10-Q 1 crc-20230930.htm 10-Q crc-20230930
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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 September 30, 2023
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 September 30, 2023 was 68,619,851.



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
Reorganization
Business Environment and Industry Outlook
Regulatory Updates
Supply Chain Constraints and Inflation
Production
Prices and Realizations
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 September 30, 2023 and December 31, 2022
(in millions, except share data)

September 30,December 31,
 20232022
CURRENT ASSETS  
Cash and cash equivalents$479 $307 
Trade receivables243 326 
Inventories71 60 
Assets held for sale13 5 
Receivable from affiliate26 33 
Other current assets, net97 133 
Total current assets929 864 
PROPERTY, PLANT AND EQUIPMENT
3,336 3,228 
Accumulated depreciation, depletion and amortization
(614)(442)
Total property, plant and equipment, net2,722 2,786 
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY15 13 
DEFERRED INCOME TAXES
150 164 
OTHER NONCURRENT ASSETS136 140 
TOTAL ASSETS$3,952 $3,967 
CURRENT LIABILITIES  
Accounts payable224 345 
Liabilities associated with assets held for sale5 5 
Fair value of commodity derivative contracts103 246 
Accrued liabilities362 298 
Total current liabilities694 894 
NONCURRENT LIABILITIES
Long-term debt, net589 592 
Asset retirement obligations388 432 
Other long-term liabilities231 185 
STOCKHOLDERS' EQUITY  
Preferred stock (20,000,000 shares authorized at $0.01 par value) no shares outstanding at September 30, 2023 and December 31, 2022
  
Common stock (200,000,000 shares authorized at $0.01 par value) (83,483,766 and 83,406,002 shares issued; 68,619,851 and 71,949,742 shares outstanding at September 30, 2023 and December 31, 2022)
1 1 
Treasury stock (14,863,915 shares held at cost at September 30, 2023 and 11,456,260 shares held at cost at December 31, 2022)
(604)(461)
Additional paid-in capital1,324 1,305 
Retained earnings1,253 938 
Accumulated other comprehensive income76 81 
Total stockholders' equity2,050 1,864 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$3,952 $3,967 



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 and nine months ended September 30, 2023 and 2022
(dollars in millions, except share and per share data; shares in millions)
Three months ended
September 30,
Nine months ended
September 30,
 2023202220232022
REVENUES    
Oil, natural gas and NGL sales$510 $680 $1,672 $2,026 
Net (loss) gain from commodity derivatives
(204)243 (131)(419)
Marketing of purchased natural gas
78 113 334 220 
Electricity sales67 88 169 171 
Other revenue9 1 31 27 
Total operating revenues460 1,125 2,075 2,025 
OPERATING EXPENSES    
Operating costs196 214 636 586 
General and administrative expenses65 59 201 163 
Depreciation, depletion and amortization56 50 170 149 
Asset impairment  3 2 
Taxes other than on income48 44 132 120 
Exploration expense 1 2 3 
Purchased natural gas marketing expense
31 98 182 186 
Electricity generation expenses23 42 85 99 
Transportation costs16 13 49 37 
Accretion expense12 10 35 32 
Other operating expenses, net28 5 62 28 
Total operating expenses475 536 1,557 1,405 
Net gain on asset divestitures 2 7 60 
OPERATING (LOSS) INCOME
(15)591 525 680 
NON-OPERATING (EXPENSES) INCOME
Interest and debt expense(15)(13)(43)(39)
Loss from investment in unconsolidated subsidiary(3) (6) 
Other non-operating income3 1 5 3 
(LOSS) INCOME BEFORE INCOME TAXES
(30)579 481 644 
Income tax benefit (provision)
8 (153)(105)(203)
NET (LOSS) INCOME
$(22)$426 $376 $441 
Net (loss) income per share
Basic $(0.32)$5.75 $5.38 $5.77 
Diluted$(0.32)$5.58 $5.18 $5.62 
Weighted-average common shares outstanding
Basic68.7 74.1 69.9 76.4 
Diluted68.7 76.3 72.6 78.5 

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 and nine months ended September 30, 2023 and 2022
(in millions)

Three months ended
September 30,
Nine months ended
September 30,
 2023202220232022
Net (loss) income
$(22)$426 $376 $441 
Other comprehensive income:
Amortization of prior service cost credit included in net periodic benefit cost, net of tax(a)
(5) (5) 
Comprehensive (loss) income attributable to common stock
$(27)$426 $371 $441 
(a) Amortization of prior service cost credit is net of $2 million in tax for the three and nine months ended September 30, 2023.
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 and nine months ended September 30, 2023
(in millions)

Three months ended September 30, 2023
 Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other
Comprehensive
Income
Total
Equity
Balance, June 30, 2023$1 $(584)$1,317 $1,295 $81 $2,110 
Net loss
— — — (22)— (22)
Share-based compensation— — 8 — — 8 
Repurchases of common stock— (20)— — — (20)
Cash dividend ($0.2825 per share)
— — — (20)— (20)
Shares cancelled for taxes— — (1)— — (1)
Other comprehensive income, net of tax
— — — — (5)(5)
Balance, September 30, 2023$1 $(604)$1,324 $1,253 $76 $2,050 

Nine months ended September 30, 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— — — 376 — 376 
Share-based compensation— — 22 — — 22 
Repurchases of common stock— (143)— — — (143)
Cash dividend ($0.2825 per share)
— — — (61)— (61)
Shares cancelled for taxes(3)— — (3)
Other comprehensive income, net of tax
— — — — (5)(5)
Balance, September 30, 2023$1 $(604)$1,324 $1,253 $76 $2,050 

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


7



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
For the three and nine months ended September 30, 2022
(in millions)

Three months ended September 30, 2022
 Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other
Comprehensive
Income
Total
Equity
Balance, June 30, 2022$1 $(315)$1,296 $463 $72 $1,517 
Net income— — — 426 — 426 
Share-based compensation— — 6 — — 6 
Repurchases of common stock— (80)— — — (80)
Cash dividend ($0.17 per share)
— — — (13)— (13)
Other— — (1)— — (1)
Balance, September 30, 2022$1 $(395)$1,301 $876 $72 $1,855 

Nine months ended September 30, 2022
 Common StockTreasury StockAdditional Paid-in CapitalRetained EarningsAccumulated Other
Comprehensive Income
Total
Equity
Balance, December 31, 2021$1 $(148)$1,288 $475 $72 $1,688 
Net income— — — 441 — 441 
Share-based compensation— — 14 — — 14 
Repurchases of common stock— (247)— — — (247)
Cash dividend ($0.17 per share)
— — — (40)— (40)
Other— — (1)— — (1)
Balance, September 30, 2022$1 $(395)$1,301 $876 $72 $1,855 

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


8



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2023 and 2022
(in millions)
Three months ended September 30,Nine months ended September 30,
 2023202220232022
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income
$(22)$426 $376 $441 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and amortization56 50 170 149 
Deferred income tax (benefit) provision
(40)137 16 166 
Asset impairment  3 2 
Net loss (gain) from commodity derivatives
204 (243)131 419 
Net payments on settled commodity derivatives(95)(182)(223)(604)
Net gain on asset divestitures (2)(7)(60)
Other non-cash charges to income, net26 15 77 42 
Changes in operating assets and liabilities, net(25)34 (21)21 
Net cash provided by operating activities104 235 522 576 
CASH FLOW FROM INVESTING ACTIVITIES
Capital investments(33)(107)(119)(304)
Changes in accrued capital investments5 (4)(10)5 
Proceeds from asset divestitures, net 3  79 
Acquisitions  (1)(17)
Distribution related to the Carbon TerraVault JV 12  12 
Capitalized joint venture transaction costs (12) (12)
Other, net (1)(3)(1)
Net cash used in investing activities(28)(109)(133)(238)
CASH FLOW FROM FINANCING ACTIVITIES
Repurchases of common stock(20)(80)(143)(247)
Common stock dividends(19)(13)(59)(39)
Issuance of common stock 1 1 1 
Debt amendment costs  (8) 
Shares cancelled for taxes(1) (3) 
Debt repurchases(5) (5) 
Net cash used in financing activities(45)(92)(217)(285)
Increase in cash and cash equivalents
31 34 172 53 
Cash and cash equivalents—beginning of period448 324 307 305 
Cash and cash equivalents—end of period$479 $358 $479 $358 

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


9



CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
September 30, 2023

NOTE 1    BASIS OF PRESENTATION

We are an independent energy and carbon management company committed to energy transition. We produce some of the lowest carbon intensity oil in the United States according to a joint report by Ceres and the Clean Air Task Force. We are focused on maximizing the value of our land, minerals and technical resources for oil and gas extraction and decarbonization efforts. We are in the early stages of developing several carbon capture and storage (CCS) projects and other emissions reducing projects in California. Our subsidiary Carbon TerraVault is expected to build, install, operate and maintain CO2 capture equipment, transportation assets and storage facilities in California. In 2022, Carbon TerraVault entered into a joint venture with BGTF Sierra Aggregator LLC (Brookfield) to pursue certain of these opportunities (Carbon TerraVault JV). See Note 2 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV. Separately, we are evaluating the feasibility of a carbon capture system to be located at our Elk Hills power plant.

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, 2022 (2022 Annual Report).

The carrying amounts of cash, cash equivalents and on-balance sheet financial instruments, other than debt, approximate fair value. Refer to Note 3 Debt for the fair value of our debt.

10


NOTE 2    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 equal installments with the last two installments subject to the achievement of certain milestones. Brookfield contributed the first $46 million installment of their initial investment to the Carbon TerraVault JV in 2022. This amount may, at our sole discretion, be distributed to us or used to satisfy future capital contributions, among other items. During 2022, $12 million was distributed to us (and used to pay transaction costs related to the formation of the joint venture) and $2 million was used to satisfy a capital call. During 2023, we used approximately $7 million to satisfy a capital call. The remaining amount of the initial contribution by Brookfield which is available to us was reported as a receivable from affiliate on our condensed consolidated balance sheet. Because the parties have certain put and call rights (repurchase features) with respect to the 26R reservoir if certain milestones are not met, the initial investment by Brookfield is reflected as a contingent liability included in other long-term liabilities on our condensed consolidated balance sheets.

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.

The tables below present the summarized financial information related to our equity method investment and related party transactions for the periods presented.

September 30,December 31,
20232022
(in millions)
Investment in unconsolidated subsidiary(a)
$15 $13 
Receivable from affiliate(b)
$26 $33 
Property, plant and equipment(c)
$4 $ 
Other long-term liabilities - Contingent liability (related to Carbon TerraVault JV put and call rights)(d)
$51 $48 
(a)Reflects our investment less losses allocated to us of $6 million and $1 million for the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively.
(b)At September 30, 2023, the amount of $26 million includes $25 million remaining of Brookfield's initial contribution available to us and $1 million related to the MSA and vendor reimbursements. At December 31, 2022, the amount of $33 million includes $32 million remaining of Brookfield's initial contribution available to us and $1 million related to the MSA and vendor reimbursements.
(c)This amount includes the reimbursement to us for plugging and abandonment activities at the 26R reservoir.
(d)These amounts were included in other long-term liabilities on our condensed consolidated balance sheet. Our obligation due to repurchase features related to the 26R reservoir includes $5 million and $2 million of accrued interest at September 30, 2023 and December 31, 2022, respectively.

Three months ended September 30,Nine months ended September 30,
2023202220232022
(in millions)(in millions)
Loss from investment in unconsolidated subsidiary
$3 $ $6 $ 
General and administrative expenses(a)
$2 $ $5 $ 
(a)General and administrative expenses on our condensed consolidated statement of operations are net of this amount invoiced by us under the MSA for back-office operational and commercial services.
11



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).

NOTE 3    DEBT

As of September 30, 2023 and December 31, 2022, our long-term debt consisted of the following:

September 30,December 31,
20232022Interest RateMaturity
(in millions)
Revolving Credit Facility$ $ 
SOFR plus 2.50%-3.50%
ABR plus 1.50%-2.50%(a)
July 31, 2027(b)
Senior Notes595 600 7.125%February 1, 2026
Principal amount$595 $600 
Unamortized debt issuance costs(6)(8)
Long-term debt, net$589 $592 
(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 September 30, 2023, our Revolving Credit Facility consisted of a senior revolving loan facility with an aggregate commitment of $627 million. Our Revolving Credit Facility also included a sub-limit of $250 million for the issuance of letters of credit. As of September 30, 2023, $148 million letters of credit were issued to support ordinary course marketing, insurance, regulatory and other matters.

The amendments to our Revolving Credit Facility included, among other things:

extended the maturity date to July 31, 2027;
increased our ability to make certain restricted payments (such as dividends and share repurchases) and certain investments (including in our carbon management business);
released liens on certain assets securing the loans made under the Revolving Credit Facility, including our Elk Hills power plant;
permitted us to designate the entities that hold certain of our assets, including our Elk Hills power plant, as unrestricted subsidiaries subject to meeting certain conditions;
extended the period for which we can enter into hedges on our production from 48 months to 60 months; and
increased our capacity to issue letters of credit from $200 million to $250 million.

We also amended the interest rates and fees we pay under our Revolving Credit Facility. Interest is payable quarterly for ABR loans and at the end of the applicable interest period for term SOFR loans, but not less than quarterly. We also pay a commitment fee on unused capacity ranging from 37.5 to 50 basis points per annum, depending on the percentage of the commitment utilized.

On October 30, 2023, we further amended our Revolving Credit Facility. See Note 13 Subsequent Events for additional information regarding this amendment.

The borrowing base is redetermined semi-annually and was reaffirmed at $1.2 billion on October 30, 2023. 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.
12



At September 30, 2023, 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 2022 Annual Report.

Repurchases

In the three and nine months ended September 30, 2023, we repurchased $5 million in face value of our Senior Notes at par resulting in an insignificant extinguishment loss for the write-off of unamortized debt issuance costs. See Note 13 Subsequent Events for additional information on debt repurchases.

Fair Value

The fair value of our fixed-rate debt at September 30, 2023 and December 31, 2022 was approximately $598 million and $574 million, respectively. We estimate fair value based on known prices from market transactions (using Level 1 inputs on the fair value hierarchy).

NOTE 4    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 September 30, 2023 and December 31, 2022 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. Upon execution of a cost sharing agreement with former lessees, we will share in on-going maintenance costs during the pendency of the challenge to the BSEE order and have recognized a liability of $12 million included in accrued liabilities at September 30, 2023.

NOTE 5    DERIVATIVES

We maintain a commodity hedging program primarily focused on crude oil, and to a lesser extent natural gas, to help protect our cash flows from the volatility of commodity prices and to optimize margins for our marketing and trading activities. We did not have any derivative instruments designated as accounting hedges as of and for the three and nine months ended September 30, 2023 and 2022. Unless otherwise indicated, we use the term "hedge" to describe derivative instruments that are designed to implement our hedging strategy.

13


Summary of open derivative contracts on oilWe held the following Brent-based contracts as of September 30, 2023:

Q4
2023
Q1
2024
Q2
2024
Q3
2024
Q4
2024
2025
Sold Calls
Barrels per day5,747 23,650 30,000 30,000 29,000 19,748 
Weighted-average price per barrel$57.06 $90.00 $90.07 $90.07 $90.07 $85.63 
Swaps
Barrels per day27,094 9,000 7,750 7,750 5,500 3,374 
Weighted-average price per barrel$70.73 $79.37 $79.65 $79.64 $77.45 $72.66 
Net Purchased Puts(a)
Barrels per day5,747 30,584 30,000 30,000 29,000 19,748 
Weighted-average price per barrel$76.25 $67.27 $65.17 $65.17 $65.17 $60.00 
(a)Purchased puts and sold puts with the same strike price have been presented on a net basis.

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.
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.
Net purchased puts – we receive settlement payments for prices below the indicated weighted-average price per barrel.

Fair value of derivativesThe following tables present the fair values on a recurring basis of our outstanding commodity derivatives as of September 30, 2023 and December 31, 2022:
September 30, 2023
ClassificationGross Amounts at Fair ValueNettingNet Fair Value
(in millions)
  Other current assets, net
$19 $(17)$2 
  Other noncurrent assets44 (44) 
Current liabilities
(120)17 (103)
Noncurrent liabilities(81)44 (37)
$(138)$ $(138)

December 31, 2022
ClassificationGross Amounts at Fair ValueNettingNet Fair Value
(in millions)
  Other current assets, net(a)
$51 $(12)$39 
  Other noncurrent assets7  7 
Current liabilities(a)
(258)12 (246)
$(200)$ $(200)
(a)In addition to our Brent based derivative contracts in the table above, we held swaps as of December 31, 2022 for natural gas to secure a margin for future physical sales of natural gas related to our marketing and trading activities. The fair value of these natural gas hedges was $4 million included in current liabilities at December 31, 2022. There were no natural gas hedges at September 30, 2023.

14


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. We recognized fair value changes on derivative instruments each reporting period in net gain (loss) from commodity derivatives on our condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022. The changes in fair value result from the relationship between our existing positions, volatility, time to expiration, contract prices and the associated forward curves.

NOTE 6    INCOME TAXES

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

 Three months ended September 30,Nine months ended September 30,
 2023202220232022
(in millions)(in millions)
(Loss) income before income taxes
$(30)$579 $481 $644 
Current income tax provision32 16 89 37 
Deferred income tax (benefit) provision
(40)137 16 166 
Total income tax (benefit) provision
$(8)$153 $105 $203 

During the nine months ended September 30, 2022, we recognized a valuation allowance of $35 million for a portion of the tax loss on the sale of our Lost Hills assets, the deductibility of which was limited. During the nine months ended September 30, 2023, we recognized the benefit of this tax loss by releasing the valuation allowance after we jointly agreed to amend the original tax treatment with the buyer. See Note 7 Divestitures and Acquisitions for more information on our Lost Hills transaction.

Realization of our deferred tax assets is subjective and remains dependent on a number of factors including our ability to generate sufficient taxable income in future periods.

NOTE 7    DIVESTITURES AND ACQUISITIONS

Divestitures

Ventura Basin Transactions

In the three and nine months ended September 30, 2022, we recorded a gain of $2 million and $12 million, respectively, related to the sale of certain Ventura basin assets. 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 the fourth quarter of 2023. 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 September 30, 2023 and December 31, 2022. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 3 Divestitures and Acquisitions in our 2022 Annual Report for additional information on the Ventura basin transactions.

Lost Hills Transaction

During the first quarter of 2022, we sold our 50% non-operated working interest in certain horizons within our Lost Hills field, located in the San Joaquin basin, recognizing a gain of $49 million. We retained an option to capture, transport and store 100% of the CO2 from steam generators across the Lost Hills field for future carbon management projects until January 1, 2026. We also retained 100% of the deep rights and related seismic data.

Other

During the nine months ended September 30, 2023, we sold a non-producing asset in exchange for the assumption of liabilities recognizing a $7 million gain. During the nine months ended September 30, 2022, we sold non-core assets recognizing an insignificant loss.

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Acquisitions

During the nine months ended September 30, 2022, we acquired properties for carbon management activities for approximately $17 million. We intend to divest a portion of these assets and recognized 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 are classified as held for sale as of September 30, 2023 on our condensed consolidated balance sheet.

NOTE 8    STOCKHOLDERS' EQUITY

Share Repurchase Program

Our Board of Directors has authorized a Share Repurchase Program to acquire up to $1.1 billion of our common stock through June 30, 2024. 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, 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 September 30, 20221,921,181 $80 $41.78 
Three months ended September 30, 2023365,145 $20 $54.75 
Nine months ended September 30, 20225,845,082 $247 $42.29 
Nine months ended September 30, 20233,407,655 $143 $41.69 
Inception of Program (May 2021) through September 30, 202314,863,915 $604 $40.53 
Note: The total value of shares purchased includes approximately $1 million in the nine months ended September 30, 2023 related to excise taxes on share repurchases, which was effective beginning in 2023. Commissions paid were not significant in all periods presented.

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)
2023
Three months ended March 31, 2023
$20 $0.2825 
Three months ended June 30, 2023
20 $0.2825 
Three months ended September 30, 2023
19 $0.2825 
Nine months ended September 30, 2023
$59 
2022
Three months ended March 31, 2022
$13 $0.1700 
Three months ended June 30, 2022
13 $0.1700 
Three months ended September 30, 2022
13 $0.1700 
Nine months ended September 30, 2022
$39 

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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 13 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 September 30, 2023, we had outstanding warrants exercisable into 4,289,825 shares of our common stock (subject to adjustments pursuant to the terms of the warrants). During the three and nine months ended September 30, 2023, we issued 1,958 and 2,179 shares of our common stock, respectively, in exchange for warrants. During the three and nine months ended September 30, 2022, 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 11 Stockholders' Equity in our 2022 Annual Report for additional information on the terms of our warrants.

NOTE 9    EARNINGS PER SHARE

Basic and diluted earnings per share (EPS) were calculated using the treasury stock method for the three and nine months ended September 30, 2023 and 2022. 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.

The following table presents the calculation of basic and diluted EPS, for the three and nine months ended September 30, 2023 and 2022:

Three months ended September 30,Nine months ended September 30,
2023202220232022
(in millions, except per-share amounts)
Numerator for Basic and Diluted EPS
Net (loss) income
$(22)$426 $376 $441 
Denominator for Basic EPS
Weighted-average shares68.7 74.1 69.9 76.4 
Potential Common Shares, if dilutive:
Warrants 0.7 0.8 0.7 
Restricted Stock Units 0.8 1.0 0.7 
Performance Stock Units 0.7 0.9 0.7 
Denominator for Diluted EPS
Weighted-average shares68.7 76.3 72.6 78.5 
EPS
Basic $(0.32)$5.75 $5.38 $5.77 
Diluted$(0.32)$5.58 $5.18 $5.62 

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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 September 30,Nine months ended September 30,
2023202220232022
(in millions)
Shares issuable upon exercise of warrants
4.3    
Shares issuable upon settlement of RSUs1.3    
Shares issuable upon settlement of PSUs1.6    
Total antidilutive shares7.2    

NOTE 10    SUPPLEMENTAL ACCOUNT BALANCES

Revenues — We derive most of our revenue from sales of oil, natural gas and natural gas liquids (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 September 30,Nine months ended September 30,
2023202220232022
(in millions)
Oil$402 $494 $1,154 $1,527 
Natural gas61 120 367 294 
NGLs47 66 151 205 
Oil, natural gas and NGL sales$510 $680 $1,672 $2,026 

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:
September 30,December 31,
20232022
(in millions)
Materials and supplies$67 $56 
Finished goods4 4 
Inventories$71 $60 

Other current assets, netOther current assets, net include the following:
September 30,December 31,
20232022
(in millions)
Net amounts due from joint interest partners(a)
$43 $39 
Fair value of commodity derivative contracts2 39 
Prepaid expenses16 17 
Greenhouse gas allowances14  
Natural gas margin deposits3 16 
Income tax receivable2 10 
Other17 12 
Other current assets, net$97 $133 
(a)Included in the September 30, 2023 and December 31, 2022 net amounts due from joint interest partners are allowances of $1 million.

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Other noncurrent assets Other noncurrent assets include the following:
September 30,December 31,
20232022
(in millions)
Operating lease right-of-use assets$68 $73 
Deferred financing costs - Revolving Credit Facility12 6 
Emission reduction credits 11 11 
Prepaid power plant maintenance33 28 
Fair value of commodity derivative contracts 7 
Deposits and other 12 15 
Other noncurrent assets$136 $140 

Accrued liabilitiesAccrued liabilities include the following:
September 30,December 31,
20232022
(in millions)
Employee-related costs$78 $49 
Taxes other than on income49 32 
Asset retirement obligations91 59 
Interest8 19 
Operating lease liability13 18 
Premiums due on commodity derivative contracts24 58 
Liability for settlement payments on commodity derivative contracts37 33 
Amounts due under production-sharing contracts15  
Signal Hill maintenance12 8 
Other35 22 
 Accrued liabilities$362 $298 

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

September 30,December 31,
20232022
(in millions)
Compensation-related liabilities$37 $36 
Postretirement benefit plan32 33 
Operating lease liability53 52 
Fair value of commodity derivative contracts
37  
Premiums due on commodity derivative contracts13 8 
Contingent liability (related to Carbon TerraVault JV put and call rights)51 48 
Other8 8 
Other long-term liabilities$231 $185 

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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 to the Carbon TerraVault JV. See Note 2 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV.

Three months ended September 30,Nine months ended September 30,
2023202220232022
(in millions)(in millions)
Exploration and production, corporate and other
$61 $54 $191 $153 
Carbon management business
4 5 10 10 
Total general and administrative expenses$65 $59 $201 $163 

Other operating expenses, netThe table below shows other operating expenses, net for our exploration and production business (including unallocated corporate overhead and other) separately from our carbon management business. Carbon management expenses include lease cost for carbon sequestration easements, advocacy, and other startup related costs.

In August 2023, we implemented organizational changes that resulted in a headcount reduction of 75 employees. As a result, we recognized a charge of $7 million in other operating expenses, net on the condensed consolidated statement of operations for the three months ended September 30, 2023, primarily related to severance benefits. For the nine months ended September 30, 2023, we recognized a severance charge of $10 million.

Three months ended September 30,Nine months ended September 30,
2023202220232022
(in millions)(in millions)
Exploration and production, corporate and other
$19 $2 $41 $25 
Carbon management business
9 3 21 3 
Total other operating expenses, net$28 $5 $62 $28 

NOTE 11    SUPPLEMENTAL CASH FLOW INFORMATION

We paid $29 million and $80 million of U.S. federal and state income tax payments during the three and nine months ended September 30, 2023, respectively. We paid $20 million of U.S. federal income tax payments during the three and nine months ended September 30, 2022. No state income tax payments were made in the three and nine months ended September 30, 2022.

Interest paid, net of capitalized amounts, was $22 million for the three months ended September 30, 2023 and $44 million for the nine months ended September 30, 2023. Interest paid, net of capitalized amounts, was $21 million for the three months ended September 30, 2022 and $43 million for the nine months ended September 30, 2022. Interest income was $5 million and $14 million for the three and nine months ended September 30, 2023, respectively.

Non-cash investing activities in the three and nine months ended September 30, 2023 included $4 million and $7 million, respectively, related to our share of capital calls by the Carbon TerraVault JV. For the three and nine months ended September 30, 2022, we made a non-cash contribution of $2 million to the Carbon TerraVault JV to satisfy a capital call. See Note 2 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV.

20


Non-cash financing activities in the three and nine months ended September 30, 2023 included $1 million and $2 million, respectively, for dividends accrued for stock-based compensation. For the three and nine months ended September 30, 2022 dividends accrued for stock-based compensation awards was $1 million. Non-cash financing activities in the nine months ended September 30, 2023 also included approximately $1 million related to an excise tax on share repurchases that we expect will be paid in 2024.

NOTE 12    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 September 30, 2023 and December 31, 2022 and the condensed consolidating statements of operations for the three and nine months ended September 30, 2023 and 2022, 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.

Condensed Consolidating Balance Sheets
As of September 30, 2023 and December 31, 2022

As of September 30, 2023
ParentCombined Unrestricted SubsidiariesCombined Restricted SubsidiariesEliminationsConsolidated
(in millions)
Total current assets
$488 $27 $414 $ $929 
Total property, plant and equipment, net
13 7 2,702  2,722 
Investments in consolidated subsidiaries2,315 (12)1,434 (3,737) 
Deferred tax asset150    150 
Investment in unconsolidated subsidiary 15   15 
Other assets13 30 93  136 
TOTAL ASSETS$2,979 $67 $4,643 $(3,737)$3,952 
Total current liabilities109