant maintenance2 34 
Fair value of commodity derivative contracts 6 
Deposits and other 15 13 
Other noncurrent assets$123 $148 

20


Accrued liabilitiesAccrued liabilities include the following:
March 31,December 31,
20242023
(in millions)
Employee-related costs$48 $82 
Taxes other than on income50 35 
Asset retirement obligations90 99 
Interest8 18 
Operating lease liability19 15 
Fair value of derivative contracts35 8 
Premiums due on commodity derivative contracts13 21 
Liability for settlement payments on commodity derivative contracts5 8 
Amounts due under production-sharing contracts10 5 
Signal Hill maintenance13 12 
Income taxes payable 18 
Other47 45 
 Accrued liabilities$338 $366 

Other long-term liabilitiesOther long-term liabilities includes the following:

March 31,December 31,
20242023
(in millions)
Compensation-related liabilities$33 $38 
Postretirement benefit plan35 36 
Operating lease liability56 55 
Fair value of commodity derivative contracts
14 2 
Premiums due on commodity derivative contracts10 10 
Contingent liability (related to Carbon TerraVault JV put and call rights)99 52 
Other6 8 
Other long-term liabilities$253 $201 

General and administrative expensesThe table below shows G&A expenses for our exploration and production business (including unallocated corporate overhead and other) separately from our carbon management business. The amounts shown for our carbon management business are net of amounts invoiced by us under the MSA with the Carbon TerraVault JV. See Note 3 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV.

Three months ended
March 31,
20242023
(in millions)
Exploration and production, corporate and other
$55 $62 
Carbon management business
2 3 
Total general and administrative expenses$57 $65 

NOTE 12    SUPPLEMENTAL CASH FLOW INFORMATION

We made U.S. federal and state income tax payments of $22 million during the three months ended March 31, 2024. We did not make U.S. federal or state income tax payments during the three months ended March 31, 2023.

21


Interest paid, net of capitalized amounts, was $20 million and $21 million for the three months ended March 31, 2024 and 2023, respectively. Interest income was $6 million and $3 million for the three months ended March 31, 2024 and 2023, respectively.

Non-cash investing activities in the three months ended March 31, 2023 included $2 million related to our share of capital calls by the Carbon TerraVault JV. See Note 3 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV.

Non-cash financing activities in the three months ended March 31, 2024 included approximately $87 million related to the issuance of shares for our stock-based compensation awards. Non-cash financing activities in the three months ended March 31, 2024 also included approximately $1 million related to dividend equivalents accrued for stock-based compensation awards and approximately $1 million related to an excise tax on share repurchases. Non-cash financing activities in the three months ended March 31, 2023 included an insignificant amount, for dividend equivalents accrued for stock-based compensation awards and approximately $1 million related to an excise tax on share repurchases.

NOTE 13    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

We have designated certain of our subsidiaries as Unrestricted Subsidiaries under the indenture governing our Senior Notes (Senior Notes Indenture). Unrestricted Subsidiaries (as defined in the Senior Notes Indenture) are subject to fewer restrictions under the Senior Notes Indenture. We are required under the Senior Notes Indenture to present the financial condition and results of operations of CRC and its Restricted Subsidiaries (as defined in the Senior Notes Indenture) separate from the financial condition and results of operations of its Unrestricted Subsidiaries. The following condensed consolidating balance sheets as of March 31, 2024 and December 31, 2023 and the condensed consolidating statements of operations for the three months ended March 31, 2023 and 2024, as applicable, reflect the condensed consolidating financial information of our parent company, CRC (Parent), our combined Unrestricted Subsidiaries, our combined Restricted Subsidiaries and the elimination entries necessary to arrive at the information for the Company on a consolidated basis. The financial information may not necessarily be indicative of the financial condition and results of operations had the Unrestricted Subsidiaries operated as independent entities.

22


Condensed Consolidating Balance Sheets
As of March 31, 2024 and December 31, 2023

As of March 31, 2024
ParentCombined Unrestricted SubsidiariesCombined Restricted SubsidiariesEliminationsConsolidated
(in millions)
Total current assets
$428 $67 $344 $ $839 
Total property, plant and equipment, net
13 16 2,764  2,793 
Investments in consolidated subsidiaries2,358 (17)1,328 (3,669) 
Deferred tax asset139    139 
Investment in unconsolidated subsidiary 16   16 
Other assets12 50 61  123 
TOTAL ASSETS$2,950 $132 $4,497 $(3,669)$3,910 
Total current liabilities82 15 497  $594 
Long-term debt541    541 
Asset retirement obligations  429  429 
Other long-term liabilities71 122 60  253 
Amounts due to (from) affiliates163 24 (187)  
Total equity2,093 (29)3,698 (3,669)2,093 
TOTAL LIABILITIES AND EQUITY$2,950 $132 $4,497 $(3,669)$3,910 
As of December 31, 2023
ParentCombined Unrestricted SubsidiariesCombined Restricted SubsidiariesEliminationsConsolidated
(in millions)
Total current assets
$511 $20 $398 $ $929 
Total property, plant and equipment, net
14 12 2,744  2,770 
Investments in consolidated subsidiaries2,311 (11)1,347 (3,647) 
Deferred tax asset132    132 
Investment in unconsolidated subsidiary 19   19 
Other assets12 36 100  148 
TOTAL ASSETS$2,980 $76 $4,589 $(3,647)$3,998 
Total current liabilities142 13 461  $616 
Long-term debt540    540 
Asset retirement obligations  422  422 
Other long-term liabilities79 73 49  201 
Total equity2,219 (10)3,657 (3,647)2,219 
TOTAL LIABILITIES AND EQUITY$2,980 $76 $4,589 $(3,647)$3,998 

23


Condensed Consolidating Statement of Operations
For the three months ended March 31, 2024 and 2023

Three months ended March 31, 2024
ParentCombined Unrestricted SubsidiariesCombined Restricted SubsidiariesEliminationsConsolidated
(in millions)
Total revenues
$6 $ $457 $(9)$454 
Total costs and other
60 10 403 (9)464 
Gain on asset divestitures  6  6 
Non-operating (loss) income(12)(4)1  (15)
(LOSS) INCOME BEFORE INCOME TAXES(66)(14)61  (19)
Income tax benefit
9    9 
NET (LOSS) INCOME
$(57)$(14)$61 $ $(10)

Three months ended March 31, 2023
ParentCombined Unrestricted SubsidiariesCombined Restricted SubsidiariesEliminationsConsolidated
(in millions)
Total revenues
$4 $ $1,020 $ $1,024 
Total costs and other
50 8 580  638 
Gain on asset divestitures  7  7 
Non-operating (loss) income(15)(3)1  (17)
(LOSS) INCOME BEFORE INCOME TAXES(61)(11)448  376 
Income tax provision(75)   (75)
NET (LOSS) INCOME$(136)$(11)$448 $ $301 

NOTE 14    SUBSEQUENT EVENTS

Dividend

On May 7, 2024, our Board of Directors declared a quarterly cash dividend of $0.31 per share of common stock. The dividend is payable to shareholders of record at the close of business on May 31, 2024 and is expected to be paid on June 14, 2024.

24


Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

We are an independent oil and natural gas exploration and production and carbon management company operating properties exclusively within California. We are committed to energy transition and have some of the lowest carbon intensity production in the United States. We are in the early stages of permitting several carbon capture and storage (CCS) projects in California. Our carbon management business, which we refer to as Carbon TerraVault, is expected to build, install, operate and maintain CO2 capture equipment, transportation assets and storage facilities in California. In August 2022, we entered into a joint venture with BGTF Sierra Aggregator LLC (Brookfield) to pursue carbon management and storage activities (Carbon TerraVault JV). For more information about the risks involved in our carbon capture projects, see Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report) and for more information on the Carbon TerraVault JV, see Part I, Item 1 – Financial Statements, Note 3 Investment in Unconsolidated Subsidiary and Related Party Transactions.

Except when the context otherwise requires or where otherwise indicated, all references to ‘‘CRC,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to California Resources Corporation and its consolidated subsidiaries.

Pending Aera Merger

On February 7, 2024, we entered into a definitive agreement and plan of merger (Merger Agreement) to combine with Aera Energy, LLC (Aera) in an all-stock transaction (Aera Merger) with an effective date of January 1, 2024. Aera is a leading operator of mature fields in California, primarily in the San Joaquin and Ventura basins, with high oil-weighted production.

Pursuant to the Merger Agreement, we have agreed to issue 21,170,357 shares of common stock (subject to customary adjustments in the event of stock splits, dividend paid in stock and similar items) plus an additional number of shares determined by reference to the dividends declared by us having a record date between the effective date and closing as more fully described in the Merger Agreement. Upon closing, Aera's $950 million outstanding long-term debt will become due as a result of a change in control provision within their legacy debt agreement. We expect to repay a significant portion of this indebtedness with cash on hand and borrowings under our Revolving Credit Facility. We intend to refinance the balance through one or more debt capital markets transactions and, only to the extent necessary, borrowings under a bridge loan facility provided by Citigroup Global Markets, Inc. (the Bank). Under the terms of our debt commitment letter with the Bank, it has committed, subject to satisfaction of customary conditions, to provide us with an unsecured 364-day bridge loan facility in an aggregate principal amount of $500 million (Bridge Loan Facility).

Closing of the Aera Merger is subject to certain conditions, including, among others, approval of the stock issuance by our stockholders, expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), prior authorization by the Federal Energy Regulatory Commission under Section 203 of the Federal Power Act and other customary closing conditions. The required waiting period under the HSR Act expired on March 25, 2024.

Upon completion of the transaction, we currently expect our existing stockholders to own approximately 77% of the combined company and the existing Aera owners to own approximately 23% of the combined company, on a fully diluted basis. The Aera Merger is expected to close around mid-year 2024. Post closing of the Aera Merger, and subject to Board approval, we expect to increase our quarterly dividend.

In the three months ended March 31, 2024, we incurred $13 million of transaction and integration costs related to the Aera Merger included in other operating expenses, net on our condensed consolidated statement of operations. We also incurred $8 million in financing fees, which is included in other current assets, net on our condensed consolidated balance sheet as of March 31, 2024.

25


Business Environment and Industry Outlook
 
Commodity Prices

Our operating results and those of the oil and natural gas industry as a whole are heavily influenced by commodity prices. Oil and natural gas prices and differentials may fluctuate significantly as a result of numerous market-related variables. These and other factors make it impossible to predict realized prices reliably. We may respond to economic conditions by adjusting the amount and allocation of our capital program while continuing to identify efficiencies and cost savings. Volatility in oil prices may materially affect the quantities of oil and natural gas reserves we can economically produce over the longer term. Refer to Prices and Realizations below for information on our realized prices.

The following table presents the average daily benchmark prices for oil and natural gas during the periods presented:
Three months ended
March 31, 2024December 31, 2023
Brent oil ($/Bbl)$81.84 $82.69 
WTI oil ($/Bbl)$76.96 $78.32 
NYMEX Henry Hub ($/MMBtu) Average Monthly Settled Price$2.24 $2.88 

Regulatory Updates

Well Permits

CalGEM remains in the process of developing standard operating procedures for reviewing well permit applications that it commenced in the second half of 2023. Significant permitting delays continue pending CalGEM’s completion of this process. An increase in permits approvals for workovers has continued through the first quarter of 2024, and substantially increased in April 2024. As of May 6, 2024, we have received 73 permits for workovers since the beginning of the year. As of May 6, 2024, we have also received 8 permits for deepenings and 1 permit for a sidetrack for wells in our Wilmington field. With only a few exceptions, there continues to be no new drill permits issued in the state.

Kern County EIR Litigation

On March 7, 2024, the California Court of Appeals, Fifth Appellate District (Court of Appeals), issued its ruling on the six challenges to Kern County’s Supplemental Recirculated Environmental Impact Report (SREIR) for Kern County Zoning Ordinance G-8992 (Ordinance). In its disposition, the Court of Appeals ordered the Trial Court to enter a modified judgement and fourth preemptory writ directing Kern County (i) to set aside approval of the Ordinance, SREIR and related findings of facts and statements of overriding considerations; and (ii) not to present a revised Ordinance for approval until Kern County has (a) prepared a revised SREIR that corrects CEQA violations relating to the (1) rejection of agricultural conservation easements as a form of partial mitigation for the conversion of agricultural land, (2) assessment of cancer risks associated with the drilling of multiple wells near sensitive receptors and (3) analysis of water supply impacts; and (b) circulated the revised SREIR for public review and comment, prepared responses to comments, and certified the revised SREIR.

On March 22, 2024, Kern County released a notice of preparation of the Second Supplemental Revised Environmental Impact Report (SSREIR). We expect that Kern County will prepare a draft SSREIR, circulate it for public comments and thereafter certify the SSREIR and approve the Ordinance. After that, the Trial Court would then consider whether to lift the stay. If that occurs, well permitting could resume assuming no further challenges to the SSREIR.

As a result of the ruling of the Court of Appeals in the Kern County EIR litigation and current lack of permits with respect to our Kern County properties, we currently plan to operate one drilling rig within Kern County in 2024. We have sufficient permits in hand to keep that rig active through the end of 2025.

26


CCS Project Permitting

In December 2023, Kern County released a draft EIR prepared in connection with our application for conditional use permits for our CTV I CCS project. The project was originally scheduled to be considered by the Kern County Planning Commission on March 28th; however, based on comments received the Planning Commission required further environmental review before it can consider the project and the draft EIR. The Planning Commission recommended that the consideration of applicable changes to the zoning ordinance and certification of the EIR be continued to the August 22, 2024 Planning Commission hearing, at which the Planning Commission will decide whether to recommend the adoption of the changes to the zoning ordinance and certification of the EIR to the Board of Supervisors. The Board of Supervisors meeting is expected to occur in or around September or October.

Low Carbon Fuel Standard

On February 14, 2024, the California Air Resources Board (CARB) announced that it was postponing the previously scheduled March 21, 2024, public hearing regarding the proposed amendments to the LCFS Regulation released on December 19, 2023. Due to continuous substantial public feedback on the proposed amendments, CARB intends to release revised proposed amendments for public review and comment, to be followed by a public hearing. The release of the revised proposed amendments is pending. These revisions may impact the eligibility of certain of our CCS projects for LCFS credits.

Results of Oil and Gas Operations

Production

The following table sets forth our average net production of oil, NGLs and natural gas per day in each of the California oil and natural gas basins in which we operated for the periods presented.
Three months ended
March 31, 2024December 31, 2023
Oil (MBbl/d)
      San Joaquin Basin30 32 
      Los Angeles Basin18 18 
          Total48 50 
NGLs (MBbl/d)
      San Joaquin Basin11 11 
          Total11 11 
Natural gas (MMcf/d)
      San Joaquin Basin90 114 
      Los Angeles Basin
      Sacramento Basin14 15 
          Total105 130 
Total Net Production (MBoe/d)76 83 

27


Total daily net production for the three months ended March 31, 2024 compared to the three months ended December 31, 2023 decreased by 7 MBoe/d predominately due to scheduled plant downtime during the first quarter of 2024. The decrease in production also reflects natural production decline as well as the divestiture of our share of a non-operated field in December 2023. Our production-sharing contracts (PSCs), which are described below, did not have a significant impact on our net oil production in the three months ended March 31, 2024 compared to the three months ended December 31, 2023.

The following table reconciles our average net production to our average gross production (which includes production from the fields we operate and our share of production from fields operated by others) for the periods presented:

Three months ended
March 31, 2024December 31, 2023
(MBoe/d)
Total Net Production7683
Partners' share under PSC-type contracts77
Working interest and royalty holders' share77
Changes in NGL inventory and other41
Total Gross Production9498

Production-Sharing Contracts (PSCs)

Our share of production and reserves from operations in the Wilmington field in the Los Angeles basin is subject to contractual arrangements similar to production-sharing contracts (PSCs) that are in effect through the economic life of the assets. The reporting of our PSC-type contracts creates a difference between reported operating costs, which are for the full field, and reported volumes, which are only our net share, inflating the per barrel operating costs. Operating costs, excluding effects of PSC-type contracts is a non-GAAP measure which adjusts for excess costs attributable to PSC-type contracts for the periods presented in the tables below:

Three months ended
March 31, 2024December 31, 2023
(in millions)($ per Boe)(in millions)($ per Boe)
Operating costs(a)
$179 $25.80 $186 $24.49 
Excess costs attributable to PSC-type contracts(18)(2.54)(17)(2.22)
Operating costs, excluding effects of PSC-type contracts$161 $23.26 $169 $22.27 
(a)Operating costs related to our exploration and production activities and are presented before elimination entries.

For further information on our production-sharing contracts, see Part I, Item 1 & 2 Business and Properties, Oil and Natural Gas Operations, Production, Price and Cost History in our 2023 Annual Report.

28


Prices and Realizations

The following tables set forth the average realized prices and price realizations as a percentage of average Brent, WTI and NYMEX indexes for our oil and natural gas operations for the periods presented:
Three months ended
March 31, 2024December 31, 2023
PriceRealizationPriceRealization
Oil ($ per Bbl)
Brent$81.84 $82.69 
Realized price without derivative settlements$