California Resources Corp - $CRC - Earnings Analysis: Successful completion of the Aera merger and achievement of merger-related synergies.

Business Model

California Resources Corporation (CRC) generates revenue from the sale of oil, natural gas, NGLs, electricity, and from marketing purchased commodities. They are also developing a carbon management business.

Revenue Sources

• Oil, natural gas, and NGL sales (primarily from San Joaquin Basin, Los Angeles Basin, and Sacramento Basin).
• Marketing of purchased commodities.
• Electricity sales from their power plant.
• Carbon TerraVault (CTV) is developing services to capture, transport and permanently store CO2 for its customers.

Income Statement Analysis

• Total operating revenues decreased significantly from Q3 2024 to Q4 2024, driven by lower net gain from commodity derivatives.
• Operating income decreased significantly from Q3 2024 to Q4 2024 due to a sharp decrease in total operating revenues.
• Net income decreased from $345 million to $33 million from Q3 2024 to Q4 2024.

Balance Sheet Analysis

• Total assets increased significantly, reflecting the impact of the Aera merger.
• Total stockholders' equity increased reflecting overall profitability and asset growth.
• Total Liabilities increased significantly, primarily due to higher Long-Term Debt and Noncurrent Asset Retirement Obligations, driven by the Aera merger.

Cash Flow Analysis

• Net cash provided by operating activities decreased slightly from Q3 2024 to Q4 2024.
• Net cash used in investing activities decreased substantially from Q3 2024 to Q4 2024.
• Net cash used in financing activities was lower in Q4 2024 compared to Q3 2024.

Capital Allocation

CRC is committed to sustainably returning cash to shareholders through dividends and share repurchases. They increased their dividend by 25% in 2024 and returned approximately 85% of free cash flow to shareholders through dividends and share repurchases. In 2024, CRC repurchased 3.6 million shares of its common stock for $190 million at an average price of $52.12 per share and returned $113 million to shareholders in dividends. They also intend to use cash for debt reduction.

Management Commentary

We delivered exceptional results in 2024, while successfully completing our transformative merger with Aera Energy.

Today we have the right people, portfolio, and business plan to help lead California’s decarbonization efforts.

In 2025, we are focused on delivering value through our integrated asset portfolio, combining conventional oil and gas, carbon management and an expanding power solutions business.

Our CTV business has seven additional Class six permits in the queue with an estimated total storage capacity of two eighty seven million metric tons.

We will maintain financial strength to generate sustainable cash flow, while returning significant capital through dividends and opportunistic share buybacks to our shareholders.

Overall Sentiment: Positive, emphasizing the successful merger, focus on decarbonization, and commitment to shareholder returns.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.