Company Details Strategic Approach to Deliver Long-Term, Value-Driven
Growth and Issues Preliminary Third Quarter and Year-to-Date 2018
Financial and Activity Estimates
California Resources Corporation (NYSE: CRC) will host its 2018 Analyst
& Investor Day today Wednesday, October 3, 2018 from 8:30 a.m. to
approximately 11:45 a.m. EDT in New York, New York.
Todd A. Stevens, CRC’s President and Chief Executive Officer, said, “CRC
adheres to a strategic approach to deliver value-driven results
throughout our assets and operations. Our diverse portfolio of
conventional assets provide robust and competitive returns while our
laser-focus on operational excellence captures synergies and
efficiencies to drive margins across our core and growth areas. As we
align our business with mid-cycle pricing, we remain committed to our
strategic priority of a disciplined VCI-based capital allocation
designed to accelerate value creation. We remain focused on thoughtfully
developing our stacked pay reservoirs and leveraging our infrastructure
to increase crude oil production and drive both margin expansion and
cash flow to further strengthen our financial position. To drive
shareholder value, CRC will continue to be guided by our core principle
of living within cash flow, and will target 10% to 15% of discretionary
cash annually toward ongoing balance sheet strengthening.”
CRC’s Value-Driven Strategic Approach
At this investor meeting, senior management will provide additional
detail regarding CRC’s strategic approach to deliver value-driven growth
over the near and long term. Highlights of the Company’s strategic
priorities and value creation efforts include:
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Capturing the value of CRC’s diverse portfolio of assets through
value-driven production and deliberate delineation. CRC’s deep
operating knowledge and expertise and detailed life-of-field plans
generate a strong pipeline of actionable projects and enhance its
already substantial reserves inventory. CRC will also showcase 731
million BOE of proved reserves, based on 2018 mid-year estimates as
audited by Ryder Scott. These reserves were 73% crude oil, consisting
of 72% proved developed.
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Ensuring effective and disciplined capital allocation and attractive
competitive returns by applying CRC’s value creation index (VCI) on a
fully burdened basis to prioritize our inventory of core, growth and
workover opportunities. CRC’s 2019 capital planning budget will
allocate approximately 60% to drilling and completions in core and
growth areas, 15% to workovers, 20% to facilities, and approximately
5% to exploration.
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Driving operational excellence through the application of technology,
streamlined processes, consolidation and innovative approaches, as
well as CRC’s unique and differentiated midstream infrastructure, to
enhance margin performance. The Company expects the combination of its
world-class assets, disciplined capital allocation and operational
excellence to deliver double-digit EBITDAX growth at $75 Brent.
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Strengthening the balance sheet by pursuing an “all of the above”
approach to simplify CRC’s capital structure, reduce fixed charges,
enhance financial metrics and reduce absolute levels of debt. The
Company will continue to balance capital investment into high VCI
projects and align with its deleveraging goals. Accordingly, CRC will
target 10% to 15% of discretionary cash for further balance sheet
strengthening.
Preliminary Third Quarter and Year-to-Date 2018
Financial Results1
In conjunction with this investor event, CRC also issued certain
preliminary third quarter and year-to-date 2018 financial and activity
estimates that it expects to report, including:
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Production of approximately 136 Mboe/day reflecting an oil mix of 62%
for the third quarter of 2018 and approximately 131 Mboe/day
reflecting an oil mix of 62% on a year-to-date basis, which are
subject to final production sharing contract and other adjustments.
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Drilled approximately 90 gross wells, including approximately 55 CRC
wells, for the third quarter of 2018 and approximately 250 gross
wells, including approximately 150 CRC wells, on a year-to-date basis.
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Approximately $200 million of capital investment, including
approximately $180 million of internally funded capital, for the third
quarter of 2018 and approximately $550 million of capital investment
year-to-date, including approximately $490 million of internally
funded capital.
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Approximately $300 million2 of adjusted EBITDAX for the
third quarter of 2018 and over approximately $775 million3
of adjusted EBITDAX on a year-to-date basis. Adjusting for settled
hedges and cash-settled equity compensation during the same periods,
the Company’s core adjusted EBITDAX performance estimates are expected
to exceed $350 million2 and $900 million3,
respectively.
CRC will provide detailed third quarter 2018 financial results and
fourth quarter guidance on Thursday, November 1, 2018 when it plans to
report full financial details for its quarter and year-to-date
performance.
1 The third quarter and year-to-date 2018 financial results
are preliminary estimates. The company’s books and records for the
applicable period are not yet finalized and actual results may differ,
possibly substantially.
2 Reconciliation of Adjusted EBITDAX to net income for Q3
2018: approximately $120 million of preliminary estimated net income;
plus interest and debt expense, net of approximately $95 million and
depreciation, depletion and amortization of approximately $130 million;
partially offset by other non-cash items including an estimated
derivative gain of approximately $50 million. Reconciliation of Adjusted
EBITDAX to operating cash flow for Q3 2018: approximately $175 million
of preliminary estimated net cash provided by operating activities plus
cash interest of approximately $70 million and working capital changes
and other adjustments of approximately $55 million. Core adjusted
EBITDAX removes the transitory effects of settled hedges and the
significant run-up in our stock price of approximately $50 million to
$100 million.
3 Reconciliation of Adjusted EBITDAX to net income for YTD18:
approximately $65 million of preliminary estimated net income; plus
interest and debt expense, net of approximately $280 million;
depreciation, depletion and amortization of approximately $375 million;
and over $60 million of other non-cash items. Reconciliation of Adjusted
EBITDAX to operating cash flow for YTD18: approximately $400 million of
preliminary estimated net cash provided by operating activities; plus
cash interest of approximately $285 million; working capital changes of
approximately $90 million; and other smaller adjustments. Core adjusted
EBITDAX removes the transitory effects of settled hedges and the
significant run-up in our stock price of approximately $175 million to
$225 million.
2018 Analyst & Investor Day Webcast Information
Formal presentations from management will take place between 8:30 a.m.
and 11:45 a.m. EDT, which will be available to the public via webcast. A
link to the live audio webcast and accompanying presentations will be
accessible from the Investor Relations section of CRC’s website at www.crc.com.
The event will be archived on CRC’s Investor Relations page for replay
shortly following the conclusion of the day’s presentations. A digital
replay of the conference call will be archived for approximately 12
months and available online on the Investor Relations page at 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. The Company 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 document 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 the Company's expectations as to
future:
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financial position, liquidity, cash flows and results of operations
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business prospects
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transactions and projects
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operating costs
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Value Creation Index metrics, which are based on certain estimates
including future production rates, costs and commodity prices
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operations and operational results including production, hedging and
capital investment
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capital budgets and maintenance capital requirements
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reserves
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type curves
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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 the assumptions or bases
underlying its expectations are reasonable and makes them in good faith,
they almost always vary from actual results, sometimes materially. We
also believe third-party statements we cite are accurate but have not
independently verified them and do not warrant their accuracy or
completeness. Factors (but not necessarily all the factors) that could
cause results to differ include:
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commodity price changes
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debt limitations on its financial flexibility
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insufficient cash flow to fund planned investments, debt repurchases
or changes to our capital plan
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inability to enter desirable transactions, including acquisitions,
asset sales and joint ventures
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legislative or regulatory changes, including those related to
drilling, completion, well stimulation, operation, 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 its products
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joint venture and acquisition activities and our ability to achieve
expected synergies
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the recoverability of resources and unexpected geologic conditions
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changes in business strategy
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incorrect estimates of reserves and related future cash flows, and the
inability to replace reserves
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PSC effects on production and unit production costs
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effect of stock price on costs associated with incentive compensation
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insufficient capital, including as a result of lender restrictions,
unavailability of capital markets or inability to attract potential
investors
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effects of hedging transactions
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equipment, service or labor price inflation or unavailability
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availability or timing of, or conditions imposed on, permits and
approvals
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lower-than-expected production, reserves or resources from development
projects, joint ventures or acquisitions, or higher-than-expected
decline rates
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disruptions due to accidents, mechanical failures, transportation or
storage constraints, natural disasters, labor difficulties, cyber
attacks or other catastrophic events
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factors discussed in “Risk Factors” in CRC's Annual Report on Form
10-K available on its website at www.crc.com.
Words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "goal," "intend," "likely," "may," "might," "plan,"
"potential," "preliminary,” “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 the Company 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.
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