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California Resources Corporation Announces Second Quarter 2017 Results

LOS ANGELES--(BUSINESS WIRE)--California Resources Corporation (NYSE:CRC), an independent California-based oil and gas exploration and production company, today reported a net loss attributable to common stock (CRC net loss) of $48 million or $1.13 per diluted share for the second quarter of 2017, compared with a net loss of $140 million or $3.51 per diluted share for the second quarter of 2016. For the first six months of 2017, CRC reported net income attributable to common stock (CRC net income) of $5 million or $0.12 per diluted share compared with a net loss of $190 million or $4.85 per diluted share for the same period in 2016.

Adjusted EBITDAX1 for the second quarter of 2017 was $158 million, compared with $160 million for the second quarter of 2016. Adjusted EBITDAX1 for the first six months of 2017 was $358 million, compared with $284 million for the same period in 2016. Cash provided by operating activities was $120 million for the first six months of 2017. CRC capital investments for the second quarter of 2017 were $82 million and $132 million for the first six months of 2017, of which $28 million was funded by CRC's joint venture (JV) partner Benefit Street Partners (BSP) in the second quarter and $43 million in the first six months. After taking into account the capital that was funded by BSP for the first six months of 2017, CRC generated free cash flow1 of $57 million.

Quarterly Highlights Include:

  • Produced approximately 129,000 BOE per day
  • Invested capital of $82 million, of which JV partner BSP funded $28 million
  • Drilled and completed 24 wells with internally funded capital, drilled 8 wells with BSP JV capital and 11 wells with MIRA JV capital

Todd Stevens, President and Chief Executive Officer, said, "During the second quarter of 2017, we expanded our capital activity utilizing joint venture capital. Our team safely ramped up activity to 7 rigs and continued to identify efficiencies and cost savings. In fact, recent wells delivered stronger-than-expected performance at lower-than-expected costs. We expect to build on this success in the third quarter and remain on track to grow production in the second half of the year."

1 For explanations of how we calculate and use Adjusted EBITDAX (non-GAAP) and Adjusted EBITDAX margin (non-GAAP) and reconciliations of net income / (loss) (GAAP) and net cash (used) provided by operating activities (GAAP) to Adjusted EBITDAX and free cash flow after working capital (non-GAAP), please see Attachment 2.

Second Quarter Results

For the second quarter of 2017, CRC net loss was $48 million or $1.13 per diluted share, compared with a net loss of $140 million or $3.51 per diluted share for the same period of 2016. The 2017 quarterly results reflected higher realized oil, NGL and natural gas prices and improved hedge results, partially offset by lower production volumes, higher production costs resulting from higher natural gas and power prices and higher levels of activity, as well as lower non-operating income from gains on asset divestitures and debt extinguishment. The second quarter 2017 adjusted net loss2 was $78 million or $1.83 per diluted share, compared with an adjusted net loss of $72 million or $1.80 per diluted share for the same period of 2016. The second quarter 2017 adjusted net loss excluded $35 million of non-cash derivatives gains and a net $5 million charge from other unusual and infrequent items. The second quarter 2016 adjusted net loss excluded $137 million of non-cash derivatives losses, $44 million of gains related to retirements of the Company's notes, a $31 million gain from asset divestitures and a net $6 million charge from other unusual and infrequent items.

Total daily production volumes averaged 129,000 barrels of oil equivalent (BOE) per day for the second quarter of 2017, compared with 140,000 BOE per day for the second quarter of 2016, a decrease of under 8 percent, which is below CRC's estimated base production decline range of 10 to 15 percent. Total daily production decreased 3,000 BOE per day or 2 percent from the first quarter of 2017.

In the second quarter of 2017, realized crude oil prices, including the effect of settled hedges, increased $4.28 per barrel to $47.98 per barrel from $43.70 per barrel in the prior year comparable quarter. Settled hedges increased realized crude oil prices by $1.03 per barrel in the second quarter of 2017 compared with $2.29 per barrel in the prior year comparable quarter. Realized NGL prices increased 33 percent to $30.08 per barrel from $22.54 per barrel in the second quarter of 2016. Realized natural gas prices increased 49 percent to $2.47 per thousand cubic feet (Mcf), compared with $1.66 per Mcf in the same period of 2016.

Production costs for the second quarter of 2017 were $216 million or $18.34 per BOE, compared with $188 million or $14.76 per BOE for the second quarter of 2016. The industry practice for reporting PSC-type contracts can result in higher production costs per barrel as full field operating costs are matched with net production. Excluding the effects of PSC-type contracts, per unit production costs would have been $17.18 and $13.88 for the second quarter of 2017 and 2016, respectively. The increase in production costs was driven by higher natural gas and power prices and the ramp-up of downhole and surface maintenance activity in line with stronger commodity prices. While higher gas prices increase CRC's production costs for power and steam generation, they result in a net benefit to CRC due to higher revenue generated from natural gas sales. General and administrative expenses for the second quarter of 2017 and for the second quarter of 2016 were $61 million.

Taxes other than on income of $31 million for the second quarter of 2017 were $11 million lower than the same period of 2016. Exploration expense of $6 million for the second quarter of 2017 was $1 million higher than the same period of 2016.

Capital investment in the second quarter of 2017 totaled $82 million, of which $55 million was directed to drilling and capital workovers.

Second quarter 2017 cash used by operating activities of $13 million included interest payments of $151 million and property tax payments of $37 million.

2 For explanations of how we calculate and use Adjusted Net Loss (non-GAAP) and reconciliations to Net Income / (Loss) (GAAP), please see Attachment 2.

Six-Month Results

For the first six months of 2017, CRC net income was $5 million or $0.12 per diluted share, compared with a net loss of $190 million or $4.85 per diluted share for the same period of 2016. The 2017 results reflected higher realized oil, NGL and natural gas prices and improved hedge results, partially offset by lower production volumes, higher production costs resulting from higher natural gas and power prices and higher levels of activity and lower gains on asset divestitures and debt extinguishment. The adjusted net loss2 for the first six months of 2017 was 1 million or $2.85 per diluted share, compared with an adjusted net loss of $172 million or $4.39 per diluted share for the same period of 2016. The 2017 adjusted net loss excluded $110 million of non-cash derivative gains, $21 million of gains from asset divestitures, $4 million of gains related to retirements of the Company's notes and a net $9 million charge from other unusual and infrequent items. The 2016 adjusted net loss excluded $133 million of gains related to retirements of the Company's notes, $218 million of non-cash derivatives losses, a $31 million gain from asset divestitures, a $63 million tax benefit from a partial reversal of valuation allowances against CRC's deferred tax assets and a net $27 million charge from other unusual and infrequent items.

Total daily production volumes averaged 131,000 BOE per day in the first six months of 2017, compared with 144,000 BOE per day for the same period in 2016, a decrease of 9 percent, which is below CRC's estimated base production decline range. This decrease included a negative effect on production volumes from our production sharing contracts of 1,000 BOE per day.

In the first six months of 2017, realized crude oil prices, including the effect of settled hedges, increased $9.22 per barrel to $49.12 per barrel from $39.90 per barrel for the same period in 2016. Settled hedges increased 2017 realized crude oil prices by $0.42 per barrel, compared with $4.38 per barrel for the same period in 2016. Realized NGL prices...


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