California Resources Corp 10-Q

Item 3 Quantitative and Qualitative Disclosures About Market Risk For the three months ended March 31, 2024, there were no material changes to market risks from the information provided under Item 305 of Regulation S-K included under the caption Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the 2023 Annual Report. Commodity Price Risk Our financial results are sensitive to fluctuations in oil, NGL and natural gas prices. These commodity price changes also impact the volume changes under our PSC-type contracts. We maintain a commodity hedging program primarily focused on hedging crude oil sales to help protect our cash flows, margins and capital program from the volatility of crude oil prices. As of March 31, 2024, we had a net liability of $49 million for our commodity derivative positions which are carried at fair value. For more information on our derivative positions as of March 31, 2024 , refer to Part I, Item 1 – Financial Statements, Note 6 Derivatives. We have price exposure for natural gas we purchase and use in our business. We used natural gas to generate electricity for our operations and higher natural gas prices will also result in an increase to our electricity costs. Counterparty Credit Risk Our credit risk relates primarily to trade receivables and derivative financial instruments. Credit exposure for each customer is monitored for outstanding balances and current activity. Counterparty credit limits have been established based upon the financial health of our counterparties, and these limits are actively monitored. In the event counterparty credit risk is heightened, we may request collateral and accelerate payment dates. Concentration of credit risk is regularly reviewed to ensure that counterparty credit risk is adequately diversified. As of March 31, 2024, the majority of our credit exposure was with investment-grade counterparties. We believe exposure to counterparty credit-related losses related to our business at March 31, 2024 was not material and losses associated with counterparty credit risk have been insignificant for all periods presented. Interest-Rate Risk Changes in interest rate may affect the amount of interest we pay on our long-term debt. We had no variable-rate debt outstanding as of March 31, 2024 . Our Senior Notes bear interest at a fixed rate of 7.125% per annum.