California Resources NYSE: CRC reported a stronger-than-expected first quarter and raised its 2026 outlook, citing higher oil prices, improved capital efficiency, accelerated drilling plans and additional cost savings from its Berry merger.
President and CEO Francisco Leon said the company is benefiting from “unprecedented energy market volatility” that has created tailwinds for its California-focused oil and gas business. He pointed to recent disruptions in global supply chains and California’s reliance on imported crude as factors underscoring the importance of in-state production.
“Today, over 60% of the oil consumed in California comes from foreign sources,” Leon said. He added that state inventories had recently declined by more than 20% as oil intended for California was diverted to Asia at “substantial premiums.”
Leon said CRC is increasing its drilling cadence this summer by three rigs, including two in California and one in Utah, bringing the company to a peak of seven rigs. The company said it has permits in hand for the seven-rig program and is already working on its 2027 plan.
First-quarter results beat company guidance
Executive Vice President and CFO Clio Crespy said CRC generated first-quarter adjusted EBITDA of $304 million, about 17% above the midpoint of its guidance. Operating cash flow before changes in working capital was $247 million, and free cash flow before changes in working capital was $116 million.
Net production averaged 154,000 barrels of oil equivalent per day, with oil representing 81% of the production mix. Crespy said realizations were 96% of Brent before hedges, in line with the company’s plan. She said underlying production was also in line with quarterly guidance after adjusting for production-sharing contract effects.
General and administrative expenses were above guidance, which Crespy attributed to the timing of legal expenses and higher cash-settled equity compensation tied to share price appreciation. She said G&A is already trending lower and should benefit from further Berry merger synergies in 2026.
CRC deployed $131 million of capital in the quarter, at the high end of its guidance. Crespy said the higher spending reflected the company’s decision to pull forward pre-spud timing on development wells and accelerate facilities spending to support the planned activity ramp.
Full-year outlook raised as drilling activity accelerates
For the second quarter, CRC expects net production of 149,000 barrels of oil equivalent per day, reflecting production-sharing contract effects at higher prices and a planned short maintenance window at the Elk Hills power plant. The company forecast second-quarter capital deployment of about $130 million, G&A of $95 million and adjusted EBITDAX of $390 million, assuming an average Brent price of $105 per barrel.
For full-year 2026, CRC raised its outlook and now expects exit gross production of 175,000 barrels of oil equivalent per day, representing roughly 1% entry-to-exit growth. The company increased the midpoint of its total capital guidance to $540 million, including a $100 million increase in drilling, completion and workover capital. That increase is partly offset by a $10 million reduction in facilities capital.
Crespy said CRC previously expected that a seven-rig program and about $485 million of drilling, completion and workover capital would be needed to hold production flat. The company now expects to deliver entry-to-exit growth with an average of five rigs and less than $400 million of drilling, completion and workover capital.
“Fewer rigs, less capital, and we are now growing,” Crespy said.
CRC now expects full-year free cash flow before changes in working capital to exceed $800 million. The company also raised its full-year adjusted EBITDAX midpoint to $1.45 billion, assuming an average Brent price of $91 per barrel. Crespy said Brent prices are up about 38% from the company’s prior assumptions, while CRC’s EBITDAX outlook has increased by about 42%.
Berry synergies increase, balance sheet strengthened
CRC also increased its Berry merger synergy target by $10 million, or 12%, after implementing more than 80% of its original target. Crespy said the increase is driven by field consolidation and contractor-to-crew conversion across the combined footprint. The company’s cumulative synergy and structural cost reduction target through 2028 now stands at more than $460 million.
Leon said the company is merging overlapping water and oil treatment facilities, consolidating supplier contracts and integrating legacy Berry fields into CRC’s operational control center. He said potential gains from artificial intelligence initiatives have not yet been included in the company’s quantified targets.
During the quarter, CRC priced a $350 million add-on to its 2034 notes, upsized from $250 million, and used the proceeds to redeem its 2029 notes. Crespy said the transaction extended CRC’s weighted average maturity to about six years, lowered interest expense and strengthened the balance sheet. Net debt ended the quarter at $1.3 billion, and net leverage was 1.1 times last-12-month EBITDA.
The company returned $46 million to shareholders during the quarter, including $36 million in dividends and $10 million in share repurchases. Crespy said cumulative shareholder returns since mid-2021 total more than $1.6 billion.
Carbon capture and data center opportunities advance
Leon said CRC’s carbon management business, CTV, is nearing a major milestone after completing construction and commissioning of California’s first commercial-scale carbon capture and storage project at the Elk Hills cryogenic gas plant. The company expects final notice of determination from the EPA “any day now,” which would allow first carbon dioxide injection.
Leon said CRC has submitted more than 350 million metric tons of carbon storage capacity to the EPA, with additional reservoirs tracking for draft permits through 2026. He also said conversations related to data centers are gaining momentum, including with a “top-tier national data center developer” that is investing several million dollars to accelerate early-stage site readiness and permitting at Elk Hills.
CRC is positioning Elk Hills as a location where it can provide land, firm natural gas supply, power infrastructure and carbon capture. Leon said power is “the binding constraint for AI growth” and argued that CRC is among the few platforms that can address that need in California.
The company is also watching California’s Reliable and Clean Power Procurement Program. Leon said natural gas with carbon capture is not yet eligible, though support is building, with three of five CPUC commissioners publicly endorsing inclusion. CRC expects the next major update in the second half of 2026.
Utah assets remain under evaluation
CRC also discussed its Uinta Basin position, which came through the Berry acquisition. Leon said the company plans to drill four wells before year-end and currently has more than 200 gross Uteland Butte locations in its portfolio, with additional benches under consideration.
Leon said the company is still evaluating whether to pursue full development or monetization of the Utah assets. He said California remains CRC’s core business, but the Uinta position could offer meaningful upside because CRC assigned “very low value” to Utah in the Berry transaction.
“We are not in the holding pattern anymore,” Leon said. “We’re gonna make a decision coming up.”
About California Resources NYSE: CRC
California Resources Corporation NYSE: CRC is an independent exploration and production company focused exclusively on developing oil and natural gas assets in California. Headquartered in Newport Beach, the company engages in hydraulic fracturing, well completions, reservoir management and enhanced recovery operations to produce crude oil, natural gas and natural gas liquids.
CRC's operations are concentrated in three core regions: the Los Angeles Basin, the Ventura Basin and the San Joaquin Basin.
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