California Resources Corporation · NYSE:CRC
California Resources — Raymond James & Associates 38th Annual Institutional Investors Conference 2017
49 slides from California Resources's conference presentation, Mar 6, 2017
Slide 1: 38th Annual Institutional Investors Conference
Mark Smith| Sr. EVP & CFO| Orlando, FL| March 6 th- 8th, 2017 38th Annual Institutional Investors Conference RAYMOND JAMES & ASSOCIATES
Slide 2: Forward-Looking / Cautionary Statements
Raymond James & Associates 20172 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 t
Slide 3: Cautionary Statements Regarding Hydrocarbon Quantities
Raymond James & Associates 20173 Cautionary Statements Regarding Hydrocarbon Quantities We have provided internally generated estimates for proved reserves and aggregated proved, probable and possible reserves (“3P Reserves”) as of December 31, 2016 in this presentation, with each category of reserv
Slide 4: CRC Opportunity Defined
Raymond James & Associates 2017 • CRC Opportunity Defined • Priorities and Accomplishments • Value Creation Focus – Doubled Inventory • Capital Allocation – Inflection Point 4
Slide 5: Reserves Value in Excess of EV
Raymond James & Associates 2017 Reserves Value1 in Excess of EV 5 1-5 See End Notes in the Appendix. PDP Value Proved Value Unproved4 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $55 Brent $65 Brent $75 Brent ($ B n ) Current EV of $6.1 Bn5 Infrastructure2 Surface & Minerals3
Slide 6: Portfolio Flexibility Provides Range of Crude Oil Scenarios
Raymond James & Associates 2017 Portfolio Flexibility Provides Range of Crude Oil Scenarios 6 40 60 80 100 120 140 160 2016 2017E 2018E 2019E 2020E Oi l P ro d uction M B /d Estimated Crude Oil Production Outcomes 0 300 600 900 1,200 Capi ta l ($ M M ) Estimated Capital Invested Note: Assumes $60 Br
Slide 7: Project Execution Drives Organic Deleveraging
Raymond James & Associates 2017 Project Execution Drives Organic Deleveraging 7 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 2016 2017E 2018E 2019E 2020E To ta l D eb t/ LTM E B IT D A X Estimated Leverage Ratios $55 $65 $75 Note: All cases are self-funding. Capital program in all cases assumes discretionary cash
Slide 8: CRC's Large Resource Base with Advantaged Infrastructure
Raymond James & Associates 2017 NY00813G / 589203_1.WOR Sacramento Basin 11 MMBoe Proved Reserves 6 MBoe/d production San Joaquin Basin 429 MMBoe Proved Reserves 97 MBoe/d production Ventura Basin 29 MMBoe Proved Reserves 7 MBoe/d production Los Angeles Basin 99 MMBoe Proved Reserves 30 MBoe/d produ
Slide 9: Largest California Producer with Deep Regional Insight
Raymond James & Associates 2017 Largest California Producer with Deep Regional Insight 9 Top California Producers in 2015* 196 161 134 35 34 - 20 40 60 80 100 120 140 160 180 200 CRC Chevron USA Aera Energy Freeport McMoRan LINN Energy G ro ss O p era te d MB O E/ d Source: DOGGR, IHS, Wood Mackenzi
Slide 10: California Stacked Reservoirs: Multiple opportunity sets
Raymond James & Associates 2017 California Stacked Reservoirs: Multiple opportunity sets with large accumulations 10 Source: Information based on internal observed data and external published reports. MONTEREY SANDS AND SHALES TEMBLOR SANDS EOCENE SANDS AND SHALES UPPER CRETACEOUS SANDS AND SHALES 1
Slide 11: Priorities and Accomplishments
Raymond James & Associates 2017 • CRC Opportunity Defined • Priorities and Accomplishments • Value Creation Focus – Doubles Inventory • Capital Allocation – Inflection Point 11
Slide 12: Benefits of the Spin: Focus Led to Improvements
Raymond James & Associates 2017 Benefits of the Spin: Focus Led to Improvements 12 Sac Valley Thermal PV10 pre-tax cash flows PV10 of investments VCI = Value Creation Index One CRC • Entrepreneurial culture • Disciplined capital allocation through portfolio management • Three principal drivers: o Ma
Slide 13: 2016 Accomplishments – CRC Delivered on Controllables
Raymond James & Associates 2017 Focus on Base Production – Production declined 10% Y-o-Y1, excluding PSC effects Generated Free Cash Flow –$49MM of free cash flow2 Reduced Debt – Decreased debt $900 million in 2016 and cumulatively reduced nearly $1.5 billion from peak levels. Defend Margins – Lower
Slide 14: Significant Debt Reduction From Post-Spin Peak
Raymond James & Associates 201714 Chose options to maximize deleveraging and minimize recurring cost to the income statement and on a per share basis 6,765(1) 5,268 4,000 5,000 6,000 7,000 2Q15 Debt Exchange for 2L Open Market Repurchases Equity for Debt Exchange Cash Tender for Unsecureds Operating
Slide 15: Resilient Resource Base – Low Decline with Limited Capital
Raymond James & Associates 2017 Resilient Resource Base – Low Decline with Limited Capital 0 100 200 300 400 500 600 0 20 40 60 80 100 120 140 160 180 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 FY 2014 FY 2015 FY 2016 $ M M M B O E /d Production By Stream (MBOE/d) Oil NGL Gas Capital 159 MBOE/d Av
Slide 16: Defending Margins Through Operating Cost Reductions
Raymond James & Associates 201716 Defending Margins Through Operating Cost Reductions and Efficiencies - 5 10 15 20 25 30 35 FY 2014 FY 2015 FY 2016 Ca sh C o st s ($/BOE ) Adj. G&A Production Costs Taxes (non income) Exploration ~17% Decrease2014 Avg : $27.37 2015 Avg : $24.24 2016 Avg : $22.77
Slide 17: Reduced Well Costs
Raymond James & Associates 201717 Reduced Well Costs 2016 program had ~21% lower well costs compared to prior similar wells 0 300 600 900 1,200 1,500 1,800 Long Beach Horizontal Elk Hills ESOZ Mt. Poso Lost Hill Injector Kern Front Lost Hills Producer $ M Last Drilled (2014/2015) 2016 • Efficiency d
Slide 18: CRC Drives California Rig Count Activity
Raymond James & Associates 2017 CRC Drives California Rig Count Activity 18 0 5 10 15 20 25 30 35 40 45 50 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Ri g C o u n t Total CA Rig Count CRC Rig Count Source: Baker Hughes Rotary Rig Count (includes offsho
Slide 19: Value Creation Focus – Doubles Inventory
Raymond James & Associates 2017 • CRC Opportunity Defined • Priorities and Accomplishments • Value Creation Focus – Doubles Inventory • Capital Allocation – Inflection Point 19
Slide 20: More Actionable Inventory From Enhanced Life of Field Plans
Raymond James & Associates 201720 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2015 2016 2015 2016 2015 2016 $55 $65 $75 D rilli n g an d W o rk o ve r C ap it al ($ M M ) Brent Marker Price ($/BBL) VCI > 1.0 VCI > 1.3 More Actionable Inventory From Enhanced Life of Field Plans Actionable
Slide 21: Value Chain Progress: Building Inventory Across Fields
Raymond James & Associates 2017 Value Chain Progress: Building Inventory Across 135 Fields 21 Legacy Field Review - Paloma • Technical reevaluation doubled OOIP estimate • Analog field performance • Applying new technology and thinking to generate new opportunities Delineation - Pleito • Grew produc
Slide 22: Updated Inventory by Project Type
Raymond James & Associates 2017 Updated Inventory by Project Type 22 Actionable projects >1.3 VCI Table indicates the years of inventory available at each price deck and continuous activity level (active rig counts per year) Rigs/Year Years of Inventory 4 29 35 47 6 19 24 31 8 14 18 24 10 12 14 19 1
Slide 23: Steamfloods – Low Risk and Stable/Low Decline
Raymond James & Associates 2017 Steamfloods – Low Risk and Stable/Low Decline 23 AVG. DEPTH (True Vertical) 2,000 AVG. GROSS THICKNESS (feet) 1,000 # OF SECTIONS 20 Avg. OOIP/OGIP per Section (MMBOE) 40 Avg. EUR (MBOE) 270 AVG. SPACING (acres) 5 # OF LOCATIONS 2,560 % OF SECTIONS COVERED BY 3D SEISM
Slide 24: Waterfloods – Low Capital Intensity and Robust Margins
Raymond James & Associates 2017 Waterfloods – Low Capital Intensity and Robust Margins 24 AVG. DEPTH (True Vertical) 5,000 AVG. GROSS THICKNESS (feet) 1,000 # OF SECTIONS 50 Avg. OOIP/OGIP per Section (MMBOE) 20 Avg. EUR (MBOE) 200 AVG. SPACING (acres) 10 # OF LOCATIONS 3,200 % OF SECTIONS COVERED B
Slide 25: Leveraging Infrastructure: Buena Vista Field Development
Raymond James & Associates 2017 Leveraging Infrastructure: Buena Vista Field Development 25 2500 TVD 2750 3000 3250 3750 4000 4250 3500 B V S ha le B V W at e rf loo d Effective Production Management • Current net production of ~9,000 Boe/d (no rigs since 2014) • Surveillance with modern tools • Dai
Slide 26: Tackling Underdeveloped Opportunities: Kettleman North Dome
Raymond James & Associates 2017 Tackling Underdeveloped Opportunities: Kettleman North Dome 26 • OOIP of 4 billion barrels, 14,000 Acres (2 mi. wide, 15 mi. long) • 1000’s of feet of stacked pay • Light oil – API > 36o • WI=100% and NRI=80% in KNDU • Modern formation evaluation, new wells, and worko
Slide 27: Capital Allocation – Inflection Point
Raymond James & Associates 2017 • CRC Opportunity Defined • Priorities and Accomplishments • Value Creation Focus – Doubles Inventory • Capital Allocation – Inflection Point 27
Slide 28: Self-Funded Capital Investment Program
Raymond James & Associates 2017 Drilling $150 50% Workover $50 17% Development Facilities $50 17% Exploration $25 8% Other $25 8% 2017E Drilling Capital – By Drive Commentary 2017E Total Capital Plan • 2017 capital plan of $300 million will be directed to oil weighted projects in our core fields: El
Slide 29: Joint Venture with Benefit Street Partners
Raymond James & Associates 2017 Primary Objective San Joaquin Basin Map Highlights • Up to $250 MM over ~2 years • Initial $50 MM tranche o Focus will start in San Joaquin Basin • CRC’s discretion on which assets to develop1 • Enhances CRC project value • Investor funds 100% of the project capital •
Slide 30: Poised to Grow
Raymond James & Associates 2017 NY00813G / 589203_1.WOR Sacramento Basin 11 MMBOE Proved Reserves 6 MBOE/d production San Joaquin Basin 429 MMBOE Proved Reserves 97 MBOE/d production Ventura Basin 29 MMBOE Proved Reserves 7 MBOE/d production Los Angeles Basin 99 MMBOE Proved Reserves 30 MBOE/d produ
Slide 31: Appendix
Raymond James & Associates 2017 California Resources Corporation Appendix 31
Slide 32: Capitalization as of 12/31/16
Raymond James & Associates 2017 Capitalization as of 12/31/16 ($MM) $25 $375 $193 $135 $1,000 $2,250 193 $0 $500 $1,000 $1,500 $2,000 $2,500 Ja n -1 6 Ju l-1 6 Ja n -1 7 Ju l-1 7 Ja n -1 8 Ju l-1 8 Ja n -1 9 Ju l-1 9 Ja n -2 0 Ju l-2 0 Ja n -2 1 Ju l-2 1 Ja n -2 2 Ju l-2 2 Ja n -2 3 Ju l-2 3 Ja n -2
Slide 33: Opportunistically Built Oil Hedge Portfolio
Raymond James & Associates 2017 Opportunistically Built Oil Hedge Portfolio1 • Hedge book started at zero post spin; we target hedges on 50% of production • Strategy focuses on protecting cash flow for capital investments and covenant compliance Q1 2017 Q2 2017 Q3 2017 Q4 2017 1Q 2018 2Q 2018 3Q 201
Slide 34: Diverse Assets with Flexible Development Opportunities
Raymond James & Associates 2017 Diverse Assets with Flexible Development Opportunities 34 • Diversity of basins and drive mechanisms • Predictable production and low decline rates • Multiple stacked reservoirs • Development targets include repeatable projects with low technical risk • Achieved a 201
Slide 35: Key CRC Fields by Drive Mechanism
Raymond James & Associates 201735 Key CRC Fields by Drive Mechanism Oakridge Wilmington Montalvo Huntington Beach Rio Viejo San Miguelito Asphalto Pleito Ranch Mt. Poso Railroad Gap Wheeler Ridge Rincon BV Nose Saticoy S. Mountain Shale 29R Oxnard Bardsdale Buena Vista Buena Vista Midway Sunset Palo
Slide 36: San Joaquin Basin
Raymond James & Associates 2017 San Joaquin Basin • Oil and gas discovered in the late 1800s • Accounts for ~69% of CRC production • ~25 billion barrels OOIP in CRC fields1 • Cretaceous to Pleistocene sedimentary section (>25,000 feet) • Source rocks are organic rich shales from Moreno, Kreyenhagen,
Slide 37: Elk Hills Area - Overview
Raymond James & Associates 2017 0 20 40 60 80 100 120 140 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 N et MB o e/ d • CRC’s flagship asset, a 100-year old field with exploration opportunities • Large fee property with multiple stacked reservoirs • Light oil from conventional and unconventiona
Slide 38: Los Angeles Basin
Raymond James & Associates 2017 Los Angeles Basin • Large, world-class basin with thick deposits • Kitchen is the entire basin, hydrocarbons did not migrate laterally; basin depth (>30,000 ft) • ~10 billion barrels OOIP in CRC fields1 • Most significant discoveries date to the 1920s – past explorati
Slide 39: Wilmington Field Overview
Raymond James & Associates 2017 - 50 100 150 200 250 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 M M B o e Net Proved Reserves Production to Date Overview Field Map Proved Reserves & Cumulative Production Structure Map & Acquisition History * • CRC’s flagship coas
Slide 40: Ventura Basin
Raymond James & Associates 2017 Ventura Basin • Estimated ~3.5 billion barrels OOIP in CRC fields1 • Operate 28 fields (about 40% of basin) • ~300,000 net acres • Multiple source rocks: Miocene (Monterey and Rincon Formations), Eocene (Anita and Cozy Dell Formations) • FY 2016 average net production
Slide 41: Sacramento Basin
Raymond James & Associates 2017 Sacramento Basin • Exploration started in 1918 and focused on seeps and topographic highs. In the 1970s the use of multifold 2D seismic led to largest discoveries • Cretaceous Starkey, Winters, Forbes, Kione, and the Eocene Domengine sands • Most current production is
Slide 42: Shale Geological Overview
Raymond James & Associates 2017 Shale Geological Overview 42 Major U.S. Shale PlaysCalifornia Unconventional Potential 0 GR 150 0 GR 150 0 GR 150 0 GR 150 0 GR 150 0 GR 150 3,000 2,000 1,000 Kreyenhagen Productive interval Target interval Moreno Bakken Barnett Eagle Ford N A B C D PG • Successful in
Slide 43: A Net Water Supplier
Raymond James & Associates 2017 A NET WATER SUPPLIER • CRC’s delivery of reclaimed produced water to agriculture in 2016 exceeded our fresh water purchases by 2.5 billion gallons • We recycled approximately 78% of our produced water in improved or enhanced recovery operations in 2016 • We reduced ou
Slide 44: Diverse Resource Base
Raymond James & Associates 2017 Diverse Resource Base • Interests in 4 of the 12 largest fields in the lower 48 states • 568 MMBoe proved reserves (12/31/2016) • Largest producer in California on a gross operated basis with significant exploration and development potential California Heritage • Stro
Slide 45: Non-GAAP Reconciliation for Adjusted EBITDAX
Raymond James & Associates 2017 Non-GAAP Reconciliation for Adjusted EBITDAX 45 Full Year ($ in millions) 2016 Net (loss) Income $ 279 Interest and debt expense 328 Income tax benefit (78) Depreciation, depletion and amortization 559 Exploration expense 23 Adjusted income items before interest and t
Slide 46: Free Cash Flow
Raymond James & Associates 2017 Free Cash Flow ($ millions) Full Year 2016 Operating cash flow $130 Capital investment (75) Changes in capital accruals (6) Free cash flow (after working capital) $49 46
Slide 47: Non-GAAP Reconciliation for PV-10
Raymond James & Associates 2017 Non-GAAP Reconciliation for PV-10 ($ in millions) At December 31, 2016 PV-10 of Proved Reserves $2,848 Present value of future income taxes discounted at 10% (181) Standardized Measure of Discounted Future Net Cash Flows $2,667 PV-10 is a non-GAAP financial measure an
Slide 48: Organic Recycle Ratio
Raymond James & Associates 2017 Organic Recycle Ratio ($/BOE) Full Year 2016 Oil and gas revenues $33.17 Production Costs (15.61) Taxes other than on income (Oil and Gas Operations) (2.36) Total CRC general and administrative expenses (4.84) Margin $10.36 Organic Finding and Development $3.42 Organi
Slide 49: End Notes
Raymond James & Associates 2017 End Notes 49 1 Current CRC estimate of reserves value as of December 31, 2016. Includes field level operating expenses and G&A. Assumes $3.30/Mcf Henry Hub. 2 Reflects the value of facilities and midstream assets at 50% of estimated replacement value. This discount is