California Resources Corp 10-Q

Item 1 Financial Statements (unaudited) CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets As of June 30, 2024 and December 31, 2023 (in millions, except share data) June 30, December 31, 2024 2023 CURRENT ASSETS Cash and cash equivalents $ 1,031 $ 496 Trade receivables 175 216 Inventories 56 72 Assets held for sale 13 13 Receivable from affiliate 61 19 Other current assets, net 103 113 Total current assets 1,439 929 PROPERTY, PLANT AND EQUIPMENT 3,548 3,437 Accumulated depreciation, depletion and amortization ( 775 ) ( 667 ) Total property, plant and equipment, net 2,773 2,770 INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 17 19 DEFERRED INCOME TAXES 139 132 OTHER NONCURRENT ASSETS 122 148 TOTAL ASSETS $ 4,490 $ 3,998 CURRENT LIABILITIES Accounts payable 248 245 Liabilities associated with assets held for sale 5 5 Accrued liabilities 340 366 Total current liabilities 593 616 NONCURRENT LIABILITIES Long-term debt, net 1,161 540 Asset retirement obligations 436 422 Other long-term liabilities 248 201 STOCKHOLDERS' EQUITY Preferred stock ( 20,000,000 shares authorized at $ 0.01 par value) no shares outstanding at June 30, 2024 and December 31, 2023 — — Common stock ( 200,000,000 shares authorized at $ 0.01 par value) ( 84,510,451 and 83,557,800 shares issued; 67,876,933 and 68,693,885 shares outstanding at June 30, 2024 and December 31, 2023) 1 1 Treasury stock ( 16,633,518 shares held at cost at June 30, 2024 and 14,863,915 shares held at cost at December 31, 2023) ( 697 ) ( 604 ) Additional paid-in capital 1,302 1,329 Retained earnings 1,374 1,419 Accumulated other comprehensive income 72 74 Total stockholders' equity 2,052 2,219 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,490 $ 3,998 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2024 and 2023 (dollars in millions, except share and per share data; shares in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 REVENUES Oil, natural gas and NGL sales $ 412 $ 447 $ 841 $ 1,162 Net gain (loss) from commodity derivatives 5 31 ( 66 ) 73 Revenue from marketing of purchased commodities 51 72 125 259 Electricity sales 36 34 51 102 Interest and other revenue 10 7 17 19 Total operating revenues 514 591 968 1,615 OPERATING EXPENSES Operating costs 156 186 332 440 General and administrative expenses 63 71 120 136 Depreciation, depletion and amortization 53 56 106 114 Asset impairment 13 — 13 3 Taxes other than on income 39 42 77 84 Exploration expense — 1 1 2 Costs related to marketing of purchased commodities 43 27 97 151 Electricity generation expenses 14 13 22 62 Transportation costs 17 16 37 33 Accretion expense 13 11 25 23 Carbon management business expenses 15 8 23 13 Other operating expenses, net 51 13 88 21 Total operating expenses 477 444 941 1,082 Gain on asset divestitures 1 — 7 7 OPERATING INCOME 38 147 34 540 NON-OPERATING (EXPENSES) INCOME Interest and debt expense ( 17 ) ( 14 ) ( 30 ) ( 28 ) Loss from investment in unconsolidated subsidiary ( 4 ) ( 1 ) ( 7 ) ( 3 ) Other non-operating (loss) income ( 6 ) 3 ( 5 ) 2 INCOME (LOSS) BEFORE INCOME TAXES 11 135 ( 8 ) 511 Income tax (provision) benefit ( 3 ) ( 38 ) 6 ( 113 ) NET INCOME (LOSS) $ 8 $ 97 $ ( 2 ) $ 398 Net income (loss) per share Basic $ 0.12 $ 1.39 $ ( 0.03 ) $ 5.65 Diluted $ 0.11 $ 1.35 $ ( 0.03 ) $ 5.47 Weighted-average common shares outstanding Basic 68.1 69.7 68.6 70.5 Diluted 70.0 71.9 68.6 72.7 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Loss) For the three and six months ended June 30, 2024 and 2023 (in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 Net income (loss) $ 8 $ 97 $ ( 2 ) $ 398 Other comprehensive income (loss): Amortization of prior service cost credit included in net periodic benefit cost, net of tax (a) — — ( 2 ) — Comprehensive income (loss) $ 8 $ 97 $ ( 4 ) $ 398 (a) Tax effects of the amortization of the prior service cost credit was insignificant for the three and six months ended June 30, 2024. The accompanying notes are an integral part of these condensed consolidated financial statements. 6 CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Stockholders' Equity For the three and six months ended June 30, 2024 and 2023 (in millions) Three months ended June 30, 2024 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Equity Balance, March 31, 2024 $ 1 $ ( 662 ) $ 1,295 $ 1,387 $ 72 $ 2,093 Net income — — — 8 — 8 Share-based compensation — — 7 — — 7 Repurchases of common stock — ( 35 ) — — — ( 35 ) Cash dividend ($ 0.31 per share) — — — ( 21 ) — ( 21 ) Shares cancelled for taxes — — ( 1 ) — — ( 1 ) Other — — 1 — — 1 Balance, June 30, 2024 $ 1 $ ( 697 ) $ 1,302 $ 1,374 $ 72 $ 2,052 Three months ended June 30, 2023 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Equity Balance, March 31, 2023 $ 1 $ ( 520 ) $ 1,311 $ 1,219 $ 81 $ 2,092 Net income — — — 97 — 97 Share-based compensation — — 7 — — 7 Repurchases of common stock — ( 64 ) — — — ( 64 ) Cash dividend ($ 0.2825 per share) — — — ( 21 ) — ( 21 ) Shares cancelled for taxes — — ( 1 ) — — ( 1 ) Balance, June 30, 2023 $ 1 $ ( 584 ) $ 1,317 $ 1,295 $ 81 $ 2,110 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Six months ended June 30, 2024 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Equity Balance, December 31, 2023 $ 1 $ ( 604 ) $ 1,329 $ 1,419 $ 74 $ 2,219 Net loss — — — ( 2 ) — ( 2 ) Share-based compensation — — 14 — — 14 Repurchases of common stock — ( 93 ) — — — ( 93 ) Cash dividend ($ 0.31 per share) — — — ( 43 ) — ( 43 ) Shares cancelled for taxes ( 42 ) — — ( 42 ) Other comprehensive income, net of tax — — — — ( 2 ) ( 2 ) Other — — 1 — — 1 Balance, June 30, 2024 $ 1 $ ( 697 ) $ 1,302 $ 1,374 $ 72 $ 2,052 Six months ended June 30, 2023 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Equity Balance, December 31, 2022 $ 1 $ ( 461 ) $ 1,305 $ 938 $ 81 $ 1,864 Net income — — — 398 — 398 Share-based compensation — — 14 — — 14 Repurchases of common stock — ( 123 ) — — — ( 123 ) Cash dividend ($ 0.2825 per share) — — — ( 41 ) — ( 41 ) Shares cancelled for taxes ( 2 ) — — ( 2 ) Balance, June 30, 2023 $ 1 $ ( 584 ) $ 1,317 $ 1,295 $ 81 $ 2,110 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the three and six months ended June 30, 2024 and 2023 (in millions) Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 CASH FLOW FROM OPERATING ACTIVITIES Net income (loss) $ 8 $ 97 $ ( 2 ) $ 398 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 53 56 106 114 Deferred income tax provision (benefit) 3 9 ( 6 ) 56 Asset impairments 13 — 13 3 Net (gain) loss from commodity derivatives ( 4 ) ( 31 ) 68 ( 73 ) Net payments on settled commodity derivatives ( 10 ) ( 63 ) ( 24 ) ( 128 ) Gain on asset divestitures ( 1 ) — ( 7 ) ( 7 ) Other non-cash charges to income, net 46 30 52 51 Changes in operating assets and liabilities, net ( 11 ) 10 ( 16 ) 4 Net cash provided by operating activities 97 108 184 418 CASH FLOW FROM INVESTING ACTIVITIES Capital investments ( 34 ) ( 39 ) ( 88 ) ( 86 ) Changes in accrued capital investments 6 ( 2 ) 2 ( 15 ) Proceeds from asset divestitures, net 2 — 12 — Acquisitions ( 6 ) ( 1 ) ( 6 ) ( 1 ) Other, net ( 1 ) ( 2 ) ( 2 ) ( 3 ) Net cash used in investing activities ( 33 ) ( 44 ) ( 82 ) ( 105 ) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Revolving Credit Facility 30 — 30 — Proceeds from 2029 Senior Notes, net 590 — 590 — Repurchases of common stock ( 35 ) ( 64 ) ( 93 ) ( 123 ) Common stock dividends ( 22 ) ( 20 ) ( 43 ) ( 40 ) Payments on equity-settled awards — — ( 4 ) — Issuance of common stock 2 — 3 1 Bridge loan commitments — — ( 5 ) — Debt amendment costs — ( 8 ) ( 3 ) ( 8 ) Shares cancelled for taxes ( 1 ) ( 1 ) ( 42 ) ( 2 ) Net cash provided by (used in) financing activities 564 ( 93 ) 433 ( 172 ) Increase (decrease) in cash and cash equivalents 628 ( 29 ) 535 141 Cash and cash equivalents—beginning of period 403 477 496 307 Cash and cash equivalents—end of period $ 1,031 $ 448 $ 1,031 $ 448 The accompanying notes are an integral part of these condensed consolidated financial statements. 9 CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements June 30, 2024 NOTE 1 BASIS OF PRESENTATION We are an independent energy and carbon management company committed to energy transition. We are committed to environmental stewardship while safely providing local, responsibly sourced energy. We are also focused on maximizing the value of our land, mineral ownership, and energy expertise for decarbonization by developing carbon capture and storage (CCS) and other emissions-reducing projects. Except when the context otherwise requires or where otherwise indicated, all references to ‘‘CRC,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to California Resources Corporation and its subsidiaries as of the date presented. On July 1, 2024, we closed on transactions contemplated by the definitive agreement and plan of merger (Merger Agreement) to obtain all of the ownership interests in Aera Energy, LLC (Aera) with an effective date of January 1, 2024 (Aera Merger). As such, the accompanying unaudited financial statements do not contain the results of Aera for the periods indicated. In the opinion of our management, the accompanying unaudited financial statements contain all adjustments necessary to fairly present our financial position, results of operations, comprehensive income, equity and cash flows for all periods presented. We have eliminated all significant intercompany transactions and accounts. We account for our share of oil and natural gas producing activities, in which we have a direct working interest, by reporting our proportionate share of assets, liabilities, revenues, costs and cash flows within the relevant lines on our condensed consolidated financial statements. In applying the equity method of accounting, our investment in an unconsolidated subsidiary ( Carbon TerraVault JV HoldCo, LLC) was initially recognized at cost and then is adjusted for our proportionate share of income or loss in addition to contributions and distributions. We have prepared this report in accordance with generally accepted accounting principles (GAAP) in the United States and the rules and regulations of the U.S. Securities and Exchange Commission applicable to interim financial information which permit the omission of certain disclosures to the extent they have not changed materially since the latest annual financial statements. We believe our disclosures are adequate to make the information presented not misleading. The preparation of financial statements in conformity with GAAP requires management to select appropriate accounting policies and make informed estimates and judgments regarding certain types of financial statement balances and disclosures. Actual results could differ. Management believes that these estimates and judgments provide a reasonable basis for the fair presentation of our condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report). The carrying amounts of cash, cash equivalents and on-balance sheet financial instruments, other than debt, approximate fair value. Refer to Note 3 Debt for the fair value of our debt. Certain prior period balances related to natural gas liquid (NGL) marketing activities have been reclassified to conform to our 2024 presentation. For the six months ended June 30, 2023, we reclassified $ 3 million related to NGL storage activities from other revenue to revenue from marketing of purchased commodities on our condensed consolidated statement of operations. 10 NOTE 2 INVESTMENT IN UNCONSOLIDATED SUBSIDIARY AND RELATED PARTY TRANSACTIONS In August 2022, our wholly-owned subsidiary Carbon TerraVault I, LLC entered into a joint venture with BGTF Sierra Aggregator LLC (Brookfield) for the further development of a carbon management business in California (Carbon TerraVault JV). We hold a 51 % interest in the Carbon TerraVault JV and Brookfield holds a 49 % interest. We determined that the Carbon TerraVault JV is a variable interest entity (VIE); however, we share decision-making power with Brookfield on all matters that most significantly impact the economic performance of the joint venture. Therefore, we account for our investment in the Carbon TerraVault JV under the equity method of accounting. Transactions between us and the Carbon TerraVault JV are related party transactions. Brookfield has committed an initial $ 500 million to invest in CCS projects that are jointly approved through the Carbon TerraVault JV. As part of the formation of the Carbon TerraVault JV, we contributed rights to inject CO 2 into the 26R reservoir in our Elk Hills field for permanent CO 2 storage (26R reservoir) and Brookfield committed to make an initial investment of $ 137 million , payable in three installments with the last two installments subject to the achievement of certain milestones. We achieved the milestone for the second installment in March 2024. The third installment will be sized based on permitted storage capacity. Brookfield contributed the first $ 46 million installment of their initial investment to the Carbon TerraVault JV in 2022 and the second $ 46 million installment in April 2024. The remaining balance of the initial installment plus the second installment may, at our sole discretion, be distributed to us or used to satisfy future capital contributions, among other items. Because the parties have certain put and call rights (repurchase features) with respect to the 26R reservoir if certain milestones are not met, the first and second installment of the initial investment by Brookfield is reflected as a contingent liability included in other long-term liabilities on our condensed consolidated balance sheets. The contingent liability was $ 102 million and $ 52 million at June 30, 2024 and December 31, 2023 , respectively, inclusive of interest. The tables below present the summarized financial information related to our equity method investment in the Carbon TerraVault JV (and do not include amounts we have incurred related to development of our carbon management business, Carbon TerraVault), along with related party transactions for the periods presented. June 30, December 31, 2024 2023 (in millions) Investment in unconsolidated subsidiary (a) $ 17 $ 19 Receivable from affiliate (b) $ 61 $ 19 Other long-term liabilities - Contingent liability (related to Carbon TerraVault JV put and call rights) $ 102 $ 52 (a) Reflects our investment less losses allocated to us of $ 7 million and $ 9 million for the six months ended June 30, 2024 and the year ended December 31, 2023 , respectively. (b) The amount of Brookfield's contributions available to us and amounts due to us under the MSA (described further below) are reported as receivable from affiliate. At June 30, 2024 , the amount of $ 61 million includes the remaining $ 58 million of Brookfield's first and second installments of their initial investment which is available to us and $ 3 million related to the MSA and vendor reimbursements. At December 31, 2023 , the amount of $ 19 million includes $ 17 million remaining of Brookfield's initial contribution available to us and $ 2 million related to the MSA and vendor reimbursements. Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) (in millions) Loss from investment in unconsolidated subsidiary $ 4 $ 1 $ 7 $ 3 General and administrative expenses (a) $ 3 $ 2 $ 5 $ 3 (a) General and administrative expenses on our condensed consolidated statements of operations have been reduced by this amount which we have invoiced to the Carbon TerraVault JV under the MSA for back-office operational and commercial services. 11 We are also performing well abandonment work at our Elk Hills field as part of the permitting process for injection of CO 2 at the 26R reservoir. During the three and six months ended June 30, 2024, we performed abandonment work and sought reimbursement in the amounts of $ 5 million and $ 9 million, respectively, from the Carbon TerraVault JV. During the three and six months ended June 30, 2023, we performed abandonment work and sought reimbursement in the amounts of $ 1 million and $ 2 million, respectively, from the Carbon TerraVault JV. The Carbon TerraVault JV has an option to participate in certain projects that involve the capture, transportation and storage of CO 2 in California. This option expires upon the earlier of (1) August 2027, (2) when a final investment decision has been approved by the Carbon TerraVault JV for storage projects representing in excess of 5 million metric tons per annum (MMTPA) in the aggregate, or (3) when Brookfield has made contributions to the joint venture in excess of $ 500 million (unless Brookfield elects to increase its commitment). We entered into a Management Services Agreement (MSA) with the Carbon TerraVault JV whereby we provide administrative, operational and commercial services under a cost-plus arrangement. Services may be supplemented by using third parties and payments to us under the MSA are limited to the amount in an approved budget. The MSA may be terminated by mutual agreement of the parties, among other events. NOTE 3 DEBT As of June 30, 2024 and December 31, 2023, our long-term debt consisted of the following: June 30, December 31, 2024 2023 Interest Rate Maturity (in millions) Revolving Credit Facility $ 30 $ — SOFR plus 2.50 %- 3.50 % ABR plus 1.50 %- 2.50 % (a) July 31, 2027 (b) 2026 Senior Notes 545 545 7.125 % February 1, 2026 2029 Senior Notes 600 — 8.250 % June 15, 2029 Principal amount $ 1,175 $ 545 Unamortized debt discount and debt issuance costs ( 14 ) ( 5 ) Long-term debt, net $ 1,161 $ 540 (a) At our election, borrowings under the amended Revolving Credit Facility may be alternate base rate (ABR) loans or term SOFR loans, plus an applicable margin. ABR loans bear interest at a rate equal to the highest of (i) the federal funds effective rate plus 0.50 % , (ii) the administrative agent prime rate and (iii) the one-month SOFR rate plus 1 % . Term SOFR loans bear interest at term SOFR, plus an additional 10 basis points per annum credit spread adjustment. The applicable margin is adjusted based on a commitment utilization percentage and will vary from (i) in the case of ABR loans, 1.50 % to 2.50 % and (ii) in the case of term SOFR loans, 2.50 % to 3.50 % . (b) The Revolving Credit Facility is subject to a springing maturity to August 4, 2025 if any of our 2026 Senior Notes are outstanding on that date. On April 26, 2023, we entered into an Amended and Restated Credit Agreement (Revolving Credit Facility) with Citibank, N.A., as administrative agent, and certain other lenders, which amended and restated in its entirety the prior credit agreement dated October 27, 2020. As of June 30, 2024, our Revolving Credit Facility consisted of a senior revolving loan facility with an aggregate commitment of $ 630 million. Our Revolving Credit Facility also included a sub-limit of $ 250 million for the issuance of letters of credit. As of June 30, 2024, $ 130 million letters of credit were issued to support ordinary course marketing, insurance, regulatory and other matters. As of June 30, 2024, we had $ 470 million of availability on our Revolving Credit Facility after taking into account a draw of $ 30 million and $ 130 million in letters of credit outstanding. The borrowing base is redetermined semi-annually and the next determination will be on or about October 1, 2024. In February 2024, in connection with the Aera Merger, we entered into a second amendment to our Revolving Credit Facility to, among other things, permit the incurrence of indebtedness under a bridge loan facility. We did not utilize a bridge loan facility in connection with the Aera Merger and wrote-off $ 6 million of bridge loan and commitment fees during the three months ended June 30, 2024 included in other non-operating (loss) income on our condensed consolidated statement of operations. 12 In March 2024, we entered into a third amendment to our Revolving Credit Facility. This amendment facilitated certain matters with respect to the Aera Merger, including the postponement of the regular spring borrowing base redetermination until the fall of 2024 and certain other amendments. On July 1, 2024, we entered into a fourth amendment to our Revolving Credit Facility. This amendment increased the aggregate revolving commitments available under the Revolving Credit Facility from $ 630 million to $ 1.1 billion. The amount we are able to borrow under our Revolving Credit Facility is limited to the amount of these commitments. This amendment also increased the borrowing base from $ 1.2 billion to $ 1.5 billion, among other matters. For a discussion of the Aera Merger, see Note 13 Subsequent Events. 2029 Senior Notes On June 5, 2024, we completed an offering of $ 600 million in aggregate principal amount of 8.25 % senior notes due 2029 (2029 Senior Notes). The terms of the 2029 Senior Notes are governed by the Indenture, dated as of June 5, 2024, by and among us, the guarantors and Wilmington Trust, National Association, as trustee (2029 Senior Notes Indenture). The net proceeds of $ 590 million, after $ 10 million of debt discount and issuance costs, were used along with available cash to repay all of Aera's outstanding debt at closing of the Aera Merger. See Note 13 Subsequent Events for more information on the closing of the Aera Merger. Security – Our 2029 Senior Notes are general unsecured obligations which are guaranteed on a senior unsecured basis by all of our existing subsidiaries that guarantee our obligations under the Revolving Credit Facility and our existing 2026 Senior Notes. Redemption – We may redeem the 2029 Senior Notes at any time on or after June 15, 2026 at the redemption prices of (i) 104.125 % during the twelve-month period beginning on June 15, 2026, (ii) 102.063 % during the twelve-month period beginning on June 15, 2027 and (iii) 100 % after June 15, 2028 and before the maturity date. Prior to June 15, 2026, we may redeem up to 35 % of the aggregate principal amount of the 2029 Senior Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at the redemption price of 108.250 %. In addition, before June 15, 2026, we may redeem some or all of the 2029 Senior Notes at a redemption price equal to 100 % of the aggregate principal amount of the 2029 Senior Notes redeemed, plus the applicable premium as specified in the 2029 Senior Notes Indenture and accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, our 2029 Senior Notes were subject to a special mandatory redemption in certain circumstances if the Aera Merger did not close. As of June 30, 2024, it was not probable that this redemption feature would be triggered and it is no longer effective. Other Covenants – Our 2029 Senior Notes include covenants that, among other things, restrict our ability to incur additional indebtedness, issue preferred stock, grant liens, make asset sales and investments, repay existing indebtedness, make subsidiary distributions, and enter into transactions that would result in fundamental changes. Events of Default and Change of Control – Our 2029 Senior Notes provide for certain triggering events, including upon a change of control, as defined in the indenture, that would require us to repurchase all or any part of the 2029 Senior Notes at a price equal to 101 % of the aggregate principal amount plus accrued and unpaid interest. 13 Fair Value We estimate that the fair value of our variable rate debt approximates its carrying value because the interest rate approximates current market rates. As shown in the table below, we estimate fair value of our fixed rate Senior Notes based on known prices from market transactions (using Level 1 inputs on the fair value hierarchy). June 30, December 31, 2024 2023 (in millions) Variable rate debt $ 30 $ — Fixed rate debt 2026 Senior Notes 547 554 2029 Senior Notes 612 — Fair Value of Long-Term Debt $ 1,189 $ 554 Other As of June 30, 2024, we were in compliance with all financial and other debt covenants under our Revolving Credit Facility, 2026 Senior Notes and 2029 Senior Notes. For more information on our 2026 Senior Notes, see Part II, Item 8 – Financial Statements and Supplementary Data, Note 4 Debt in our 2023 Annual Report. NOTE 4 LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES We are involved, in the normal course of business, in lawsuits, environmental and other claims, and other contingencies that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties or injunctive or declaratory relief. We accrue reserves for currently outstanding lawsuits, claims and proceedings when we determine it is probable that a liability has been incurred and the liability can be reasonably estimated. Reserve balances for these items at June 30, 2024 and December 31, 2023 were not material to our condensed consolidated balance sheets as of such dates. We also evaluate the amount of reasonably possible losses that we could incur as a result of these matters. We believe that reasonably possible losses that we could incur in excess of reserves cannot be accurately determined. In October 2020, Signal Hill Services, Inc. defaulted on its decommissioning obligations associated with two offshore platforms. The Bureau of Safety and Environmental Enforcement (BSEE) determined that former lessees, including our former parent, Occidental Petroleum Corporation (Oxy) with a 37.5 % share, are responsible for accrued decommissioning obligations associated with these offshore platforms. Oxy sold its interest in the platforms approximately 30 years ago and it is our understanding that Oxy has not had any connection to the operations since that time and was challenging BSEE's order. Oxy notified us of the claim under the indemnification provisions of the Separation and Distribution Agreement between us and Oxy. In September 2021, we accepted the indemnification claim from Oxy and are challenging the order from BSEE. In March 2024, we entered into a cost sharing agreement with former lessees to share in ongoing maintenance costs during the pendency of the challenge to the BSEE order. We estimate our ongoing share of maintenance costs for the platforms could be approximately $ 5 million per year. Due to the preliminary stage of the process, no cost estimates to abandon the offshore platforms have been determined. NOTE 5 DERIVATIVES We continue to maintain a commodity hedging program primarily focused on crude oil to help protect our cash flows, margins and capital program from the volatility of commodity prices. We also enter into natural gas swaps for the purpose of hedging our fuel consumption at one of our steamfloods as well as swaps for natural gas purchases and sales related to our marketing activities. We did not have any derivative instruments designated as accounting hedges as of and for the three and six months ended June 30, 2024 and 2023. Unless otherwise indicated, we use the term "hedge" to describe derivative instruments that are designed to implement our hedging strategy. 14 Summary of Derivative Contracts We held the following Brent-based contracts as of June 30, 2024: Q3 2024 Q4 2024 Q1 2025 Q2 2025 2H 2025 Sold Calls Barrels per day 30,000 29,000 30,000 30,000 29,500 Weighted-average price per barrel $ 90.07 $ 90.07 $ 87.08 $ 87.08 $ 87.11 Purchased Puts Barrels per day 30,000 29,000 30,000 30,000 29,500 Weighted-average price per barrel $ 65.17 $ 65.17 $ 61.67 $ 61.67 $ 61.69 Swaps Barrels per day 8,875 8,875 5,250 3,500 3,250 Weighted-average price per barrel $ 80.10 $ 79.94 $ 76.27 $ 72.50 $ 72.50 The outcomes of the derivative positions are as follows: • Sold calls – we make settlement payments for prices above the indicated weighted-average price per barrel. • Purchased puts – we receive settlement payments for prices below the indicated weighted-average price per barrel. • Swaps – we make settlement payments for prices above the indicated weighted-average price per barrel and receive settlement payments for prices below the indicated weighted-average price per barrel. At June 30, 2024, we also held the following swaps to hedge purchased natural gas used in our operations as shown in the table below. Q3 2024 Q4 2024 Swaps: MMBtu per day 10,000 10,000 Weighted-average price per MMBtu $ 5.65 $ 5.65 We also have a limited number of derivative contracts related to our natural gas marketing activities that are intended to lock in locational price spreads. These derivative contracts are not significant to our results of operations or financial statements taken as a whole. Fair Value of Derivatives Derivative instruments not designated as hedging instruments are required to be recorded on the balance sheet at fair value. We report gains and losses on our derivative contracts which hedge commodity price risk related to our oil production and our marketing activities in operating revenue on our consolidated statements of operations as shown in the table below: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) (in millions) Non-cash commodity derivative gain (loss) $ 11 $ 94 $ ( 48 ) $ 201 Settlements and premiums ( 6 ) ( 63 ) ( 18 ) ( 128 ) Net gain (loss) from commodity derivatives $ 5 $ 31 $ ( 66 ) $ 73 15 We report gains and losses on our derivative contracts for purchased natural gas used to generate steam for our steamflood operations as a component of operating expense on our consolidated statement of operations. For the three and six months ended June 30, 2024, we recognized a net loss of $ 1 million (which includes a non-cash gain of $ 3 million and $ 4 million of settlement payments) and a net loss of $ 2 million (which includes a non-cash gain of $ 4 million and $ 6 million of settlement payments) in other operating expenses, net on our consolidated statement of operations. We did not have derivative contracts related to purchased natural gas for our marketing activities during the three and six months ended June 30, 2023. Our derivative contracts are measured at fair value using industry-standard models with various inputs, including quoted forward prices, and are classified as Level 2 in the required fair value hierarchy for the periods presented. The following tables present the fair values of our outstanding commodity derivatives as of June 30, 2024 and December 31, 2023: June 30, 2024 Classification Gross Amounts at Fair Value Netting Net Fair Value (in millions) Other current assets, net $ 13 $ ( 13 ) $ — Other noncurrent assets 15 ( 15 ) — Current liabilities ( 41 ) 13 ( 28 ) Noncurrent liabilities ( 25 ) 15 ( 10 ) $ ( 38 ) $ — $ ( 38 ) December 31, 2023 Classification Gross Amounts at Fair Value Netting Net Fair Value (in millions) Other current assets, net $ 39 $ ( 18 ) $ 21 Other noncurrent assets 38 ( 32 ) 6 Current liabilities ( 26 ) 18 ( 8 ) Noncurrent liabilities ( 34 ) 32 ( 2 ) $ 17 $ — $ 17 NOTE 6 INCOME TAXES The following table presents the components of our total income tax provision: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) (in millions) Income (loss) before income taxes $ 11 $ 135 $ ( 8 ) $ 511 Current income tax provision — 29 — 57 Deferred income tax provision (benefit) 3 9 ( 6 ) 56 Total income tax provision (benefit) $ 3 $ 38 $ ( 6 ) $ 113 16 Our annual effective tax rate of 27 % differed from the U.S. federal statutory tax rate of 21% for the three months ended June 30, 2024 primarily due to state taxes. Our annual effective tax rate of 75 % differed from the U.S. federal statutory rate of 21% for the six months ended June 30, 2024 primarily due to the settlement of stock-based compensation awards in the first quarter of 2024 at a share price which exceeded the grant date value used to recognize compensation expense for financial accounting. This difference resulted in a tax benefit and had the effect of increasing our effective tax rate for the six months ended June 30, 2024. Our annual effective tax rate of 28 % differed from the U.S. federal statutory tax rate of 21% for the three and six months ended June 30, 2023 primarily due to state taxes. During the six months ended June 30, 2023 we recognized a tax benefit for the release of a valuation allowance, which was recognized in 2022. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 7 Income Taxes in our 2023 Annual Report for additional information. Management expects to realize the recorded deferred tax assets primarily through future income and reversal of taxable temporary differences. Realization of our existing deferred tax assets is not assured and depends on a number of factors including our ability to generate sufficient taxable income in future periods. NOTE 7 DIVESTITURES, ACQUISITIONS AND ASSETS HELD FOR SALE Divestitures Fort Apache in Huntington Beach In March 2024, we sold our 0.9 -acre Fort Apache real estate property in Huntington Beach, California for purchase price of $ 10 million and recognized a $ 6 million gain. Other During the three and six months ended June 30, 2024, we sold non-core assets recognizing a $ 1 million gain. During the six months ended June 30, 2023, we sold a non-producing asset in exchange for the assumption of liabilities, recognizing a $ 7 million gain related to the liability reduction. Acquisitions In the three and six months ended June 30, 2024, we acquired land for our carbon management business for approximately $ 6 million. In the three and six months ended June 30, 2023, we acquired land for our carbon management business for approximately $ 1 million. Assets Held for Sale Ventura Basin Transactions During 2021 and 2022, we entered into transactions to sell our Ventura basin assets. The transaction contemplates multiple closings that are subject to customary closing conditions. The transfer of the remaining assets in the Ventura basin was approved in June 2024 by the State Lands Commission. We expect to close on the sale of these assets in the second half of 2024. These remaining assets, consisting of property, plant and equipment and associated asset retirement obligations, are classified as held for sale on our condensed consolidated balance sheets at June 30, 2024 and December 31, 2023. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 8 Divestitures and Acquisitions in our 2023 Annual Report for additional information on the Ventura basin transactions. Other In 2022, we acquired properties for carbon management activities for approximately $ 17 million, with the intent to divest a portion of these assets. We recorded these assets at fair value recognizing an impairment of $ 3 million in the first quarter of 2023. The fair value, using Level 3 inputs in the fair value hierarchy, declined during the first quarter of 2023 due to market conditions (including inflation and rising interest rates). The assets being divested are classified as held for sale as of June 30, 2024 on our condensed consolidated balance sheet. 17 NOTE 8 STOCKHOLDERS' EQUITY Share Repurchase Program Our Board of Directors has authorized a Share Repurchase Program to acquire up to $ 1.35 billion of our common stock through December 31, 2025. The repurchases may be effected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, derivative contracts or otherwise in compliance with Rule 10b-18, subject to market conditions. The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares and our Board of Directors may modify, suspend or discontinue authorization of the program at any time. The following is a summary of our share repurchases, which are held as treasury stock, for the periods presented: Total Number of Shares Purchased Total Value of Shares Purchased Average Price Paid per Share (number of shares) (in millions) ($ per share) Three months ended June 30, 2023 1,618,746 $ 64 $ 39.12 Three months ended June 30, 2024 703,839 $ 35 $ 49.71 Six months ended June 30, 2023 3,042,510 $ 123 $ 40.12 Six months ended June 30, 2024 1,769,603 $ 93 $ 51.85 Inception of Program (May 2021) through June 30, 2024 16,633,518 $ 697 $ 41.74 Note: The total value of shares purchased includes approximately $ 1 million in both the six months ended June 30, 2024 and 2023 related to excise taxes on share repurchases, which was effective beginning on January 1, 2023. Commissions paid on share repurchases were not significant in all periods presented. Dividends Our Board of Directors declared the following cash dividends for each of the periods presented. Total Dividend Rate Per Share (in millions) ($ per share) 2024 Three months ended March 31, 2024 $ 21 $ 0.31 Three months ended June 30, 2024 22 $ 0.31 Six months ended June 30, 2024 $ 43 2023 Three months ended March 31, 2023 $ 20 $ 0.2825 Three months ended June 30, 2023 20 $ 0.2825 Six months ended June 30, 2023 $ 40 In addition to dividends on our common stock shown in the table above, we paid $ 4 million on equity-settled stock-based compensation awards in the six months ended June 30, 2024 . Future cash dividends, and the establishment of record and payment dates, are subject to final determination by our Board of Directors each quarter after reviewing our financial performance and position. See Note 13 Subsequent Events for information on future cash dividends. Warrants In October 2020, we reserved an aggregate 4,384,182 shares of our common stock for warrants, which are exercisable at $ 36 per share through October 2024. 18 As of June 30, 2024, we had outstanding warrants exercisable into 4,119,144 shares of our common stock (subject to adjustments pursuant to the terms of the warrants). During the three and six months ended June 30, 2024, we issued 34,474 and 53,325 shares of our common stock in exchange for warrants. During the three and six months ended June 30, 2023, we issued an insignificant number of shares of our common stock in exchange for warrants. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 10 Stockholders' Equity in our 2023 Annual Report for additional information on the terms of our warrants. NOTE 9 EARNINGS PER SHARE Basic and diluted earnings per share (EPS) were calculated using the treasury stock method for the three and six months ended June 30, 2024 and 2023. Our restricted stock unit (RSU) and performance stock unit (PSU) awards are not considered participating securities since the dividend rights on unvested shares are forfeitable. For basic EPS, the weighted-average number of common shares outstanding excludes shares underlying our equity-settled awards and warrants. For diluted EPS, the basic shares outstanding are adjusted by adding potential common shares, if dilutive. The following table presents the calculation of basic and diluted EPS, for the three and six months ended June 30, 2024 and 2023: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions, except per-share amounts) Numerator for Basic and Diluted EPS Net income (loss) $ 8 $ 97 $ ( 2 ) $ 398 Denominator for Basic EPS Weighted-average shares 68.1 69.7 68.6 70.5 Potential common shares, if dilutive: Warrants 1.2 0.5 — 0.5 Restricted stock units 0.4 0.9 — 0.9 Performance stock units 0.3 0.8 — 0.8 Denominator for Diluted EPS Weighted-average shares 70.0 71.9 68.6 72.7 EPS Basic $ 0.12 $ 1.39 $ ( 0.03 ) $ 5.65 Diluted $ 0.11 $ 1.35 $ ( 0.03 ) $ 5.47 19 The following table presents potentially dilutive weighted-average common shares which were excluded from the denominator for diluted EPS in periods of losses: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) Shares issuable upon exercise of warrants — — 4.2 — Shares issuable upon settlement of RSUs — — 0.8 — Shares issuable upon settlement of PSUs — — 1.0 — Total antidilutive shares — — 6.0 — NOTE 10 SUPPLEMENTAL ACCOUNT BALANCES Restricted cash — Cash and cash equivalents at June 30, 2024 included an insignificant amount that was restricted under oil and natural gas liens in favor of one of our suppliers. We had no restricted cash at December 31, 2023. Revenues — We derive most of our revenue from sales of oil, natural gas and NGLs, with the remaining revenue primarily generated from sales of electricity and marketing activities related to storage and managing excess pipeline capacity. The following table provides disaggregated revenue for sales of produced oil, natural gas and NGLs to customers: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) (in millions) Oil $ 353 $ 362 $ 701 $ 752 Natural gas 14 43 46 306 NGLs 45 42 94 104 Oil, natural gas and NGL sales $ 412 $ 447 $ 841 $ 1,162 From time-to-time, we enter into transactions for third-party production, which we report as revenue from marketing of purchased commodities on our condensed consolidated statements of operations. Revenues from marketing of purchased commodities primarily results from the storage or transportation of natural gas to take advantage of differences in pricing or location, or in the quality of products other than natural gas. The following table provides disaggregated revenue for sales to customers related to our marketing activities: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) Oil $ 28 $ — $ 48 $ — Natural gas 23 72 71 256 NGLs — — 6 3 Revenue from marketing of purchased commodities $ 51 $ 72 $ 125 $ 259 20 Inventories — Materials and supplies, which primarily consist of well equipment and tubular goods used in our oil and natural gas operations, are valued at weighted-average cost and are reviewed periodically for obsolescence. Finished goods include produced oil and NGLs in storage, which are valued at the lower of cost or net realizable value. Inventories, by category, are as follows: June 30, December 31, 2024 2023 (in millions) Materials and supplies $ 54 $ 68 Finished goods 2 4 Inventories $ 56 $ 72 In the three and six months ended June 30, 2024, we recorded an impairment of excess and obsolete materials and supplies of $ 13 million. The impairment related to the write-down of obsolete materials and supplies to fair value using Level 3 inputs in the fair value hierarchy. Other current assets, net — Other current assets, net include the following: June 30, December 31, 2024 2023 (in millions) Net amounts due from joint interest partners (a) $ 48 $ 43 Fair value of commodity derivative contracts — 21 Prepaid expenses 16 19 Greenhouse gas allowances 12 12 Income tax receivable 8 — Other 19 18 Other current assets, net $ 103 $ 113 (a) Included in the June 30, 2024 and December 31, 2023 net amounts due from joint interest partners are allowances of $ 3 million. Other noncurrent assets — Other noncurrent assets include the following: June 30, December 31, 2024 2023 (in millions) Operating lease right-of-use assets $ 83 $ 73 Deferred financing costs - Revolving Credit Facility 12 11 Emission reduction credits 11 11 Prepaid power plant maintenance 2 34 Fair value of commodity derivative contracts — 6 Deposits and other 14 13 Other noncurrent assets $ 122 $ 148 21 Accrued liabilities — Accrued liabilities include the following: June 30, December 31, 2024 2023 (in millions) Employee-related costs $ 69 $ 82 Taxes other than on income 36 35 Asset retirement obligations 77 99 Interest 21 18 Operating lease liability 19 15 Fair value of derivative contracts 28 8 Premiums due on commodity derivative contracts 13 21 Liability for settlement payments on commodity derivative contracts 2 8 Amounts due under production-sharing contracts 16 5 Signal Hill maintenance 2 12 Income taxes payable — 18 Other 57 45 Accrued liabilities $ 340 $ 366 Other long-term liabilities — Other long-term liabilities includes the following: June 30, December 31, 2024 2023 (in millions) Compensation-related liabilities $ 35 $ 38 Postretirement benefit plan 33 36 Operating lease liability 55 55 Fair value of commodity derivative contracts 10 2 Premiums due on commodity derivative contracts 7 10 Contingent liability (related to Carbon TerraVault JV put and call rights) 102 52 Other 6 8 Other long-term liabilities $ 248 $ 201 General and administrative expenses — The table below shows G&A expenses for our exploration and production business (including unallocated corporate overhead and other) separately from our carbon management business. The amounts shown for our carbon management business are net of amounts invoiced by us under the MSA with the Carbon TerraVault JV. See Note 2 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV. Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) (in millions) Exploration and production, corporate and other $ 60 $ 68 $ 115 $ 130 Carbon management business 3 3 5 6 Total general and administrative expenses $ 63 $ 71 $ 120 $ 136 22 NOTE 11 SUPPLEMENTAL CASH FLOW INFORMATION Supplemental disclosures to our condensed consolidated statements of cash flows, excluding leases and ARO, are presented below: Three months ended June 30, Six months ended June 30, 2024 2023 2024 2023 (in millions) (in millions) Supplemental Cash Flow Information Interest paid, net of amount capitalized $ ( 1 ) $ 1 $ 19 $ 22 Income taxes paid $ 4 $ 51 $ 26 $ 51 Interest income $ 8 $ 6 $ 14 $ 9 Supplemental Disclosure of Non-cash Investing and Financing Activities Contribution to the Carbon TerraVault JV $ 5 $ 2 $ 5 $ 4 Issuance of shares for stock-based compensation awards $ 1 $ 2 $ 88 $ 2 Dividends accrued for stock-based compensation awards $ — $ 1 $ 1 $ 2 Excise tax on share repurchases $ — $ — $ 1 $ 1 NOTE 12 CONDENSED CONSOLIDATING FINANCIAL INFORMATION We have designated certain of our subsidiaries as Unrestricted Subsidiaries under the indenture governing our 2026 Senior Notes (2026 Senior Notes Indenture) and 2029 Senior Notes (2029 Senior Notes Indenture). Unrestricted Subsidiaries (as defined in the 2026 Senior Notes Indenture and 2029 Senior Notes Indenture) are subject to fewer restrictions under the indentures. We are required under the 2026 Senior Notes Indenture and 2029 Senior Notes Indenture to present the financial condition and results of operations of CRC and its Restricted Subsidiaries (as defined in the 2026 Senior Notes Indenture and 2029 Senior Notes Indenture) separate from the financial condition and results of operations of its Unrestricted Subsidiaries. The following condensed consolidating balance sheets as of June 30, 2024 and December 31, 2023 and the condensed consolidating statements of operations for the three and six months ended June 30, 2024 and 2023, as applicable, reflect the condensed consolidating financial information of CRC (Parent), our combined Unrestricted Subsidiaries, our combined Restricted Subsidiaries and the elimination entries necessary to arrive at the information for the Company on a consolidated basis. The financial information may not necessarily be indicative of the financial condition and results of operations had the Unrestricted Subsidiaries operated as independent entities. 23 Condensed Consolidating Balance Sheets As of June 30, 2024 and December 31, 2023 As of June 30, 2024 Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated (in millions) Total current assets $ 1,055 $ 61 $ 323 $ — $ 1,439 Total property, plant and equipment, net 13 21 2,739 — 2,773 Investments in consolidated subsidiaries 2,461 ( 28 ) 1,361 ( 3,794 ) — Deferred tax asset 139 — — — 139 Investment in unconsolidated subsidiary — 17 — — 17 Other assets 14 49 59 — 122 TOTAL ASSETS $ 3,682 $ 120 $ 4,482 $ ( 3,794 ) $ 4,490 Total current liabilities 117 15 461 — $ 593 Long-term debt 1,161 — — — 1,161 Asset retirement obligations — — 436 — 436 Other long-term liabilities 72 126 50 — 248 Amounts due to (from) affiliates 280 44 ( 324 ) — — Total equity 2,052 ( 65 ) 3,859 ( 3,794 ) 2,052 TOTAL LIABILITIES AND EQUITY $ 3,682 $ 120 $ 4,482 $ ( 3,794 ) $ 4,490 As of December 31, 2023 Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated (in millions) Total current assets $ 511 $ 20 $ 398 $ — $ 929 Total property, plant and equipment, net 14 12 2,744 — 2,770 Investments in consolidated subsidiaries 2,311 ( 11 ) 1,347 ( 3,647 ) — Deferred tax asset 132 — — — 132 Investment in unconsolidated subsidiary — 19 — — 19 Other assets 12 36 100 — 148 TOTAL ASSETS $ 2,980 $ 76 $ 4,589 $ ( 3,647 ) $ 3,998 Total current liabilities 142 13 461 — $ 616 Long-term debt 540 — — — 540 Asset retirement obligations — — 422 — 422 Other long-term liabilities 79 73 49 — 201 Total equity 2,219 ( 10 ) 3,657 ( 3,647 ) 2,219 TOTAL LIABILITIES AND EQUITY $ 2,980 $ 76 $ 4,589 $ ( 3,647 ) $ 3,998 24 Condensed Consolidating Statement of Operations For the three and six months ended June 30, 2024 and 2023 Three months ended June 30, 2024 Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated (in millions) Total operating revenues $ 7 $ — $ 513 $ ( 6 ) $ 514 Total costs and other 77 18 388 ( 6 ) 477 Gain on asset divestitures — — 1 — 1 Non-operating income (loss) ( 21 ) ( 7 ) 1 — ( 27 ) INCOME (LOSS) BEFORE INCOME TAXES ( 91 ) ( 25 ) 127 — 11 Income tax benefit ( 3 ) — — — ( 3 ) NET INCOME (LOSS) $ ( 94 ) $ ( 25 ) $ 127 $ — $ 8 Three months ended June 30, 2023 Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated (in millions) Total operating revenues $ 5 $ — $ 586 $ — $ 591 Total costs and other 62 11 371 — 444 Non-operating (loss) income ( 11 ) ( 2 ) 1 — ( 12 ) (LOSS) INCOME BEFORE INCOME TAXES ( 68 ) ( 13 ) 216 — 135 Income tax provision ( 38 ) — — — ( 38 ) NET (LOSS) INCOME $ ( 106 ) $ ( 13 ) $ 216 $ — $ 97 Six months ended June 30, 2024 Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated (in millions) Total operating revenues $ 13 $ — $ 971 $ ( 16 ) $ 968 Total costs and other 136 28 793 ( 16 ) 941 Gain on asset divestitures — — 7 — 7 Non-operating (loss) income ( 34 ) ( 11 ) 3 — ( 42 ) (LOSS) INCOME BEFORE INCOME TAXES ( 157 ) ( 39 ) 188 — ( 8 ) Income tax provision 6 — — — 6 NET (LOSS) INCOME $ ( 151 ) $ ( 39 ) $ 188 $ — $ ( 2 ) 25 Six months ended June 30, 2023 Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated (in millions) Total operating revenues $ 9 $ — $ 1,606 $ — $ 1,615 Total costs and other 112 19 951 — 1,082 Gain on asset divestitures — — 7 — 7 Non-operating (loss) income ( 27 ) ( 5 ) 3 — ( 29 ) (LOSS) INCOME BEFORE INCOME TAXES ( 130 ) ( 24 ) 665 — 511 Income tax provision ( 113 ) — — — ( 113 ) NET (LOSS) INCOME $ ( 243 ) $ ( 24 ) $ 665 $ — $ 398 NOTE 13 SUBSEQUENT EVENTS Aera Merger On July 1, 2024, we obtained all of the ownership interests in Aera. Aera is a leading operator of mature fields in California, primarily in the San Joaquin and Ventura basins, with high oil-weighted production. In connection with the closing of the Aera Merger, we issued 21,315,707 shares of common stock to the Aera owners and paid $ 990 million in connection with the extinguishment of Aera's outstanding indebtedness using the proceeds from the issuance of the 2029 Senior Notes and cash on hand. For more information on the 2029 Senior Notes and an amendment to our Revolving Credit Facility entered into at the closing of the Aera Merger, refer to Note 3 Debt. As of July 1, 2024, immediately following closing of the Aera Merger, our existing stockholders prior to the Aera Merger owned approximately 76 % of CRC and the previous owners of Aera owned approximately 24 % of CRC. In the three and six months ended June 30, 2024, we recognized $ 13 million and $ 26 million, respectively, of transaction and integration costs related to the Aera Merger which are included in other operating expenses, net on our condensed consolidated statement of operations. In July 2024, we recognized additional transaction costs of $ 27 million which were conditioned upon closing. We expect the Aera Merger to be accounted for as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations (ASC 805). Due to the proximity of the acquisition date to the filing of the Quarterly Report on Form 10-Q for the period ended June 30, 2024, the initial accounting for the Aera Merger is incomplete, and therefore we are unable to disclose certain information required by ASC 805, including the provisional amounts recognized as of the acquisition date for fair value of consideration transferred, each major class of assets acquired and liabilities assumed, and goodwill, if any, due to the ongoing status of the valuation. Dividend On August 2, 2024, our Board of Directors increased the cash dividend policy to anticipate a total annual dividend of $ 1.55 , payable to shareholders in quarterly increments of $ 0.3875 per share of common stock. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by our Board of Directors each quarter after reviewing our financial performance and position. On August 5, 2024 , our Board of Directors declared a quarterly cash dividend of $ 0.3875 per share of common stock. The dividend is payable to shareholders of record at the close of business on August 30, 2024 and is expected to be paid on September 16, 2024 . 26