California Resources Corporation Announces Fourth Quarter 2019 and Full Year Results

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 of $67 million, or $1.36 per diluted share, for the fourth quarter of 2019. Adjusted net income¹ for the fourth quarter of 2019 was $36 million, or $0.73 per diluted share. For the full year of 2019, CRC reported a net loss attributable to common stock of $28 million, or $0.57 per diluted share. Adjusted net income¹ for the full year of 2019 was $70 million, or $1.40 per diluted share. Operational and financial highlights for the fourth quarter and full year of 2019 were as follows:

Quarterly Highlights

• Reported adjusted EBITDAX¹ of $308 million; adjusted EBITDAX margin¹ of 45%; net cash provided by operating activities of $136 million; free cash flow¹ of $74 million after internally funded capital
• Implemented a more efficient organizational design, resulting in anticipated ongoing annual cost savings of approximately $50 million with slightly more than 50% in general and administrative (G&A) expenses and the remainder in production costs
• Delivered average net production of 123,000 barrels of oil equivalent (BOE) per day including 76,000 barrels per day of oil
• Gross-operated field production, which includes production attributable to our JV partners, was 141,000 BOE per day, of which 91,000 barrels per day was oil
• Invested $146 million of total capital, including $62 million of internally funded capital
• Drilled 104 wells in total, including 95 wells in the San Joaquin basin and 9 wells in the Los Angeles basin
• Repurchased $23 million face value of Second Lien Notes for $7 million

Full Year Highlights

• Reduced net debt to below $5.0 billion, with a net debt/adjusted EBITDAX¹ ratio of 4.3
• Reported adjusted EBITDAX¹ of $1,142 million and an adjusted EBITDAX margin¹ of 41%
• Delivered free cash flow after internally funded capital¹ of $269 million and net cash provided by operating activities of $676 million
• Produced an average of 128,000 BOE per day on a net basis including 80,000 barrels per day of oil
• Drilled 294 wells, including 126 wells with internally funded capital
• Invested $612 million of total capital, including internally funded capital of $407 million, of which $302 million was directed to drilling and workovers
• Entered into a development joint venture with Alpine Energy Capital, LLC ("Alpine") to develop CRC's flagship Elk Hills field
• Secured a credit agreement amendment to provide future flexibility in connection with potential royalty transactions

Todd A. Stevens, CRC's President and Chief Executive Officer, commented, “We are extremely proud that we reduced our outstanding net debt at year end below $5 billion. We believe our announced exchange transaction could reduce our debt by almost $1 billion and is one of several steps moving towards our target leverage ratio below 3x. In 2019, we received strong confirmation of our ESG and operational efforts, including earning a Leadership Level ranking of A- on our climate disclosure from CDP and achieving a noteworthy safety record of no recordable injuries among our employees during the year.”

Stevens continued, “Our VCI metric instills capital discipline and provides for consistent and effective capital allocation. In 2019, we advanced CRC’s capital investment plans by entering into our third major development joint venture, with Alpine Energy Capital committing up to $500 million of investments in our flagship Elk Hills field. We also increased our adjusted EBITDAX margins in 2019 for the third year in a row by optimizing our operations and consolidating our organization.”

“Further, our decision to utilize more JV capital in the fourth quarter instead of internally funded capital, plus impacts from power outages and fires, led CRC’s net production to the low end of our production guidance. We are entering 2020 with an internally funded capital program of $100 to $300 million, which we will adjust as warranted based on market conditions. We expect our JV capital program in Elk Hills will increase our total capital program by $160 to $200 million to support a total 2020 capital program of approximately $260 to $500 million.”

Fourth Quarter 2019 Results

For the fourth quarter of 2019, CRC reported a net loss attributable to common stock (CRC net loss) of $67 million, or $1.36 per diluted share, compared to net income attributable to common stock of $346 million, or $7.00 per diluted share, for the same period of 2018. Adjusted net income¹ for the fourth quarter of 2019 was $36 million, or $0.73 per diluted share, compared to $26 million, or $0.53 per diluted share, for the same period in 2018. Fourth quarter 2019 adjusted net income¹ excluded a net gain of $18 million on debt repurchases, non-cash losses on commodity derivatives of $67 million, $45 million for severance and termination benefits and other losses of $9 million, net, for other unusual and infrequent items. Fourth quarter 2018 adjusted net income¹ excluded $295 million of non-cash derivative gains on commodity contracts, a $6 million non-cash derivative loss from interest-rate contracts and a net gain of $31 million on debt repurchases.

Adjusted EBITDAX¹ for the fourth quarter of 2019 was $308 million and cash provided by operating activities was $136 million.

Total daily net production volumes decreased 10% year-over-year, from 136,000 BOE per day for the fourth quarter of 2018 to 123,000 BOE per day for the fourth quarter of 2019. The decrease over the same prior-year period was due to the Lost Hills divestiture, lower capital investment, power outages and other factors. The Lost Hills divestiture reduced our fourth quarter 2019 production by approximately 2,000 BOE per day compared to the same quarter of 2018. Oil volumes in the fourth quarter of 2019 averaged 76,000 barrels per day, NGL volumes averaged 15,000 barrels per day and natural gas volumes averaged 190 million cubic feet per day.

Despite lower Brent index prices, our realized crude oil prices, including the effect of settled hedges, increased by $10.24 per barrel from $59.97 in the fourth quarter of 2018 to $70.21 per barrel in the fourth quarter of 2019. In the fourth quarter of 2019, hedge settlements increased our realized crude oil prices by $5.99 per barrel compared to a reduction of $6.15 per barrel in the same prior-year period. Realized NGL prices were $33.81 per barrel, down $9.75 per barrel over the prior-year period as local and national markets continued to experience excess domestic supply coupled with weaker demand due to Los Angeles and Bay area refinery downtimes. Realized natural gas prices were $3.00 per thousand cubic feet (Mcf) for the fourth quarter of 2019, $0.77 per Mcf lower than the same prior-year period due to milder winter temperatures across the U.S. and fewer infrastructure constraints within local California markets in 2019 compared to 2018.

Production costs for the fourth quarter of 2019 were $211 million, compared to $233 million for the fourth quarter of 2018. The decrease was primarily due to cost savings from our workforce reduction, the Lost Hills divestiture and lower downhole maintenance activity, partially offset by higher energy prices. On a per barrel basis, for the same comparative periods, production costs were $18.67 and $18.61, respectively. Excluding the effect of PSC-type contracts, production costs on a per barrel basis¹ for 2019 and 2018 would have been $17.32 and $17.44, respectively.

G&A expenses were $62 million for the fourth quarter of 2019, compared to $65 million for the same prior-year period. The decrease was primarily attributable to the workforce reduction that was implemented in the fourth quarter of 2019 and consolidating our office space, partially offset by equity compensation expense resulting from movements in our stock price.

CRC reported taxes other than on income of $38 million for the fourth quarter of 2019, compared to $29 million for the same prior-year period. Exploration expense was $4 million for the fourth quarter of 2019, $12 million lower than the $16 million reported in same prior-year period due to lower activity.

Total capital invested during the fourth quarter of 2019 was $146 million, within our guidance. CRC internally funded $62 million, of which $45 million was directed to drilling and capital workovers. CRC's JV partners Macquarie Infrastructure and Real Assets Inc. (MIRA) and Alpine invested an additional $13 million and $71 million, respectively, which are excluded from CRC's consolidated results.

Cash provided by operating activities for the fourth quarter of 2019 was $136 million and free cash flow¹ was $74 million after taking into account CRC's internally funded capital.

Full Year 2019 Results

For the full year of 2019, CRC net loss was $28 million, or $0.57 per diluted share, compared to a net income attributable to common stock of $328 million, or $6.77 per diluted share, for 2018. Including hedge settlements, the 2019 results reflected higher year-over-year oil and natural gas sales despite a lower oil price environment. Adjusted net income¹ for 2019 was $70 million, or $1.40 per diluted share, compared with an adjusted net income¹ of $61 million, or $1.27 per diluted share, for 2018. The 2019 adjusted net income¹ excluded $166 million of non-cash derivative losses, a net gain of $126 million from debt repurchases, $47 million in severance and termination benefits and a net $11 million charge related to other unusual and infrequent items. Adjusted net income¹ for 2018 excluded $224 million on non-cash derivative gains, a net gain of $57 million from debt repurchases, $4 million in severance and termination benefits and a net $10 million charge related to other unusual and infrequent items.

Total daily net production volumes averaged 128,000 BOE per day for full year 2019, compared with 132,000 BOE per day for 2018, a decrease of 3 percent. The 2018 volumes reflect three quarters of production from the April 2018 Elk Hills acquisition. The 2019 volumes reflect the effect of the strategic Lost Hills divestiture that occurred in May 2019.

In 2019, realized crude oil prices, including the effect of settled hedges, increased $6.05 per barrel to $68.65 per barrel from $62.60 per barrel in 2018. Settled hedges increased 2019 realized crude oil prices by $3.82 per barrel, compared with a reduction of $7.51 per barrel for the same period in 2018. Realized NGL prices decreased 27 percent, or $11.96 per barrel to $31.71 per barrel in 2019 from $43.67 per barrel in 2018. Realized natural gas prices decreased $0.13 per Mcf to $2.87 per Mcf, compared with $3.00 per Mcf in 2018, largely due to increased national supply and milder weather in 2019.

Production costs for full year 2019 were $895 million, or $19.16 per BOE, compared to $912 million, or $18.88 per BOE, in 2018. The decrease in total production costs was primarily attributable to the Lost Hills divestiture along with the effect of the workforce reduction and lower downhole maintenance activity, while per unit costs increased with the decline in total production. Per unit production costs, excluding the effect of PSCs¹, were $17.70 and $17.47 per BOE for 2019 and 2018, respectively.

G&A expenses for the full year of 2019 were $290 million, compared to $299 million in the same prior-year period, with the decrease largely due to lower equity compensation expense in 2019 as a result of a lower stock price and a reduction in headcount in the fourth quarter of 2019.

Taxes other than on income were $157 million for 2019 compared to $149 million in 2018. Exploration expense of $29 million for 2019 was 15 percent lower than the $34 million in 2018.

CRC's internally funded capital investment in 2019 totaled $407 million, of which $302 million was directed to drilling and capital workovers. CRC's JV partners invested $205 million in 2019, all of which was directed to drilling. Of our JV partners' investment, BSP invested $48 million which is included in CRC's consolidated results.

Cash provided by operating activities for the full year of 2019 was $676 million and free cash flow¹ was $269 million after taking into account CRC's internally funded capital.

Operational Update

In the fourth quarter of 2019, CRC operated an average of eight drilling rigs, with two on primary, one on waterfloods, one on steamfloods and four on unconventional production. With total invested capital, we drilled 104 development wells (41 primary, 14 waterflood, 32 steamflood, and 17 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 91,000 net BOE per day and operated seven rigs. The Los Angeles basin contributed 23,000 net BOE per day of production and operated one rig directed toward waterflood projects. The Ventura basin produced 4,000 net BOE per day and the Sacramento basin produced 5,000 net BOE per day, both with no active drilling program.

2020 Capital Budget

CRC expects its 2020 internally funded capital program will range from $100 million to $300 million. CRC anticipates JV investment of $160 to $200 million for 2020. CRC anticipates a total capital program of approximately $260 to $500 million for the year. At current prices, CRC's capital plan will target the lower end of the guidance range. CRC's 2020 capital is focused on oil and largely directed to short payout projects like capital workovers, especially in the first half of the year, as well as primary drilling of both vertical and lateral wells and low-risk projects including waterflood and steamflood investments that maintain base production.

Repurchases and Balance Sheet Update

During the fourth quarter of 2019, CRC repurchased $23 million in face value of Second Lien Notes for $7 million. The aggregate face value repurchased since the Second Liens were issued is $442 million to-date, including $183 million in 2018, $252 million in 2019 and $7 million in 2020. Net debt outstanding at the end of the fourth quarter was under $5.0 billion.

The borrowing base under the Company's 2014 Revolving Credit Facility was reconfirmed effective November 1, 2019 at $2.3 billion.

On February 20, 2020, CRC launched an offer to exchange a significant portion of its Second Lien Notes and senior notes into notes and equity interests in a new entity that holds a royalty interest in the Elk Hills unit, and a new first lien last out term loan and warrants convertible into CRC's common stock. The Elk Hills unit comprises approximately 98% by acreage and 98% by production of our Elk Hills field. If fully subscribed, the transaction would have the effect of reducing CRC's net debt by almost $1 billion. The transaction is expected to close March 20, 2020.

Hedging Update

CRC continues to execute an opportunistic hedging program to protect its cash flow, operating margins and capital program, while maintaining adequate liquidity. For the first and second quarters of 2020, CRC has protected the downside risk of 30,000 and 20,000 barrels of oil per day at approximately $71 Brent and $68 Brent, respectively. These put spreads provide downside price protection when Brent prices drop below $57 and $54 per barrel in the first and second quarters, respectively, at which point CRC receives Brent plus approximately $14 per barrel. CRC also entered into a swap for 5,000 barrels of oil per day in the second quarter of 2020 at approximately $70 Brent, which may be increased by another 5,000 barrels per day at the same price at the option of the counterparties. For the third and fourth quarters of 2020, CRC has protected the downside risk of 13,000 and 8,000 barrels of oil per day, respectively, at $65 per barrel. These put spreads provide downside protection when Brent prices drop below approximately $54 and $53 per barrel in the respective quarters, at which point CRC receives Brent plus approximately $11 and $12 per barrel in the respective quarters. CRC also entered into a swap at a price of $65 Brent and sold a put at a price of $55 per barrel on 5,000 barrels of oil per day for the third and fourth quarters of 2020. For these hedges, CRC will receive $65 per barrel at all prices except when Brent drops below $55 per barrel, where CRC will receive Brent plus $10 per barrel. These swaps may be increased by another 5,000 barrels per day at the same price at the option of the counterparty. See Attachment 9 for more details.

Sustainability Performance

In 2019, CRC met or surpassed its health, safety and environmental metrics published in its 2019 Proxy. CRC's workforce achieved the best-ever injury and illness incidence rate in its operations in 2019 with zero employee recordable events and an overall rate including contractors of 0.34 recordable events per 200,000 hours worked, which is better than office-based occupations such as radio broadcasters, insurance agents and stockbrokers according to the most recent U.S. Bureau of Labor Statistics data. CRC also surpassed its environmental stewardship targets for spill prevention and water conservation, and delivered more than three gallons of reclaimed water to agriculture for every gallon of fresh water CRC purchased in 2019.

In addition to attaining CDP's Leadership Level for climate disclosure, CRC made continued progress in 2019 toward its quantitative 2030 Sustainability Goals for water recycling, renewables integration, methane emission reduction and carbon capture and sequestration that align directly with the State's long-term goals. For 2020, CRC has adopted additional annual sustainability metrics for incentive compensation that incorporate specific milestones for sustainability projects, workforce diversity and development, and community partnerships that will be summarized in CRC's 2020 Proxy.

¹ See Attachment 3 for non-GAAP financial measures of adjusted EBITDAX, adjusted EBITDAX margin, production costs (excluding effects of PSC-type contracts), adjusted net income (loss) and free cash flow after internally funded capital, including reconciliations to their most directly comparable GAAP measure, where applicable.

Conference Call Details

To participate in the conference call scheduled for February 26th, 2020 at 5:00 P.M. Eastern Standard Time, either dial (877) 328-5505 (International calls please dial +1 (412) 317-5421) or access via webcast at www.crc.com, fifteen minutes prior to the scheduled start time to register. Participants may also pre-register for the conference call at http://dpregister.com/10137361. 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 www.crc.com.

About California Resources Corporation

California Resources Corporation is the largest oil and natural gas exploration and production company in California on a gross-operated basis. CRC operates its world-class resource base exclusively within the State of California, applying complementary and integrated infrastructure to gather, process and market its production. Using advanced technology, California Resources Corporation focuses on safely and responsibly supplying affordable energy for California by Californians.

Forward-Looking Statements

This presentation contains forward-looking statements that involve risks and uncertainties that could materially affect CRC's expected results of operations, liquidity, cash flows and business prospects. Such statements include those regarding CRC's expectations as to its future:

• financial position, liquidity, cash flows and results of operations
• business prospects
• transactions and projects
• operating costs
• Value Creation Index (VCI) metrics, which are based on certain estimates including future production rates, costs and commodity prices
• operations and operational results including production, hedging and capital investment
• budgets and maintenance capital requirements
• reserves
• type curves
• expected synergies from acquisitions and joint ventures

Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. While CRC believes assumptions or bases underlying its expectations are reasonable and makes them in good faith, they almost always vary from actual results, sometimes materially. CRC also believes third-party statements it cites are accurate, but has not independently verified them and does not warrant their accuracy or completeness. Factors (but not necessarily all the factors) that could cause results to differ include:

• commodity price changes
• debt limitations on CRC's financial flexibility
• insufficient cash flow to fund planned investments, debt repurchases or changes to our capital plan
• inability to enter into desirable transactions, including acquisitions, asset sales and joint ventures
• legislative or regulatory changes, including those related to drilling, completion, well stimulation, operation, inspection, maintenance or abandonment of wells or facilities, managing energy, water, land, greenhouse gases or other emissions, protection of health, safety and the environment, or transportation, marketing and sale of CRC's products
• joint ventures and acquisitions and CRC's ability to achieve expected synergies
• the recoverability of resources and unexpected geologic conditions
• incorrect estimates of reserves and related future cash flows and the inability to replace reserves
• changes in business strategy
• PSC effects on production and unit production costs
• effect of stock price on costs associated with incentive compensation
• insufficient capital or liquidity, including as a result of lender restrictions, the unavailability of capital markets or inability to attract potential investors
• effects of hedging transactions
• equipment, service or labor price inflation or unavailability
• availability or timing of, or conditions imposed on, permits and approvals
• lower-than-expected production, reserves or resources from development projects, joint ventures or acquisitions, or higher-than-expected decline rates
• disruptions due to accidents, mechanical failures, power outages, transportation or storage constraints, natural disasters, pandemics, labor difficulties, cyber attacks or other catastrophic events
• factors discussed in “Item 1A - Risk Factors” in CRC's Annual Report on Form 10-K available on its website at crc.com.

Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "target, "will" or "would" and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made and CRC undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Note: MBbl/d refers to thousands of barrels per day; MMcf/d refers to millions of cubic feet per day; MBoe/d refers to thousands of barrels of oil equivalent (Boe) per day. Natural gas volumes have been converted to Boe based on the equivalence of energy content of six thousand cubic feet of natural gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence.