California Resources Corp Q2 FY2025 earnings call

• Delivered record quarterly shareholder returns, repurchasing nearly $290 million, over 260% of free cash flow.
• Implemented ARA-related merger synergies 3 months ahead of schedule, achieving the $235 million target with an estimated net present value of synergies over 10 years at ~$1.4 billion.
• Strong operational performance enhanced full-year outlook, with a roughly 7% increase in adjusted EBITDAX due to year-to-date execution and reservoir performance exceeding expectations, and addition of a second rig.
• California Energy Commission's response to Governor Newsom's directive on energy reliability, with expected regulatory reforms to improve oil and gas permitting.
• Near term, focused on getting California's first CCS project into operation, with CTV JV receiving EPA construction authorization, expecting Class 6 wells completed by year-end 2025 and injection in early 2026; actively engaged in discussions for power supply from Elk Hills power plant with CCS.

In the second quarter, California Resources Corporation recorded net total production of 137,000 BOE per day. Adjusted EBITDAX was $324 million. Free cash flow was $109 million, and the company returned a record $287 million to shareholders this quarter. First half 2025 costs were down approximately 11% from the second half of 2024, reflecting lower G&A expenses, nonenergy operating costs, and taxes other than on income. Revenue contribution isn't broken down by specific product segments as detailed in the transcript.

• Raised full-year production guidance, lowered cost and drilling capital expectations, increased adjusted EBITDAX forecast. Expect 9% improvement in 2025 free cash flow outlook before working capital even with lower oil prices.
• Plan to be at the lower end of the $500 million to $600 million maintenance capital range, with updates once permits are clear.
• Plan to retire remainder of 2026 note in second half of 2025; remain opportunistic with share repurchases, with over $200 million remaining under authorization extended to June 2026.

• Uncertainty around California regulatory reforms and permitting process resolution.
• Dependence on timely regulatory approvals for CCS project and oil/gas permitting.
• Fluctuations in commodity prices affecting financial performance.

Q: Scott Hanold asked about California oil and gas permitting, including Kern County litigation.

A: Francisco J. Leon discussed ongoing constructive conversations, legislature reconvening in mid-August, expecting details in September/October.

Q: Betty Jiang inquired about capital efficiency improvements and maintenance CapEx outlook.

A: Francisco J. Leon said maintenance CapEx likely at lower end of $500M-$600M range, capital efficiency favorable.

Q: Wei Jiang asked about cash tax benefits.

A: Clio Crespy discussed benefits from One Big Beautiful Bill, expecting $35M cash tax savings in 2025, lower cash taxes as percentage of EBITDAX in future.

Q: Josh Silverstein questioned free cash flow allocation after retiring 2026 note.

A: Clio Crespy said will remain opportunistic with share repurchases, over $200M available, balanced approach.

Q: Kale Akamine asked about P&A wells and Elk Hills PPA.

A: Francisco J. Leon said averaging 1,500 P&A wells per year, still not ready to guide on Elk Hills PPA 2026, focused on right contract.

Q: Zach Parham inquired about Elk Hills power plant timing and dividend growth.

A: Francisco J. Leon said plan to update on Elk Hills by end of year, dividend grown every year for 4 years, will continue evaluating.

Q: David Deckelbaum asked about maintenance capital and permit backlog.

A: Francisco J. Leon said permits part of shareholder return program, full permits for 2 rigs in 2025, updates after legislative session.

Q: Nate Pendleton asked about Class VI permitting and CO2 pipeline.

A: Chris D. Gould discussed Class VI permitting progress, EPA expediting permits, AB 881 advancing to support CO2 pipelines.

Q: Michael Furrow asked about share repurchases and production taxes.

A: Francisco J. Leon said stand ready to repurchase, production taxes adjusted due to lower than expected increase.

Q: Scott Gruber asked about upstream investment strategy and recovery factors.

A: Francisco J. Leon said unconstrained permitting would add to cash flow per share, significant running room to increase recovery factors.