California Resources Corp. (CRC) CEO Todd Stevens said he sees uncertainty continuing in the oil sector globally, but the Los Angeles-based independent should remain a strong player with a portfolio of diverse assets.
Speaking on a 3Q2019 earnings conference call Monday, Stevens said production fell by 2,000 boe/d because of an earlier sale of a 50% interest in parts of the Elk Hills field in California.
Total daily production volumes decreased 6% year/year, from 136,000 boe/d to 128,000 boe/d. Oil volumes averaged 79,000 b/d, natural gas liquids (NGL) volumes averaged 16,000 b/d, and gas volumes averaged 196 MMcf/d. “The decrease was due to the Lost Hills divestiture, lower capital investment including fewer workovers, power outages and other factors,” Stevens said.
Stevens stressed that CRC as a pure-play California operator has an advantage as production comes from a diverse mix of sources, with 55% from CRC-owned land; 21% from private owners; 20% from state lands; and 4% from federal lands. This makes CRC “well positioned” to thrive next year.
“To put this in economic terms, our Long Beach operation alone has provided nearly $5 billion to the state, Los Angeles County and the city of Long Beach during the past 15 years from operations on state lands.”
For the near-term, CRC will be concentrating on “controlling what it can control,” increasing efficiencies and lowering costs, said Stevens, noting it plans to reduce its joint venture (JV) project rig count to two while keeping seven rigs on the partnership projects.
“We’re now operating our assets with half the number of employees we had prior to the 2014 spinoff” from Occidental Petroleum Corp., he noted.
Asked if CRC was going to accelerate efforts to sell assets to lower its overall debt and restructure its balance sheet, Stevens indicated there was no rush. “We don’t just have some leases and a pumping unit, we have a vibrant business that typically you would find inside of a super major,” he said.
“When we say we’re really looking at ‘all-of-the-above,’ we’re looking at it from the standpoint of any part of our upstream or midstream assets has monetization value. We went through the downturn” in late 2014 into 2016 and “preserved our asset value to get to a point where we have stable prices like now, so we wouldn’t conduct any fire sales, and we have [high-value] surface land in Huntington Beach and elsewhere.”
CRC has “a lot of levers to pull, a fulsome of businesses with different types of assets, so we’re really taking our time trying to do the right thing for our shareholders, and not rush and do something we’re going to regret.”
“The JVs are really a powerful tool, and it’s an added tool in our toolbox, helping us manage our cash flow, de-risk opportunities, and bring value forward to our assets,” Stevens said.
In 3Q2019, net income was $94 million ($1.89/share), compared with $66 million ($1.32) for the same period last year.
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