California Resources Corporation · NYSE:CRC
California Resources — Q2 2017 Earnings Presentation
27 slides from California Resources's earnings presentation, Aug 3, 2017
Slide 1: Second Quarter 2017 Earnings Review
Second Quarter 2017 Earnings Review Todd Stevens | President & CEO | Los Angeles, CA | August 3, 2017 Mark Smith | Sr. EVP & CFO
Slide 2: Forward Looking / Cautionary Statements
Forward Looking / Cautionary Statements This presentation contains forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. Such statements include those regarding our expectations a
Slide 3: 1H 2017 Highlights
1H 2017 Highlights 7 Rigs ACTIVITY Exit Rate Shows Increased Activity ~4% PRODUCTION 2H’16 to 1H’17 Decline 131,000 Boe/d $51 Million JVs JV Capital Invested $57 Million Free Cash Flow* *See www.crc.com/investor-relations for a reconciliation to the closest GAAP measure and other important informati
Slide 4: Capital Investment Program – Living within Cash Flow
Capital Investment Program – Living within Cash Flow Moving from Defense to Offense • CRC 2017 capital plan will be directed to oil-weighted projects in our core fields: Elk Hills, The JV capital increases Wilmington, Kern Front, Buena Vista, Mt. Poso, Pleito Ranch, Wheeler Ridge and the delineation
Slide 5: Deep Inventory of Actionable Projects at $45 Brent
Deep Inventory of Actionable Projects at $45 Brent Portfolio Spectrum 40 • Growth portfolio focus, fully burdened • All projects meet VCI 1.3 30 threshold at $45 Brent Steamflood and $2.50 NYMEX, and Waterflood Full Cycle Cost ($/Boe) Primary deliver robust cash flow Shale Gas • Portfolio has large
Slide 6: Portfolio Flexibility Provides Range of Crude Oil Scenarios
Portfolio Flexibility Provides Range of Crude Oil Scenarios Estimated Crude Oil Production Outcomes 120 Oil Production MB/d At about current commodity prices, we are 110 positioned for growth in: 100 Portfolio Planning • Cash flow 90 Scenarios • Production 80 • Reserves 70- ≈ 2017E 2018E 2019E 2020E
Slide 7: Resilient Resource Base – Inflection Point
Resilient Resource Base – Inflection Point Production By ) Stream (Mboe/d) 180 200 160 175 140 150 120 125 Capital ($MM) 100 100 MBoe/d 80 75 60 50 40 20 25 0 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17E Oil NGL Gas Capital Note: Due to consolidated financials, capital and production fo
Slide 8: Responsible Growth: Living within Cash Flow
Responsible Growth: Living within Cash Flow 500 400 300 $ MM 200 100 0 1H15 2H15 1H16 2H16 1H17 Adj. EBITDAX* Operating Cash Flow Organic Capital Investment** * See www.crc.com, Investor Relations for a reconciliation to the closest GAAP measure and other important information. ** Does not include J
Slide 9: CRC – Price Realizations
CRC – Price Realizations Oil Price Realization (with Hedges) Gas Price Realization WTI Realizations Brent NYMEX Realizations 60 $3.26 3.50 $54.66 $3.14 $53.64 $50.92 3.00 $2.66 $2.42 $2.90 50 $49.19 2.50 $2.75 $51.91 $48.29 $2.47 $45.04 $50.24 2.00 $/Bbl $48.80 $47.98 $2.28 $/Mcf $43.32 1.50 40 $42.
Slide 10: Defending Cash Margins
Defending Cash Margins $20.00 $16.00 $12.00 $/Boe $8.00 $4.00 $- 1H 15 2H 15 1H 16 2H 16 1H 17 Operating Cash Margin = Oil and Gas Revenue including settled hedges – Production Costs (Lease Operating Expenses) – Taxes Other than Income – Operating Overhead 2Q 2017 Earnings | 10
Slide 11: CRC Pivots to Increased Activity & Higher Cash Flows
CRC Pivots to Increased Activity & Higher Cash Flows Working Capital and 1H16 Volume Price Costs Interest Other 1H17 200 150 Operating Cash Flow $ MM 100 120 50 44 0 -50 -100 2Q 2017 Earnings | 11
Slide 12: Strengthening the Balance Sheet
Strengthening the Balance Sheet Capitalization as of 6/30/17 ($MM) • Deleveraging remains a priority; ~$1.6 billion decrease to date 1st Lien Secured RCF 1 (1LFO) 842 from post-spin peak 1st Lien Secured Term Loan (1LFO) 584 1st Lien Second Out Term Loan (1LSO) 1,000 • Going forward, we are focused
Slide 13: Reserves Value In Excess of EV
Reserves Value1 In Excess of EV $20 $16 $12 ($Billion) Infrastructure3 $8 Surface & Minerals2 Unproved4 Current EV $4 Proved Value of $5.5 Bn5 PDP Value $0 $50 Brent $55 Brent $60 Brent 1-5 See endnotes in the Appendix. 2Q 2017 Earnings | 13
Slide 14: Opportunistically Built Oil Hedge Portfolio
1 Opportunistically Built Oil Hedge Portfolio Calls 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4Q 2018 Barrels per Day 6,100 6,300 16,800 16,200 16,100 16,100 Weighted Average Ceiling $57.73 $57.80 $58.86 $58.92 $58.91 $58.91 Price per Barrel Purchased Puts Barrels per Day 18,100 11,300 1,200 1,200 1,1
Slide 15: Quarterly & Six Month Cost Comparison
Quarterly & Six Month Cost Comparison 2Q16 1Q17 2Q17 1H16 1H17 Production $14.76 $17.70 $18.34 $14.21 $18.02 costs ($/Boe) Taxes other than on $42 $33 $31 $81 $64 income ($MM) Exploration expense $5 $6 $6 $10 $12 ($MM) Interest expense $74 $84 $83 $148 $167 ($MM) 2Q 2017 Earnings | 15
Slide 16: 2Q17 Results Summary Comparison
2Q17 Results Summary Comparison 2Q16 1Q17 2Q17 Earnings (Loss) per Share – Diluted ($3.51) $1.22 ($1.13) Adjusted Earnings (Loss) per Share* ($1.80) ($1.02) ($1.83) Oil Production 90 MBbl/d 86 MBbl/d 83 MBbl/d Total Production 140 MBoe/d 132 MBoe/d 129 MBoe/d Realized Oil Price w/ Hedge ($/Bbl) $43.
Slide 17: 3Q17 Guidance
3Q17 Guidance Anticipated Realizations Against the Prevailing Index Prices for 3Q17 Oil 90% to 94% of Brent NGLs 58% to 62% of Brent Natural Gas 84% to 88% of NYMEX Production, Capital and Income Statement Guidance Production 127 to 132 Mboe/d Capital $115 to $135 million Production Costs $18.35 to
Slide 18: History of Proactive Strategic Decisions
History of Proactive Strategic Decisions Swift, decisive actions have positioned the company for growth through the commodity downturn. Proactive discussions with lenders and solid asset base provide line of sight to a recovery and an actionable inventory. 120 30 100 25 Oil Price 1 CRC Rig Count Bre
Slide 19: The Case for CRC: Investment Thesis Overview
The Case for CRC: Investment Thesis Overview Investment Case for CRC Competitive Advantages World-class assets with Resilient model that Focused on value Operational Grow within Industry leading Integrated and significant inventory preserves optionality and poised for growth flexibility cash flow de
Slide 20: Appendix
Appendix
Slide 21: Significant Debt Reduction from Post-Spin Peak
Significant Debt Reduction from Post-Spin Peak Chose options to maximize deleveraging and minimize recurring cost to the income statement on a per share basis Continue to seek opportunistic transactions that reduce overall debt 7,000 Total Debt ($ MM) 6,000 6,7651 5,000 5,169 - 4,000 2 2Q15 Debt Exc
Slide 22: Inventory of Actionable Projects Expands by >200MMBoe at $55 Brent
Inventory of Actionable Projects Expands by >200MMBoe at $55 Brent 40 Portfolio Spectrum • Growth portfolio focus, fully burdened • All projects meet VCI 1.3 30 threshold at $55 Brent Steamflood and $3.50 NYMEX, and Waterflood Full Cycle Cost ($/Boe) Primary deliver robust cash flow Shale Gas • Port
Slide 23: JVs Validate Inventory and Enhance Value
JVs Validate Inventory and Enhance Value $550 Million Portfolio Flexibility SIGNED TWO Total Potential JV Capital and Optionality JVs Kettleman North Dome Enables High >$250 Million Margin Production Lost Hills INVESTMENTS Already Committed Growth Mt Poso Kern Front ~3.5-4.0 MBoe/d Elk Hills PRODUCT
Slide 24: Accelerating Value and Derisking Inventory through JVs
Accelerating Value and Derisking Inventory through JVs Highlights: Highlights: • Up to $250MM over ~2 years • Up to $300MM ― Initial tranche of $50MM ― Initial commitment of $160MM funded • DrillCo type structure where Investor funds • Investor funds 100% of project 100% of project capital for 90% W
Slide 25: Typical Industry JV Structure
Typical Industry JV Structure Hurdle Rate • Based on recent industry JV 7,000.00 Production deals, a typical deal structure is Reached – Partner pays 80-100% Capital 6,000.00 – Receives 80-100% Working Interest 5,000.00 – Typical hurdle rate: – 10% - 20% IRR 4,000.00 – Partner’s working interest onc
Slide 26: Life of Field Plans – Growing Inventory
Life of Field Plans – Growing Inventory 3P Resource Growth • Comprehensive technical review of 40% of CRC’s fields 2,000 1,750 • Updated Geologic models, OOIP 1,500 • Teams shared analog experience across 1,250 826 CRC >250%New Pools MMBoe 1,000 Growth 321 • Cataloged opportunities consistent with A
Slide 27: End Notes
End Notes 1 Current CRC estimate of reserves value as of December 31, 2016. Includes field-level operating expenses and G&A. Assumes $3.30/Mcf NYMEX. 2 Surface & Minerals reflect the estimated value of undeveloped surface and fee interests. 3Reflects the value of facilities and midstream assets at 5