California Resources Corporation Announces First Quarter 2019 Results

Source Press Release
Company California Resources Corporation 
Tags Asset Deals, Deals, Bakken, Unconventional Resources, Financial & Operating Data, Hedging, Upstream Activities, Strategy - Upstream, Capital Spending, Guidance, Strategy - Corporate
Date May 02, 2019

California Resources Corporation (NYSE: CRC), an independent California-based oil and gas exploration and production company, today reported a net loss attributable to common stock (CRC net loss) of $67 million, or $1.38 per diluted share, for the first quarter of 2019. Adjusted net income1 for the first quarter of 2019 was $31 million, or $0.63 per diluted share. Operational and financial highlights for the first quarter of 2019 are as follows:

Highlights

  • Reported adjusted EBITDAX1 of $301 million; an adjusted EBITDAX margin1 of 38%; an adjusted EBITDAX per BOE1 of $25.13, which was the highest since 2015; net cash provided by operating activities of $158 million
  • First quarter 2019 average daily production of 133,000 barrels of oil equivalent (BOE) per day, an 8% increase over the prior year period; oil production increased 9% over the prior year period
  • Invested $138 million of total capital, including internally funded capital of $104 million
  • Drilled 42 wells with internally funded capital and 18 wells with JV capital
  • Sold a 50% working interest and transferred operatorship in portions of a field for consideration in excess of $200 million, consisting of approximately $168 million in cash and a carried 200-well development program, for a valuation of $88,000 per flowing barrel including the carry

Todd Stevens, CRC's President and Chief Executive Officer, said, "CRC began 2019 with a solid first quarter that highlighted our value-driven, dynamic capital allocation. We generated strong cash flow, benefiting from the high quality, low risk and long life of CRC's resource base, as well as our ability to quickly adapt operating and capital plans to capture value across various price environments. To further accelerate value, we recently sold an interest in our shallow production in the Lost Hills field, which garnered more than $200 million consisting of $168 million in cash, in addition to a 100% carry on a 200-well development program worth at least $35 million. The sale represents a 'win-win' that provides cash to fund our ongoing balance sheet strengthening efforts, while retaining a significant upside in the future development by the new operator. We will continue to seek strategic opportunities through the drill bit and through accretive transactions using our diverse portfolio that unlock shareholder value and strengthen our balance sheet."

First Quarter 2019 Results

For the first quarter of 2019, CRC reported a net loss attributable to common stock of $67 million, or $1.38 per diluted share, compared to a loss of $2 million, or $0.05 per diluted share for the same period of 2018. Adjusted net income1 for the first quarter of 2019 was $31 million, or $0.63 per diluted share, compared with adjusted net income1 of $8 million, or $0.18 per diluted share for the same prior year period. First quarter of 2019 adjusted net income1 excluded $97 million of non-cash derivative losses on commodity contracts, a $3 million non-cash derivative loss from interest-rate contracts as well as a net gain of $6 million on debt repurchases and $4 million of unusual and infrequent items.

EBITDAX for the first quarter of 2019 was $301 million and cash provided by operating activities was $158 million, which included interest payments of $72 million.

Total daily production volumes increased 8% year-over-year, from 123,000 BOE per day for the first quarter of 2018 to 133,000 BOE per day for the first quarter of 2019. Total daily production for 2019 included volumes from the Elk Hills transaction, which was completed in the second quarter of 2018. Oil volumes averaged 84,000 barrels per day, NGL volumes averaged 15,000 barrels per day and gas volumes averaged 202,000 thousand cubic feet (MCF) per day.

Realized crude oil prices, including the effect of settled hedges, increased by $2.51 per barrel from the first quarter of 2018 to $65.28 per barrel in the first quarter of 2019 primarily due to settled hedges that increased our realized crude oil prices by $1.98 per barrel. Realized NGL prices were $42.52 per barrel. Realized natural gas prices were $3.43 per MCF for the first quarter of 2019, $0.62 higher than the same prior-year period primarily due to higher winter demand.

Production costs for the first quarter of 2019 were $233 million compared to $212 million for the first quarter of 2018. The increase is attributable to the Elk Hills transaction, cash-settled stock-based compensation, energy costs and other items.

General and administrative (G&A) expenses were $83 million for the first quarter of 2019 compared to $63 million for the same prior-year period. CRC's cash-settled stock-based compensation expense increased approximately $7 million due to the increase in the Company's stock price in the first quarter of 2019. Additionally, 2019 G&A expenses increased by approximately $3 million as certain costs are no longer collected from CRC's former working interest partner following the Elk Hills transaction.

CRC reported taxes other than on income of $41 million for the first quarter of 2019 compared to $38 million for the same prior year period. Exploration expense was $10 million for the first quarter of 2019, $2 million higher in the first quarter of 2019 than the same prior-year period due to an increased exploration budget.

CRC's internally funded capital investment for the first quarter of 2019 totaled $104 million, of which $93 million was directed to drilling and capital workovers. CRC's JV partner Benefit Street Partners (BSP) also invested $27 million, which is included in CRC's consolidated results. CRC's JV partner Macquarie Infrastructure and Real Assets Inc. (MIRA) invested an additional $7 million, which is excluded from CRC's consolidated results.

Operational Update

In the first quarter of 2019, CRC operated an average of 7 drilling rigs with 2 rigs focused on conventional primary production, 2 on waterfloods, 1 on steamfloods and 2 on unconventional production. With total invested capital, we drilled 52 development wells and 8 exploration wells (40 steamflood, 9 waterflood, 5 primary and 6 unconventional). Steamfloods and waterfloods have different production profiles and longer response times than typical conventional wells and, as a result, the full production contribution may not be experienced in the same period that the well is drilled. The San Joaquin basin produced approximately 97,000 BOE per day and operated six rigs. The Los Angeles basin contributed 25,000 BOE per day of production and operated one rig directed toward waterflood projects. The Ventura and Sacramento basins, where we had no active drilling program, produced 6,000 BOE per day and 5,000 BOE per day, respectively.

2019 Capital Budget

CRC’s internally funded investments will be largely directed to short payout projects, such as primary drillingand capital workovers, and low-risk projects including waterflood and steamflood investments that maintain base production. CRC estimates its 2019 internally funded capital program will range from $300 million to $385 million, which may be adjusted during the course of the year depending on commodity prices. CRC obtained an additional $50 million investment from BSP during the first quarter of 2019 and continues discussions to obtain additional investments from new and existing JVs to achieve a total capital budget of approximately $500 million.

Strategic Asset Divestiture

On May 1, 2019 CRC sold 50% of our working interest and transferred operatorship in certain zones in our Lost Hills field in the San Joaquin Basin for total consideration in excess of $200 million, consisting of approximately $168 million in cash and a carried 200 well development program to be drilled through 2023 with an estimated minimum value of $35 million. The cash proceeds were used to pay down the revolver and CRC benefits from accelerated development from the drilling carry.

Balance Sheet and Credit Facility Update

Effective May 1, 2019, CRC's borrowing base under its 2014 Credit Agreement was reaffirmed at $2.3 billion. Following the closing of the Lost Hills transaction, pro forma total debt outstanding was $5.1 billion, down $168 million from March 31, 2019, bringing total availability on the Company's revolver to over $420 million before the minimum liquidity requirement.

During the first quarter of 2019, CRC repurchased $18 million in aggregate principal amount of CRC's Second Lien Notes for $14 million.

Hedging Update

CRC continues to implement an opportunistic hedging program to protect its cash flow, operating margins and capital program, while maintaining adequate liquidity. For the second quarter of 2019, CRC has protected its downside price risk on approximately 40,000 barrels per day at approximately $70 Brent. For the third and fourth quarters of 2019, CRC has protected the downside price risk on approximately 40,000 and 35,000 barrels per day at approximately $73 Brent and $76 Brent, respectively. The underlying instruments in our 2019 hedge program are puts and put spreads that provide full upside to oil price movements. For the first and second quarters of 2020, CRC has protected the downside risk of approximately 25,000 and 15,000 barrels per day at approximately $72 Brent and $70 Brent, respectively. CRC's 2019 and 2020 put spreads provide downside price protection until Brent prices drop to between $55 and $60 per barrel, at which point we receive Brent plus approximately $15 per barrel. See Attachment 7 for more details.

1 See Attachment 3 for non-GAAP financial measures of adjusted EBITDAX, adjusted EBITDAX margin, adjusted EBITDAX per BOE, production costs (excluding the effects of PSC-type contracts) and adjusted net income (loss), including reconciliations to their most directly comparable GAAP measure, where applicable.

Conference Call Details

To participate in today’s conference call scheduled for 5:00 P.M. Eastern Daylight Time, either dial (877) 328-5505 (International calls please dial +1 (412) 317-5421) or access via webcast at , fifteen minutes prior to the scheduled start time to register. Participants may also pre-register for the conference call at . A digital replay of the conference call will be archived for approximately 30 days and supplemental slides for the conference call will be available online in the Investor Relations section of .

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd