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California Resources Digesting JVs, Looking for More

Still absorbing a series of partnerships formed in 2017 and earlier this month, Los Angeles-based California Resources Corp. (CRC) is looking for more joint ventures (JV) or selling some of its assets while adding to its portfolio of reserves that grew by 119% last year.

CRC CEO Todd Stevens during a 4Q2017 conference call on Monday discussed how the JVs are helping to right the ship so the independent can focus this year on conventional exploration and production (E&P) opportunities, expand steam flood production and capital workovers.

"The plan is working," and CRC is lowering its E&P costs, he said.

CRC has monetized "a small amount of assets" in the recent years since it was spun off from Occidental Petroleum Corp., and nearly all of the assets now are either competing for capital or possibly could be sold.

"Really everything here is on the table from an external standpoint," Stevens said. CRC is in "active discussions with numerous" parties "regarding JV partnerships and the sale of certain assets."

At the end of last year, CRC had six exploration wells underway, all "with other people's’ money, so I think it is important to understand that we can execute on a lot of small joint ventures that are value additive and involve real wildcatting."

CRC began this year with a $425-450 million capital budget, which could ramp up "as confidence in the current commodity price environment grows,” he said. Financing from the JVs is to remain flexible, filling in as needed.

On a budget of $139 million in 4Q2017, CRC produced 126,000 boe/d and drilled 44 wells with JV partners and 37 others on its own.

E&P efforts produced a reserve replacement ratio of 119% and a third straight year of single-digit finding and development (F&D) costs of $6.82/boe. At year-end, CRC had 618 million boe of proven reserves and 450 million boe of probable reserves.

"The JVs have allowed us to ramp up overall activity while creating optionality and to direct CRC capital to other high value opportunities," Stevens said. "By operating with JV partners, we expect to continue to improve operating efficiencies, maximize capital opportunities, and de-risk an even broader inventory of actual projects as we did in 2017."

As California has experienced an abrupt return to drought conditions statewide, Stevens reported that CRC last year provided record volumes of reclaimed water supplies to the agricultural sector, topping 4.9 billion gallons, compared to two billion gallons it provided in 2014 when it was formed.

"We have served as a net water supplier to agriculture for every year since our formation, and in 2017 we set another record by treating and delivering 4.9 billion gallons," Stevens said.

CRC reported a net loss in 4Q2017 of $138 million (minus $3.23/share), compared with a year-ago loss of $77 million (minus $1.83). In 2017, net losses totaled $266 million (minus $6.26), versus 2016 net income of $279 million ($6.76). 

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