Item 1. Financial Statements
Item 1 Financial Statements (unaudited)
CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of September 30, 2024 and December 31, 2023
(in millions, except share data)
September 30, December 31,
2024 2023
CURRENT ASSETS
Cash and cash equivalents $ 241 $ 496
Trade receivables 313 216
Inventories 75 72
Assets held for sale 13 13
Receivable from affiliate 46 19
Other current assets, net 184 113
Total current assets 872 929
PROPERTY, PLANT AND EQUIPMENT
6,752 3,437
Accumulated depreciation, depletion and amortization
( 916 ) ( 667 )
Total property, plant and equipment, net 5,836 2,770
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 84 19
DEFERRED INCOME TAXES
50 132
OTHER NONCURRENT ASSETS 286 148
TOTAL ASSETS $ 7,128 $ 3,998
CURRENT LIABILITIES
Accounts payable 351 245
Liabilities associated with assets held for sale 5 5
Accrued liabilities 541 366
Total current liabilities 897 616
NONCURRENT LIABILITIES
Long-term debt, net 1,131 540
Fair value of derivative contracts 55 2
Asset retirement obligations 1,083 422
Deferred tax liability
124 —
Other long-term liabilities 337 199
STOCKHOLDERS' EQUITY
Preferred stock ( 20,000,000 shares authorized at $ 0.01 par value) no shares outstanding at September 30, 2024 and December 31, 2023
— —
Common stock ( 200,000,000 shares authorized at $ 0.01 par value) ( 106,930,510 and 83,557,800 shares issued; 89,461,673 and 68,693,885 shares outstanding at September 30, 2024 and December 31, 2023)
1 1
Treasury stock ( 17,468,837 shares held at cost at September 30, 2024 and 14,863,915 shares held at cost at December 31, 2023)
( 739 ) ( 604 )
Additional paid-in capital 2,479 1,329
Retained earnings 1,683 1,419
Accumulated other comprehensive income 77 74
Total stockholders' equity 3,501 2,219
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,128 $ 3,998
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CALIFORNIA R ESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2024 and 2023
(dollars in millions, except share and per share data; shares in millions)
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
REVENUES
Oil, natural gas and NGL sales $ 870 $ 510 $ 1,711 $ 1,672
Net gain (loss) from commodity derivatives
356 ( 204 ) 290 ( 131 )
Revenue from marketing of purchased commodities
51 77 176 336
Electricity sales 69 67 120 169
Interest and other revenue
7 10 24 29
Total operating revenues 1,353 460 2,321 2,075
OPERATING EXPENSES
Operating costs 311 196 643 636
General and administrative expenses 106 65 226 201
Depreciation, depletion and amortization 140 56 246 170
Asset impairment — — 13 3
Taxes other than on income 85 48 162 132
Exploration expense 1 — 2 2
Costs related to marketing of purchased commodities
43 31 140 182
Electricity generation expenses 9 23 31 85
Transportation costs 23 16 60 49
Accretion expense 31 12 56 35
Carbon management business expenses
13 7 36 20
Other operating expenses, net 73 21 161 42
Total operating expenses 835 475 1,776 1,557
Gain on asset divestitures
— — 7 7
OPERATING INCOME (LOSS)
518 ( 15 ) 552 525
NON-OPERATING (EXPENSES) INCOME
Interest and debt expense ( 29 ) ( 15 ) ( 59 ) ( 43 )
Loss on early extinguishment of debt
( 5 ) — ( 5 ) —
Loss from investment in unconsolidated subsidiaries
( 2 ) ( 3 ) ( 9 ) ( 6 )
Other non-operating income (loss)
1 3 ( 4 ) 5
INCOME (LOSS) BEFORE INCOME TAXES
483 ( 30 ) 475 481
Income tax (provision) benefit
( 138 ) 8 ( 132 ) ( 105 )
NET INCOME (LOSS)
$ 345 $ ( 22 ) $ 343 $ 376
Net income (loss) per share
Basic $ 3.86 $ ( 0.32 ) $ 4.54 $ 5.38
Diluted $ 3.78 $ ( 0.32 ) $ 4.42 $ 5.18
Weighted-average common shares outstanding
Basic 89.4 68.7 75.5 69.9
Diluted 91.2 68.7 77.6 72.6
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 nine months ended September 30, 2024 and 2023
(in millions)
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
Net income (loss)
$ 345 $ ( 22 ) $ 343 $ 376
Other comprehensive income (loss) (a) :
Actuarial gain associated with pension and postretirement plans
9 — 9 —
Amortization of prior service cost credit included in net periodic benefit cost, net of tax
( 4 ) ( 5 ) ( 6 ) ( 5 )
Comprehensive income (loss)
$ 350 $ ( 27 ) $ 346 $ 371
(a) Amounts are net of $ 2 million and $ 1 million in tax for the three and nine months ended September 30, 2024, respectively. Amounts are net of $ 2 million in tax for the three and nine months ended September 30, 2023.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
For the three and nine months ended September 30, 2024 and 2023
(in millions)
Three months ended September 30, 2024
Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other
Comprehensive
Income Total
Equity
Balance, June 30, 2024 $ 1 $ ( 697 ) $ 1,302 $ 1,374 $ 72 $ 2,052
Net income
— — — 345 — 345
Share-based compensation — — 5 — — 5
Repurchases of common stock — ( 42 ) — — — ( 42 )
Shares issued for warrants
— — 37 — — 37
Shares issued for Aera Merger
— — 1,135 — — 1,135
Cash dividend ($ 0.3875 per share)
— — — ( 36 ) — ( 36 )
Other comprehensive income, net of tax
— — — — 5 5
Balance, September 30, 2024 $ 1 $ ( 739 ) $ 2,479 $ 1,683 $ 77 $ 3,501
Three months ended September 30, 2023
Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other
Comprehensive
Income Total
Equity
Balance, June 30, 2023 $ 1 $ ( 584 ) $ 1,317 $ 1,295 $ 81 $ 2,110
Net loss
— — — ( 22 ) — ( 22 )
Share-based compensation — — 8 — — 8
Repurchases of common stock — ( 20 ) — — — ( 20 )
Cash dividend ($ 0.2825 per share)
— — — ( 20 ) — ( 20 )
Shares cancelled for taxes — — ( 1 ) — — ( 1 )
Other comprehensive income, net of tax — — — — ( 5 ) ( 5 )
Balance, September 30, 2023 $ 1 $ ( 604 ) $ 1,324 $ 1,253 $ 76 $ 2,050
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Nine months ended September 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 income
— — — 343 — 343
Share-based compensation — — 19 — — 19
Repurchases of common stock — ( 135 ) — — — ( 135 )
Shares issued for warrants
— — 37 — — 37
Shares issued for Aera Merger
— — 1,135 — — 1,135
Cash dividend ($ 1.0075 per share)
— — — ( 79 ) — ( 79 )
Shares cancelled for taxes ( 42 ) — — ( 42 )
Other comprehensive income, net of tax
— — — — 3 3
Other — — 1 — — 1
Balance, September 30, 2024 $ 1 $ ( 739 ) $ 2,479 $ 1,683 $ 77 $ 3,501
Nine months ended September 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 — — — 376 — 376
Share-based compensation — — 22 — — 22
Repurchases of common stock — ( 143 ) — — — ( 143 )
Cash dividend ($ 0.8475 per share)
— — — ( 61 ) — ( 61 )
Shares cancelled for taxes
( 3 ) — — ( 3 )
Other comprehensive income, net of tax — — — — ( 5 ) ( 5 )
Balance, September 30, 2023 $ 1 $ ( 604 ) $ 1,324 $ 1,253 $ 76 $ 2,050
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2024 and 2023
(in millions)
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)
$ 345 $ ( 22 ) $ 343 $ 376
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 140 56 246 170
Deferred income tax provision (benefit)
90 ( 40 ) 84 16
Asset impairments
— — 13 3
Net (gain) loss from commodity derivatives
( 347 ) 204 ( 279 ) 131
Net payments on settled commodity derivatives ( 29 ) ( 95 ) ( 53 ) ( 223 )
Net loss on early extinguishment of debt 5 — 5 —
Gain on asset divestitures
— — ( 7 ) ( 7 )
Other non-cash charges to income, net 45 26 97 77
Changes in operating assets and liabilities, net ( 29 ) ( 25 ) ( 45 ) ( 21 )
Net cash provided by operating activities 220 104 404 522
CASH FLOW FROM INVESTING ACTIVITIES
Capital investments ( 79 ) ( 33 ) ( 167 ) ( 119 )
Changes in accrued capital investments 6 5 8 ( 10 )
Proceeds from asset divestitures, net — — 12 —
Purchase of a business, net of cash acquired
( 853 ) — ( 853 ) —
Acquisitions — — ( 6 ) ( 1 )
Other, net ( 2 ) — ( 4 ) ( 3 )
Net cash used in investing activities ( 928 ) ( 28 ) ( 1,010 ) ( 133 )
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Revolving Credit Facility — — 30 —
Repayments of Revolving Credit Facility ( 30 ) — ( 30 ) —
Proceeds from 2029 Senior Notes, net
298 — 888 —
Repurchases of common stock ( 42 ) ( 20 ) ( 135 ) ( 143 )
Common stock dividends ( 34 ) ( 19 ) ( 77 ) ( 59 )
Payments on equity-settled awards
— — ( 4 ) —
Issuance of common stock — — 2 1
Bridge loan commitments
— — ( 5 ) —
Debt amendment costs
( 7 ) — ( 10 ) ( 8 )
Stock warrants exercised
37 — 37 —
Shares cancelled for taxes — ( 1 ) ( 42 ) ( 3 )
Debt repurchases ( 303 ) ( 5 ) ( 303 ) ( 5 )
Other
( 1 ) — — —
Net cash (used in) provided by financing activities
( 82 ) ( 45 ) 351 ( 217 )
Increase (decrease) in cash and cash equivalents
( 790 ) 31 ( 255 ) 172
Cash and cash equivalents—beginning of period 1,031 448 496 307
Cash and cash equivalents—end of period $ 241 $ 479 $ 241 $ 479
The accompanying notes are an integral part of these condensed consolidated financial statements.
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CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
September 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.
In the opinion of our management, the accompanying unaudited condensed consolidated 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 investments in our unconsolidated subsidiaries are recognized either at cost, as is the case with Carbon TerraVault JV HoldCo, LLC, or at fair value if acquired in a business combination, as is the case for Midway Sunset Cogeneration Company. These investments are then 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.
On July 1, 2024, we closed on transactions pursuant to the definitive agreement and plan of merger (Merger Agreement) to obtain all of the ownership interests in Aera Energy, LLC (Aera) (Aera Merger). Refer to Note 2 Aera Merger for further discussion of the Aera Merger. The Aera Merger has been accounted for as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations (ASC 805). The merger consideration of $ 2.1 billion was allocated to individual assets acquired net of liabilities assumed based on their fair value as of July 1, 2024 and are not included on the comparative balance sheet presented. The accompanying unaudited condensed consolidated statement of operations, comprehensive income and cash flows contain the results of Aera beginning on July 1, 2024.
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 4 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 three and nine months ended September 30, 2023, we reclassified $ 1 million and $ 2 million, respectively, related to NGL storage activities from other revenue to revenue from marketing of purchased commodities on our condensed consolidated statement of operations.
10
Concentration of Customers
We sell crude oil, natural gas and NGLs to marketers, California refineries and other customers that have access to transportation and storage facilities. In light of the ongoing energy deficit in California and strong demand for native crude oil production, we do not believe that the loss of any single customer would have a material adverse effect on our consolidated financial statements taken as a whole.
For the three months ended September 30, 2024, two California customers each accounted for at least 10%, and collectively 58 %, of our sales (before the effects of hedging).
NOTE 2 AERA MERGER
On July 1, 2024, we obtained by way of merger 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. The Aera Merger adds significant proved developed reserves to CRC. In connection with the closing of the Aera Merger, we issued 21,315,707 shares of common stock to the former Aera owners (Sellers). We also paid approximately $ 990 million in connection with the extinguishment of all of Aera's outstanding indebtedness using the proceeds from the issuance of our 8.25 % senior notes due 2029 (2029 Senior Notes) and cash on hand. For more information on the 2029 Senior Notes and recent amendments to our Revolving Credit Facility, refer to Note 4 Debt and Note 15 Subsequent Events.
As of July 1, 2024, and immediately following closing of the Aera Merger, our existing stockholders prior to the Aera Merger owned 76 % of CRC and the Sellers owned 24 % of CRC.
At the date of this filing, our assessment of the fair value of assets acquired and liabilities assumed is not complete. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, final appraisals of Aera's assets, evaluation of Aera's materials and supplies inventory, measurement of leases and preparation of final tax returns that will provide underlying tax basis of the assets acquired and liabilities assumed. We expect to complete the purchase price allocation during the 12-month period subsequent to the Aera Merger closing date and adjustments may be made to the provisional amounts recorded as of September 30, 2024.
The following table summarizes the consideration transferred:
Merger Consideration
(in millions, except share and per share data)
Shares of common stock (dividend adjusted)
21,315,707
Common stock per share fair value on July 1, 2024 $ 53.28
Fair value of share consideration $ 1,136
Settlement of Aera debt
990
Member taxes
( 1 )
Total purchase consideration
$ 2,125
11
The following table represents the preliminary purchase price allocation of the identifiable assets acquired and the liabilities assumed based on their estimated fair values as of the closing date of the Aera Merger:
Preliminary Purchase Price Allocation
(in millions)
Assets Acquired
Cash
$ 137
Other current assets
202
Investment in unconsolidated subsidiary
59
Property, plant and equipment 3,119
Pension and other postretirement benefits
73
Other noncurrent assets
67
Total Assets Acquired 3,657
Liabilities Assumed
Accounts payable ( 157 )
Accrued liabilities ( 132 )
Asset retirement obligations
( 700 )
Fair value of derivative contracts
( 351 )
Other long-term liabilities ( 192 )
Total Liabilities Assumed ( 1,532 )
Net Assets Acquired $ 2,125
We recorded cash based on Aera's bank balances as of July 1, 2024, which included restricted cash of $ 27 million. The measurements for predominately all of the other current and other noncurrent assets acquired and accounts payable, accrued liabilities and other long-term liabilities assumed are based on contracts in place at Aera on the acquisition date. Assets and liabilities related to Aera's pension and other postretirement benefit plans were measured based on actuarial valuations using Level 3 inputs. For more information on Aera's pension and other postretirement benefit plans, see Note 11 Pension and Postretirement Benefit Plans .
The fair value of an investment in an unconsolidated subsidiary was based on a preliminary appraisal using both the cost approach and available market data. The fair value of derivative instruments was based on observable inputs, primarily forward commodity-price curves. These inputs are considered Level 2 inputs in the fair value hierarchy.
The fair value of certain acquired property, plant and equipment, primarily consisting of proved oil and natural gas properties, land, gas processing plants and corporate assets including software and computer equipment, was based on preliminary appraisals. The fair value of proved oil and natural gas properties as of the acquisition date is based on estimated discounted future net cash flows incorporating market participant assumptions on an after-tax basis. Significant inputs to the valuation include estimates of future production volumes, future operating and development costs, future commodity prices, a weighted average cost of capital and a projected inflation rate. When estimating the fair value of proved properties, additional risk adjustments were applied to proved undeveloped reserves to reflect the relative uncertainty of the reserve class. These inputs are classified as Level 3 unobservable inputs, including the underlying commodity price assumptions which are based on the five-year NYMEX forward strip prices, escalated for inflation thereafter, and adjusted for price differentials.
The liability for future asset retirement obligations was determined by calculating the present value of estimated future abandonment costs. We utilized several assumptions, including a credit-adjusted risk-free interest rate, estimated remediation costs, estimated timing of when the work will be performed and a projected inflation rate.
Deferred income taxes, included in other noncurrent assets and long-term liabilities, represent the tax effects of differences in the tax basis and merger-date fair values of assets acquired and liabilities assumed. Refer to Note 7 Income Taxes for additional information on the deferred tax liability.
12
Lease-related assets and liabilities acquired are remeasured as if the leases were new at the merger date. These agreements are still under review for measurement at an updated incremental borrowing rate. Lease assets are included in property, plant and equipment and the liabilities are included in accrued liabilities and other long-term liabilities.
Supplemental Unaudited Pro Forma Financial Information
The following supplemental unaudited pro forma financial information presents the condensed consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 as if the Aera Merger had occurred on January 1, 2023.
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Total operating revenue
$ 1,353 $ 438 $ 3,006 $ 3,165
Net income
$ 386 $ ( 459 ) $ 341 $ 43
EPS
Basic $ 4.32 $ ( 5.10 ) $ 3.53 $ 0.47
Diluted $ 4.23 $ ( 5.10 ) $ 3.45 $ 0.45
The pro forma information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the Aera Merger been completed on January 1, 2023, nor is it necessarily indicative of future operating results of the combined entity. The pro forma financial information for the three and nine months ended September 30, 2024 and 2023 is a result of combining our three and nine months statements of operations with Aera's pre-merger results from January 1, 2024 and 2023 and includes adjustments for revenues and direct expenses. The pro forma results do not reflect any cost savings anticipated as a result of the Aera Merger and exclude the impact of any severance and merger-related costs. The pro forma results include adjustments to depreciation, depletion and amortization (DD&A) based on the purchase price allocated to property, plant, and equipment and the estimated useful lives as well as adjustments to interest and accretion expense. The pro forma adjustments include estimates and assumptions based on currently available information. Management believes the estimates and assumptions are reasonable, and the relative effects of the Aera Merger are properly reflected. Future results may vary significantly from the results reflected in the following pro forma information.
For the period of July 1, 2024 through September 30, 2024, revenue and income before income taxes associated with Aera totaled $ 765 million and $ 400 million, respectively.
The following table summarizes the merger-related costs incurred:
Three months ended
September 30, 2024 Nine months ended
September 30, 2024
(in millions)
Employee severance and related costs
$ 27 $ 28
Transaction and integration costs
$ 30 $ 56
Total merger-related costs
$ 57 $ 84
Transaction and integration costs related to the Aera Merger and employee severance and related costs are included in other operating expenses, net on our condensed consolidated statement of operations.
13
In August 2024, management committed to a reduction in force as part of the integration process following the Aera Merger, which, when complete, will result in a 12 % reduction in the combined company's employee headcount. We initiated this workforce reduction to align the size and composition of our workforce with expected future operating and capital plans. In addition, employee severance and related costs includes expenses from a voluntary separation program for eligible employees.
The accelerated vesting of certain awards for former Aera executives was $ 7 million, and is included in general and administrative expenses for the three and nine months ended September 30, 2024. This amount for accelerated vesting is not included in the table above. The accelerated vesting was based on existing change of control provisions within the former Aera employee award agreements.
NOTE 3 INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES AND RELATED PARTY TRANSACTIONS
Midway Sunset Cogeneration Company
In July 2024, our merger with Aera led to our ownership of Midway Sunset Cogeneration Company, which is a partnership designed to own, manage, and operate a cogeneration facility in Kern County, California. We hold a 50 % interest in Midway Sunset Cogeneration Company and San Joaquin Energy Company, a subsidiary of NRG Energy Inc. (NRG), holds a 50 % interest. We determined that Midway Sunset Cogeneration Company is a voting interest entity, where we share decision-making power with San Joaquin Energy Company, on all matters that most significantly impact the economic performance of the company. Therefore, we account for our investment in Midway Sunset Cogeneration Company under the equity method of accounting. We recorded our investment at a preliminary fair value of $ 59 million which was $ 48 million in excess of Aera's investment in the underlying assets of the partnership. This difference is associated with PP&E and we expect this amount will reverse over the remaining useful life of the power plant. There are no significant transactions between CRC and Midway Sunset Cogeneration Company. As of September 30, 2024, the carrying value of our investment in Midway Sunset Cogeneration Company was $ 55 million.
Carbon TerraVault JV
In August 2022, we 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 committed an initial $ 500 million to invest in CCS projects that are jointly approved through the Carbon TerraVault JV. Our initial contribution included rights to inject CO 2 into the 26R reservoir in our Elk Hills field for permanent CO 2 storage (26R reservoir). Brookfield's initial investment is $ 137 million, of which $ 92 million has been contributed to date. The remaining amount of Brookfield's initial investment will be sized based on permitted storage capacity.
Because the parties have certain put and call rights (repurchase features) with respect to the 26R reservoir if certain milestones are not met, 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 $ 104 million and $ 52 million at September 30, 2024 and December 31, 2023 , respectively, inclusive of interest.
14
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.
September 30, December 31,
2024 2023
(in millions)
Investment in unconsolidated subsidiary
$ 29 $ 19
Receivable from affiliate (a)
$ 46 $ 19
Other long-term liabilities - Contingent liability (related to Carbon TerraVault JV put and call rights)
$ 104 $ 52
(a) 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 September 30, 2024 , the amount of $ 46 million includes the remaining $ 43 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
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Loss from investment in unconsolidated subsidiary
$ 3 $ 3 $ 10 $ 6
General and administrative expenses (a)
$ 2 $ 2 $ 7 $ 5
(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.
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 nine months ended September 30, 2024, we performed abandonment work and sought reimbursement in the amounts of $ 4 million and $ 13 million, respectively, from the Carbon TerraVault JV. During the three and nine months ended September 30, 2023, we performed abandonment work and sought reimbursement in the amounts of $ 2 million and $ 4 million, respectively, from the Carbon TerraVault JV.
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NOTE 4 DEBT
As of September 30, 2024 and December 31, 2023, our long-term debt consisted of the following:
September 30, December 31,
2024 2023 Interest Rate Maturity
(in millions)
Revolving Credit Facility $ — $ — SOFR plus 2.50 %- 3.50 %
ABR plus 1.50 %- 2.50 % (a)
July 31, 2027 (b)
2026 Senior Notes 245 545 7.125 %
February 1, 2026
2029 Senior Notes 900 — 8.250 %
June 15, 2029
Principal amount $ 1,145 $ 545
Unamortized debt discount and issuance costs
( 17 ) ( 5 )
Unamortized premium
3 —
Long-term debt, net $ 1,131 $ 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) On November 1, 2024 the maturity date of the Revolving Credit Facility was extended to March 16, 2029, and the springing maturity date was also amended. See Note 15 Subsequent Events for more information on the amendment.
Revolving Credit Facility
As of September 30, 2024, our Amended and Restated Credit Agreement, dated April 26, 2023 (Revolving Credit Facility), consisted of a senior revolving loan facility with an aggregate commitment of $ 1.1 billion. The amount we are able to borrow under our Revolving Credit Facility is limited to the amount of these commitments. Our Revolving Credit Facility also included a sub-limit of $ 250 million for the issuance of letters of credit. As of September 30, 2024, $ 175 million letters of credit were issued to support ordinary course marketing, insurance, regulatory and other matters. As of September 30, 2024, we had $ 925 million of availability on our Revolving Credit Facility after taking into account $ 175 million in letters of credit outstanding. Our borrowing base of $ 1.5 billion is redetermined semi-annually and was re-affirmed in November 2024 as part of our recent amendment. For information on the fifth amendment to our Revolving Credit Facility, refer to Note 15 Subsequent Events.
Amendments
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. We capitalized approximately $ 3 million in deferred financing fees related to this amendment to other assets on our condensed consolidated statement of financial position during the nine months ended September 30, 2024. We did not capitalize any deferred financing fees related to this amendment during the three months ended September 30, 2024.
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.
16
In July 2024, we entered into a fourth amendment to our Revolving Credit Facility as part of the Aera Merger. This amendment increased the aggregate revolving commitments available under the Revolving Credit Facility from $ 630 million to $ 1.1 billion. Our ability 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. We capitalized approximately $ 7 million in deferred financing fees related to this amendment to other assets on our condensed consolidated statement of financial position during the three and nine months ended September 30, 2024.
On November 1, 2024, we entered into a fifth amendment to our Revolving Credit Facility which included extending the springing maturity of our Revolving Credit Facility and increasing the aggregate amount of our commitments by $ 50 million. Refer to Note 15 Subsequent Events for additional information on the fifth amendment.
2029 Notes Offering and Follow-On Offering
On June 5, 2024, we completed the offering of $ 600 million in aggregate principal amount of the 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 for approximately $ 990 million at closing of the Aera Merger. See Note 2 Aera Merger for more information on the closing of the Aera Merger.
On August 22, 2024, we completed a follow-on offering of an additional $ 300 million in aggregate principal amount of 2029 Senior Notes. The net proceeds from this offering of $ 298 million, after $ 3 million of debt premium and $ 5 million of debt issuance costs, were used to repurchase a portion of our 7.125 % senior notes due 2026 (2026 Senior Notes). The 2029 Senior Notes issued on August 22, 2024 are governed by the same indenture as the $ 600 million of 2029 Senior Notes that were previously issued on June 5, 2024.
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.
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.
17
Tender Offer and Note Repurchases
In the three and nine months ended September 30, 2024, we repurchased $ 300 million in face value of our 2026 Senior Notes for $ 303 million, resulting in a loss on early extinguishment of debt in the amount of $ 5 million which includes a $ 2 million write-off of unamortized debt issuance costs. In the three and nine months ended September 30, 2023, we repurchased $ 5 million in face value of our 2026 Senior Notes at par, resulting in an insignificant extinguishment loss for the write-off of unamortized debt issuance costs.
Our 2026 Senior Notes are redeemable at any time prior to the maturity date at a redemption price equal to (i) 102 % of the principal amount if redeemed in the twelve months beginning February 1, 2024, and (ii) 100 % of the principal amount if redeemed after February 1, 2025, in each case plus accrued and unpaid interest.
Fair Value
As shown in the table below, we estimate the fair value of our fixed rate 2029 Senior Notes and 2026 Senior Notes based on known prices from market transactions (using Level 1 inputs on the fair value hierarchy).
September 30, December 31,
2024 2023
(in millions)
Variable rate debt
$ — $ —
Fixed rate debt
2026 Senior Notes
246 554
2029 Senior Notes
918 —
Fair Value of Long-Term Debt
$ 1,164 $ 554
Other
As of September 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 5 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 September 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.
18
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.
As of September 30, 2024 there were no material changes to our legacy purchase obligations disclosed in the 2023 Annual Report. In connection with the Aera Merger, we assumed purchase obligations of approximately $ 50 million. These purchase obligations are primarily related to natural gas transportation and a power purchase agreement for a future solar project.
NOTE 6 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 in our steamflood operations as well as swaps for natural gas purchases and sales related to our marketing activities. In connection with the Aera Merger, we also acquired swaps related to crude oil sales and natural gas purchases. We did not have any derivative instruments designated as accounting hedges as of and for the three and nine months ended September 30, 2024 and 2023. Unless otherwise indicated, we use the term "hedge" to describe derivative instruments that are designed to implement our hedging strategy.
Summary of Derivative Contracts
We held the following Brent-based contracts as of September 30, 2024:
Q4
2024 Q1
2025 Q2
2025 Q3
2025 Q4
2025 2026 2027 2028
Sold Calls
Barrels per day 29,000 30,000 30,000 30,000 29,000 5,000 — —
Weighted-average price per barrel $ 90.07 $ 87.08 $ 87.08 $ 87.08 $ 87.13 $ 85.00 $ — $ —
Purchased Puts
Barrels per day 29,000 30,000 30,000 30,000 29,000 5,000 — —
Weighted-average price per barrel $ 65.17 $ 61.67 $ 61.67 $ 61.67 $ 61.72 $ 60.00 $ — $ —
Swaps
Barrels per day 59,014 52,837 45,631 44,126 42,626 30,449 13,882 10,353
Weighted-average price per barrel $ 74.90 $ 72.48 $ 71.31 $ 70.62 $ 69.94 $ 67.95 $ 65.53 $ 65.00
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.
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• 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 September 30, 2024, we also held the following swaps to hedge purchased natural gas used in our operations as shown in the table below.
Q4
2024 Q1
2025
Q2
2025 Q3
2025 Q4
2025 2026 2027 2028
SoCal Border
MMBtu per day
20,000 10,000 29,074 25,750 22,408 — — —
Weighted-average price per MMBtu
$ 5.49 $ 6.02 $ 3.44 $ 3.48 $ 3.53 $ — $ — $ —
NWPL Rockies
MMBtu per day
50,999 50,999 51,750 51,750 51,750 35,336 12,616 9,613
Weighted-average price per MMBtu
$ 4.67 $ 5.48 $ 2.95 $ 2.95 $ 4.22 $ 4.04 $ 4.34 $ 3.95
PG&E Citygate
MMBtu per day
14,000 14,000 — — — — — —
Weighted-average price per MMBtu
$ 5.60 $ 6.10 $ — $ — $ — $ — $ — $ —
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
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Non-cash commodity derivative gain (loss)
$ 373 $ ( 109 ) $ 325 $ 92
Settlements and premiums
( 17 ) ( 95 ) ( 35 ) ( 223 )
Net gain (loss) from commodity derivatives
$ 356 $ ( 204 ) $ 290 $ ( 131 )
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 nine months ended September 30, 2024, we recognized a net loss of $ 9 million (which includes a non-cash gain of $ 3 million and $ 12 million of settlement payments) and a net loss of $ 11 million (which includes a non-cash gain of $ 7 million and $ 18 million of settlement payments) in other operating expenses, net on our condensed consolidated statement of operations. We did not have derivative contracts related to purchased natural gas for our marketing activities during the three and nine months ended September 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.
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The following tables present the fair values of our outstanding commodity derivatives as of September 30, 2024 and December 31, 2023. See Note 2 Aera Merger for the fair value of Aera's acquired derivative contracts on July 1, 2024.
September 30, 2024
Classification Gross Amounts at Fair Value Netting Net Fair Value
(in millions)
Other current assets, net
$ 59 $ ( 13 ) $ 46
Other noncurrent assets
34 ( 12 ) 22
Current liabilities ( 32 ) 13 ( 19 )
Noncurrent liabilities ( 67 ) 12 ( 55 )
$ ( 6 ) $ — $ ( 6 )
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 7 INCOME TAXES
The following table presents the components of our total income tax provision (benefit) and effective tax rate:
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Income (loss) before income taxes
$ 483 $ ( 30 ) $ 475 $ 481
Current income tax provision 48 32 48 89
Deferred income tax provision (benefit)
90 ( 40 ) 84 16
Total income tax provision (benefit)
$ 138 $ ( 8 ) $ 132 $ 105
Effective tax rate
29 % 27 % 28 % 22 %
The difference between our annual effective tax rate as shown in the table above and the U.S. federal statutory tax rate of 21% is primarily due to state taxes where the state statutory tax rate is 7% (net of the federal tax deduction). Our annual effective rate of 22 % differed from the U.S. federal statutory rate of 21% for the nine months ended September 30, 2023 primarily due to state taxes and the recognition of 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 on the release of the valuation allowance.
21
We had net deferred tax assets of $ 50 million and net deferred tax liabilities of $ 124 million as of September 30, 2024. As of December 31, 2023, we had a net deferred tax asset of $ 132 million. The change of $ 206 million primarily relates to the assumption of a deferred tax liability estimated at $ 120 million upon the acquisition of Aera on July 1, 2024. For further information on the acquisition of Aera, see Note 2 Aera Merger . The remaining increase in our deferred tax liability primarily relates to Aera’s unrealized gains on derivative contracts during the three months ended September 30, 2024 which are not recognized for tax purposes until settlement. Management expects to realize the 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.
There are no ongoing examinations related to CRC or Aera. As the surviving entity after the Aera Merger, we are responsible for managing Aera's examinations, if any, for years that remain subject to examination. For Aera, years ending December 31, 2021 through December 31, 2023 remain subject to examination for U.S. federal tax purposes and years ending December 31, 2020 through December 31, 2023 remain subject to examination for California tax purposes.
NOTE 8 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 nine months ended September 30, 2024, we sold non-core assets recognizing a $ 1 million gain. During the nine months ended September 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 nine months ended September 30, 2024, we acquired land for our carbon management business for approximately $ 6 million. In the nine months ended September 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 completed the sale of these assets in October 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 September 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. See Note 15 Subsequent Events for information on the closing of the sale that occurred in October 2024.
22
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 September 30, 2024 on our condensed consolidated balance sheet.
NOTE 9 STOCKHOLDERS' EQUITY
The following table is a summary of common stock issuances:
Common Stock
Balance at December 31, 2023
68,693,885
Issued as part of the Aera Merger
21,315,707
Shares repurchased
( 2,604,922 )
Shares issued for exercised warrants
1,139,163
Other shares issued, net
917,840
Balance at September 30, 2024
89,461,673
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 September 30, 2023
365,145 $ 20 $ 54.75
Three months ended September 30, 2024
835,319 $ 42 $ 50.23
Nine months ended September 30, 2023 3,407,655 $ 143 $ 41.69
Nine months ended September 30, 2024 2,604,922 $ 135 $ 51.33
Inception of Program (May 2021) through September 30, 2024
17,468,837 $ 739 $ 42.14
Note: The total value of shares purchased includes approximately $ 1 million in both the nine months ended September 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
On August 2, 2024, our Board of Directors increased the cash dividend policy to anticipate a total annual dividend of $ 1.55 per share of common stock , payable to shareholders in quarterly increments of $ 0.3875 per share of common stock.
23
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
Three months ended September 30, 2024 34 $ 0.3875
Nine months ended September 30, 2024
$ 77
2023
Three months ended March 31, 2023 $ 20 $ 0.2825
Three months ended June 30, 2023 20 $ 0.2825
Three months ended September 30, 2023 19 $ 0.2825
Nine months ended September 30, 2023
$ 59
In addition to dividends on our common stock shown in the table above, we paid $ 4 million of dividend equivalents on equity-settled stock-based compensation awards in the nine months ended September 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 15 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 issuance upon the exercise of warrants, which were exercisable at $ 36 per share through October 28, 2024.
As of September 30, 2024, we had outstanding warrants exercisable into 2,812,754 shares of our common stock (subject to adjustments pursuant to the terms of the warrants). During the three and nine months ended September 30, 2024, we issued 1,085,838 and 1,139,163 shares of our common stock in exchange for warrants, respectively. During the three and nine months ended September 30, 2023, we issued 1,958 and 2,179 shares of our common stock in exchange for warrants, respectively.
See Note 15 Subsequent Events for warrant exercises during October 2024.
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 10 EARNINGS PER SHARE
Basic and diluted earnings per share (EPS) were calculated using the treasury stock method for the three and nine months ended September 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.
24
The following table presents the calculation of basic and diluted EPS, for the three and nine months ended September 30, 2024 and 2023:
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions, except per-share amounts)
Numerator for Basic and Diluted EPS
Net income (loss)
$ 345 $ ( 22 ) $ 343 $ 376
Denominator for Basic EPS
Weighted-average shares 89.4 68.7 75.5 69.9
Potential common shares, if dilutive:
Warrants 1.0 — 1.1 0.8
Restricted stock units
0.4 — 0.5 1.0
Performance stock units
0.4 — 0.5 0.9
Denominator for Diluted EPS
Weighted-average shares 91.2 68.7 77.6 72.6
EPS
Basic $ 3.86 $ ( 0.32 ) $ 4.54 $ 5.38
Diluted $ 3.78 $ ( 0.32 ) $ 4.42 $ 5.18
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
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Shares issuable upon exercise of warrants — 4.3 — —
Shares issuable upon settlement of RSUs — 1.3 — —
Shares issuable upon settlement of PSUs — 1.6 — —
Total antidilutive shares — 7.2 — —
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NOTE 11 PENSION AND POSTRETIREMENT BENEFIT PLANS
Prior to the Aera Merger, we had two qualified defined benefit pension plans covering union employees and a postretirement health care plan for certain retired employees. In connection with the Aera Merger, we acquired two defined benefit pension plans, a qualified retirement plan and a supplemental retirement plan. We also acquired two plans that provide health care benefits for certain retired employees. Certain of the postretirement benefit obligations are funded through 401(h) accounts under the defined benefit plans. Aera's pension and postretirement obligations were remeasured as of the July 1, 2024 acquisition date. At that time, we recognized a net benefit asset of $ 73 million, included in other noncurrent assets, and a net benefit liability of $ 35 million, included in other long-term liabilities, on our condensed consolidated statement of financial position. Accumulated other comprehensive income balances were eliminated in purchase accounting.
In August 2024, we amended Aera's pension and postretirement benefit plans. For Aera’s defined benefit pension plans and post age 65 postretirement benefit plan, participants no longer earn benefits for service after September 30, 2024. However, future service will count towards vesting of benefits accumulated based on past service. For Aera’s postretirement benefit plans, we expanded the eligibility provisions in the event of an involuntary layoff. Following the Aera Merger, we recognized a curtailment gain of $ 4 million and a one-time cost of special termination benefits of $ 4 million included in net periodic benefit costs for the three and nine months ended September 30, 2024 as shown in the table below.
The following table sets forth the components of the net periodic benefit costs for our defined benefit pension and postretirement benefit plans for the three and nine months ended September 30, 2024 and 2023:
Three months ended September 30, Three months ended September 30,
2024 2023
Pension
Benefit Postretirement
Benefit Pension
Benefit Postretirement
Benefit
(in millions) (in millions)
Service cost - benefits earned during the period $ 3 $ 1 $ — $ —
Interest cost on projected benefit obligation 4 1 — —
Expected return on plan assets ( 6 ) ( 1 ) — —
Curtailment gain — ( 4 ) ( 3 )
Cost of special termination benefits
— 4 — —
Amortization of prior service cost credit — ( 1 ) — ( 1 )
Net periodic benefit costs $ 1 $ — $ — $ ( 4 )
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Nine months ended September 30, Nine months ended September 30,
2024 2023
Pension
Benefit Postretirement
Benefit Pension
Benefit Postretirement
Benefit
(in millions) (in millions)
Service cost - benefits earned during the period $ 3 $ 2 $ — $ 1
Interest cost on projected benefit obligation 4 2 1 2
Expected return on plan assets ( 7 ) ( 1 ) ( 1 ) —
Curtailment gain — ( 4 ) — ( 3 )
Recognized actuarial gain
— ( 1 ) — ( 1 )
Cost of special termination benefits
— 4 — —
Amortization of prior service cost credit — ( 4 ) — ( 4 )
Net periodic benefit costs $ — $ ( 2 ) $ — $ ( 5 )
We made no contributions to our defined benefit pension plans during the three months ended September 30, 2024 and contributed $ 2 million to our defined benefit plans during the nine months ended September 30, 2024. We made no contributions during the three and nine months ended September 30, 2023. We do not expect to make any significant contributions to our defined benefit pension plans during the remainder of 2024.
NOTE 12 SUPPLEMENTAL ACCOUNT BALANCES
Restricted cash — Restricted cash of $ 28 million at September 30, 2024 primarily includes funds held in an escrow account established to secure oil field well and infrastructure abandonment and habitat restoration at an oil and gas field previously owned by Aera. Funds will be released from the escrow account as work is completed. The Merger Agreement provides that 50 % of the amount by which released funds exceeds the cumulative abandonment and restoration expenditures from January 1, 2024 onward is payable to the Sellers. We do not expect this amount to be significant. Restricted cash 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
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Oil $ 804 $ 402 $ 1,505 $ 1,154
Natural gas 22 61 68 367
NGLs 44 47 138 151
Oil, natural gas and NGL sales $ 870 $ 510 $ 1,711 $ 1,672
Since July 1, 2024, the closing date of the Aera Merger, the results of operations for Aera have been included in our consolidated financial statements. For the period from July 1, 2024 to September 30, 2024, $ 475 million of oil, natural gas and NGL sales attributable to Aera's business has been included in the consolidated statements of operations.
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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 marketing oil sales that have resulted from third-party purchases. The following table provides disaggregated revenue for sales to customers related to our marketing activities:
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Oil $ 25 $ — $ 73 $ —
Natural gas 26 78 97 334
NGLs — ( 1 ) 6 2
Revenue from marketing of purchased commodities
$ 51 $ 77 $ 176 $ 336
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:
September 30, December 31,
2024 2023
(in millions)
Materials and supplies $ 71 $ 68
Finished goods 4 4
Inventories $ 75 $ 72
In the nine months ended September 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.
We also acquired inventory with an estimated value of $ 18 million in connection with the Aera Merger. See Note 2 Aera Merger for additional information.
Other current assets, net — Other current assets, net include the following:
September 30, December 31,
2024 2023
(in millions)
Net amounts due from joint interest partners (a)
$ 34 $ 43
Fair value of commodity derivative contracts 46 21
Prepaid expenses 18 19
Greenhouse gas allowances 49 12
Other 37 18
Other current assets, net $ 184 $ 113
(a) Included in the September 30, 2024 and December 31, 2023 net amounts due from joint interest partners are allowances of $ 3 million.
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Other noncurrent assets — Other noncurrent assets include the following:
September 30, December 31,
2024 2023
(in millions)
Operating lease right-of-use assets $ 100 $ 73
Deferred financing costs - Revolving Credit Facility 17 11
Emission reduction credits 21 11
Prepaid power plant maintenance 3 34
Fair value of commodity derivative contracts 22 6
Funded pension
89 2
Deposits and other 34 11
Other noncurrent assets $ 286 $ 148
Accrued liabilities — Accrued liabilities include the following:
September 30, December 31,
2024 2023
(in millions)
Employee-related costs $ 165 $ 82
Taxes other than on income 97 35
Asset retirement obligations 130 99
Interest 29 18
Operating lease liability 20 15
Fair value of derivative contracts 19 8
Premiums due on commodity derivative contracts 13 21
Liability for settlement payments on commodity derivative contracts 1 8
Amounts due under production-sharing contracts 4 5
Signal Hill maintenance 1 12
Income taxes payable 11 18
Other 51 45
Accrued liabilities $ 541 $ 366
Other long-term liabilities — Other long-term liabilities includes the following:
September 30, December 31,
2024 2023
(in millions)
Compensation-related liabilities $ 48 $ 38
Postretirement and pension benefit plans 68 36
Operating lease liability 71 55
Premiums due on commodity derivative contracts 5 10
Contingent liability (related to Carbon TerraVault JV put and call rights) 104 52
Other 41 8
Other long-term liabilities $ 337 $ 199
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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 3 Investment in Unconsolidated Subsidiary and Related Party Transactions for more information on the Carbon TerraVault JV. Since July 1, 2024, the closing date of the Aera Merger, the results of operations for Aera have been included in our consolidated financial statements. The amounts shown for our exploration and production business includes $ 46 million related to Aera during the period of July 1, 2024 through September 30, 2024.
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Exploration and production, corporate and other
$ 104 $ 61 $ 219 $ 191
Carbon management business
2 4 7 10
Total general and administrative expenses $ 106 $ 65 $ 226 $ 201
NOTE 13 SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures to our condensed consolidated statements of cash flows are presented below:
Three months ended
September 30, Nine months ended
September 30,
2024 2023 2024 2023
(in millions) (in millions)
Supplemental Cash Flow Information
Interest paid, net of amount capitalized $ 23 $ 22 $ 42 $ 44
Income taxes paid $ 29 $ 29 $ 55 $ 80
Interest income
$ 1 $ 5 $ 15 $ 14
Supplemental Disclosure of Non-cash Investing and Financing Activities
Contribution to the Carbon TerraVault JV $ 15 $ 4 $ 20 $ 7
Issuance of shares for stock-based compensation awards
$ — $ 2 $ 88 $ 3
Dividends accrued for stock-based compensation awards
$ 2 $ 1 $ 2 $ 2
Excise tax on share repurchases
$ — $ — $ 1 $ 1
NOTE 14 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 September 30, 2024 and December 31, 2023 and the condensed consolidating statements of operations for the three and nine months ended September 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.
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Condensed Consolidating Balance Sheets
As of September 30, 2024 and December 31, 2023
As of September 30, 2024
Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated
(in millions)
Total current assets
$ 251 $ 46 $ 575 $ — $ 872
Total property, plant and equipment, net
12 24 5,800 — 5,836
Investments in consolidated subsidiaries 5,031 ( 27 ) 14,638 ( 19,642 ) —
Deferred tax asset 50 — — — 50
Investment in unconsolidated subsidiaries
— 29 55 — 84
Other assets 19 51 216 — 286
TOTAL ASSETS $ 5,363 $ 123 $ 21,284 $ ( 19,642 ) $ 7,128
Total current liabilities 125 15 757 — 897
Long-term debt 1,131 — — — 1,131
Asset retirement obligations — — 1,083 — 1,083
Other long-term liabilities 72 130 190 — 392
Deferred tax liability
124 — — — 124
Amounts due to (from) affiliates 410 19 ( 429 ) — —
Total equity 3,501 ( 41 ) 19,683 ( 19,642 ) 3,501
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 5,363 $ 123 $ 21,284 $ ( 19,642 ) $ 7,128
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 STOCKHOLDERS' EQUITY
$ 2,980 $ 76 $ 4,589 $ ( 3,647 ) $ 3,998
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Condensed Consolidating Statement of Operations
For the three and nine months ended September 30, 2024 and 2023
Three months ended September 30, 2024
Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated
(in millions)
Total operating revenues
$ 2 $ — $ 1,437 $ ( 86 ) $ 1,353
Total costs and other
86 16 818 ( 85 ) 835
Non-operating (loss) income
( 32 ) ( 5 ) 2 — ( 35 )
(LOSS) INCOME BEFORE INCOME TAXES
( 116 ) ( 21 ) 621 ( 1 ) 483
Income tax provision
( 138 ) — — — ( 138 )
NET (LOSS) INCOME
$ ( 254 ) $ ( 21 ) $ 621 $ ( 1 ) $ 345
Three months ended September 30, 2023
Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated
(in millions)
Total operating revenues
$ 6 $ — $ 454 $ — $ 460
Total costs and other
66 12 397 — 475
Non-operating (loss) income ( 12 ) ( 4 ) 1 — ( 15 )
(LOSS) INCOME BEFORE INCOME TAXES ( 72 ) ( 16 ) 58 — ( 30 )
Income tax benefit
8 — — — 8
NET (LOSS) INCOME $ ( 64 ) $ ( 16 ) $ 58 $ — $ ( 22 )
Nine months ended September 30, 2024
Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated
(in millions)
Total operating revenues
$ 15 $ — $ 2,407 $ ( 101 ) $ 2,321
Total costs and other
222 44 1,611 ( 101 ) 1,776
Gain on asset divestitures — — 7 — 7
Non-operating (loss) income ( 66 ) ( 16 ) 5 — ( 77 )
(LOSS) INCOME BEFORE INCOME TAXES ( 273 ) ( 60 ) 808 — 475
Income tax provision ( 132 ) — — — ( 132 )
NET (LOSS) INCOME $ ( 405 ) $ ( 60 ) $ 808 $ — $ 343
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Nine months ended September 30, 2023
Parent Combined Unrestricted Subsidiaries Combined Restricted Subsidiaries Eliminations Consolidated
(in millions)
Total operating revenues
$ 14 $ — $ 2,061 $ — $ 2,075
Total costs and other
177 31 1,349 — 1,557
Gain on asset divestitures — — 7 — 7
Non-operating (loss) income ( 39 ) ( 9 ) 4 — ( 44 )
(LOSS) INCOME BEFORE INCOME TAXES ( 202 ) ( 40 ) 723 — 481
Income tax provision ( 105 ) — — — ( 105 )
NET (LOSS) INCOME $ ( 307 ) $ ( 40 ) $ 723 $ — $ 376
NOTE 15 SUBSEQUENT EVENTS
Amendment to our Revolving Credit Facility
On November 1, 2024, we amended our existing Revolving Credit Facility. The amendments included, among other things:
• increasing the amount of the revolving commitments by $ 50 million to $ 1,150 million to reflect changes to our lender group;
• extending the maturity date of the facility from July 31, 2027 to March 16, 2029;
• amending the springing maturity to permit our 2026 Senior Notes to remain outstanding past October 31, 2025 so long as the aggregate availability (less the outstanding 2026 Senior Notes) is not less than 25 % of the total revolving commitments;
• increasing our capacity to issue letters of credit from $ 250 million to $ 300 million; and
• other technical amendments.
Borrowing Base Redetermination
The borrowing base under our Revolving Credit Facility is redetermined semi-annually and was reaffirmed at $ 1.5 billion on November 1, 2024.
Dividend
On November 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 December 2, 2024 and is expected to be paid on December 16, 2024 .
Ventura Basin Divestiture
On October 14, 2024, we completed the sale of Ventura basin assets for net proceeds of $ 3 million. See Note 8 Divestitures, Acquisitions and Assets Held for Sale above and 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.
Warrants
During October 2024, we issued 2,630,540 shares of our common stock in connection with warrant exercises. Since the issuance date of the warrants in October 2020, 3,856,833 shares have been issued upon the exercise of warrants and 469,429 shares were cancelled due to net settlement. On October 28, 2024, any unexercised warrants expired in accordance with their terms and 57,920 shares underlying such warrants were never issued.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.