California Resources Corporation (CRC) Earnings

Management highlights

### Strategic Integration & Midstream Expansion - The company is building an integrated California energy platform centered on local energy security, supported by a shifting state regulatory environment that now prioritizes local onshore production to address price volatility and supply chain issues from imported crude. - Closed the Line 100 pipeline acquisition from P-66, adding 120 miles of pipeline, 1 million barrels of storage, and additional gathering/loading infrastructure. Announced the all-cash Crimson midstream acquisition, which adds a 2,000-mile crude pipeline network connecting core CRC producing fields to California's highest-value markets. The transaction is priced at a steep discount to public midstream valuation multiples, is financially accretive, and received tentative CPUC approval with no conditions, with final approval expected later this month. ### Core E&P Operational Progress - Achieved 100%+ of the 2026 Berry Synergy target six months ahead of schedule, delivering 103 million in annualized cost savings. Cumulative synergies and structural cost reductions through 2028 are now projected to reach up to 470 million. - Drilling and completion efficiency improved materially: time to market fell ~25% year-over-year, 80% of year-to-date drilled wells outperformed type curves with average initial production 10% above expectations. Normalized annual California production can now be maintained with 6 rigs (1 fewer than previously projected), reducing drilling and workover maintenance capital by 5%. - Four Uinta basin wells were drilled ahead of schedule and under budget; first production is on track for Q4 2026 as planned. ### Growth Business Milestones - Commenced CO2 injection and generated first revenue at California's first commercial-scale CCS project at Elk Hills, becoming one of the few global commercial CCS operators. The project is on track to hit its 100,000 ton per year sequestration target. The company is well positioned to participate in the upcoming CPUC Reliable and Clean Power Procurement Program (RCPPP), which could support 2.4 GW of gas-fired power decarbonization via CCS in the Central Valley. - Announced a partnership with Beacon Data Centers to develop the 275 MW Golden Valley Technology Hub data center project adjacent to the Elk Hills Power Plant, targeting growing power demand for AI. A conditional use permit has been submitted, with environmental review expected to advance later this year; early development is funded by the co-developer, and discussions with global hyperscale operators have accelerated. ### Balance Sheet Improvements - Refinanced remaining 2029 senior notes with new 2035 senior notes, extending weighted average debt maturity from 5.5 years to 8 years, cutting annual interest expense by 5.5 million, and achieving the lowest credit spread in CRC history. Net leverage stands at approximately 1x, with the revolving credit facility fully undrawn.

Guidance

- Full-year 2026 net production guidance is maintained at an average of ~153,000 boe/d, with ~1% entry-to-exit production growth including Uinta. - Full-year total capital guidance is maintained at $520 million to $560 million; planned 2026 drilling and workover capital was cut by $10 million, with savings redeployed to targeted facilities investments, leaving the total capital range unchanged. - Full-year 2026 oil price realizations are expected to be ~94% of Brent, remaining within the original 94% to 98% guidance range established prior to Q2 transportation constraints. - Q3 2026 oil price realization is guided to ~93% of Brent, a prudent near-term assumption that management expects will represent the low point of 2026 realizations, with recovery starting in Q4 2026. Long-term realizations are expected to return to historical levels as logistics improvements are implemented. - Starting in 2027, normalized annual California maintenance drilling and workover capital is expected to be 5% lower than prior projections, with stable production maintained at 6 rigs (5 rigs will operate in H2 2026, down from the prior plan of 6 rigs). - Updated full guidance will be issued after the Crimson acquisition closes.

Segment performance

California Resources Corporation reports results for its core oil and gas exploration and production (E&P) segment, plus emerging midstream, carbon management, and behind-the-meter power segments: - Core Oil & Gas: Q2 2026 net production averaged 149,000 barrels of oil equivalent per day (boe/d), with oil representing 81% of total volume. Adjusted EBITDAX was $338 million; operating cash flow was $300 million, and free cash flow before working capital was $151 million. Operating costs totaled $470 million, G&A declined 9% year-over-year to $347 million. This segment contributes ~85% of total company revenue. - Midstream: The recently acquired Line 100 pipeline adds 120 miles of crude pipeline and 1 million barrels of storage capacity. The pending Crimson acquisition adds a 2,000-mile pipeline network; this segment will contribute contracted third-party transportation revenue once the transaction closes, expected to be ~5% of total revenue post-close. - Carbon Management: Commercial operation of California's first CCS project at Elk Hills commenced in Q2, with 100,000 tons per year of sequestration capacity, generating first revenue this quarter. This segment currently contributes less than 1% of total revenue, with high growth potential. - Behind-The-Meter Power/Data Center: The Golden Valley Technology Hub 275 MW project is in early permitting; the segment contributes 0% of current revenue.

Risks & headwinds

- The pending Crimson acquisition requires final CPUC approval, which is expected later this month but carries regulatory timing and outcome uncertainty. - Temporary takeaway capacity constraints driven by a commercial dispute with an existing pipeline operator led to a $25 million negative impact on Q2 2026 earnings, a temporary 1,500 boe/d inventory build, and pressured oil price differentials. While management expects the issue to be resolved, there is risk of extended pressure on realizations if disputes are not resolved quickly. - Uinta basin development has higher capital intensity, higher break-evens, lower crude quality, higher operating/transportation costs, and steeper production declines than California assets, making it unlikely to compete for long-term capital, creating downside risk to the value of the Uinta position. - Permitting for new projects (including the Golden Valley Technology Hub and Huntington Beach re-entitlement) carries inherent regulatory and timing risk in California's complex regulatory environment. - Geopolitical instability in the Middle East creates global energy market volatility that can impact near-term pricing and supply dynamics in California.

Analyst Q&A

• Q: How does the Crimson acquisition fit into CRC's long-term integrated California strategy, and what is driving the current transport bottleneck? When will differential pressures ease? /

  A: CRC has long focused on acquiring high-value, hard-to-replicate assets in California where existing operational expertise makes the assets more valuable under CRC ownership than as standalone assets. Crimson's 2,000-mile network connects core CRC fields to high-value California markets, adds stable contracted third-party revenue, and addresses existing takeaway constraints, aligning with the company's goal of building a fully integrated local energy platform. The current bottleneck stems from temporary commercial disputes with a third-party pipeline operator over tariff compliance, combined with higher activity levels across California's local production. Management capped CRC's differential impact at ~$2 per barrel, believes the worst of the pressure is past, and expects Crimson's additional infrastructure will permanently improve market access and realizations moving into 2027.

• Q: What is the long-term plan for the Uinta basin asset? /

  A: CRC is on track to bring four drilled Uinta wells online by the end of 2024, ahead of schedule and under budget, and well performance to date has been acceptable. However, Uinta is an unconventional high-decline asset with higher capital intensity, higher break-evens, lower crude quality, and higher operating/transport costs than CRC's core low-decline California assets, which generate far higher returns on capital. Uinta is now classified as a non-core asset, and management does not expect it to compete for long-term capital allocation; the company will evaluate options to maximize value for shareholders, including a potential potential potential potential potential sale.

• Q: How does Crimson fit into CRC's capital allocation framework? /

  A: All capital allocation decisions (drilling, acquisitions, debt management, shareholder returns) are evaluated against the same strict criteria: strategic fit, valuation, and return on capital. Crimson was acquired at ~4.4x 2027 estimated EBITDA, a steep discount to comparable public midstream assets, and is highly accretive. Beyond the pipeline's standalone cash flow, it improves the entire CRC platform by enhancing market access, boosting realized pricing, and increasing operational flexibility, making it more valuable to CRC than it would be as a standalone company. It met both strategic and financial thresholds, so it was prioritized as a high-value use of capital.

• Q: What is the critical path for the Golden Valley Technology Hub data center project? /

  A: Beacon Data Centers was selected as a partner because it has extensive experience developing large North American data center projects, existing relationships with hyperscale tenants, and funds early-stage development, complementing CRC's existing land, power infrastructure, and California permitting expertise. The conditional use permit has been filed, with environmental review advancing later this year; the behind-the-meter design avoids long waits for new grid interconnection, includes low-water closed-loop cooling, and has already secured local community support. Multiple work streams (hyperscale commercial discussions, permitting, engineering, financing) are advancing in parallel, which is the standard approach for delivering complex projects in California.

• Q: How should investors think about share buybacks after using cash for the Crimson acquisition? /

  A: Management does not see Crimson as a trade-off against long-term share repurchase activity. The company maintains a strong balance sheet with ~1x leverage, no meaningful debt maturities for seven years, and an undrawn revolving credit facility, providing plenty of flexibility to pursue both strategic investments and opportunistic buybacks. The absence of buybacks this quarter was purely a timing consideration around executing the transaction, not a change in philosophy. Management continues to see significant intrinsic value in CRC shares at current prices, and opportunistic buybacks remain a core part of the capital allocation framework.