California Resources Corporation · NYSE:CRC
California Resources — Investor Day (October 2018)
132 slides from California Resources's investor day presentation, Oct 3, 2018
Slide 1: CRC: Value-Driven Analyst & Investor Day
CRC: VALUE-DRIVEN ANALYST & INVESTOR DAY O c t o b e r 3 , 2 0 1 8 | N e w Y o r k C i t y , N e w Y o r k
Slide 2: Agenda
Agenda Strategic Overview Value Driven Exploration & Development Todd Stevens, President and CEO Darren Williams, EVP Operations and Geoscience Operating in California Strengthening the Balance Sheet Charlie Weiss, EVP Public Affairs Mark Smith, Sr. EVP and CFO Conventional Delivers Strong Value CRC
Slide 3: Forward Looking / Cautionary Statements
Forward Looking / Cautionary Statements – Certain Terms This presentation contains forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. Such statements include those regarding ou
Slide 4: CRC Overview Video
CRC OVERVIEW VIDEO See the Investor Relations page at www.crc.com to access this video.
Slide 5: Five Main Takeaways
Five Main Takeaways 1. CRC is well-positioned to prosper in the mid-cycle environment as California’s premier operator 2. Conventional delivers strong & differentiated value 3. The application of capital and technology will allow CRC to grow its core and growth areas, improve efficiencies and delive
Slide 6: The VCI Difference Delivers Real Value
The VCI Difference Delivers Real Value Delivering Smart Growth and Real Value • Value-directed investments Value • Disciplined capital allocation Focus • Enhanced returns over full-cycle time frame • Prioritization of projects and drives alignment of team Value Creation Index • Ahead of competitive
Slide 7: CRC's Value-Driven Strategic Approach
CRC’s Value-Driven Strategic Approach Capture Value of Ensure Effective Drive Operational Strengthen Portfolio Capital Allocation Excellence Balance Sheet • Pursue value-driven • Utilize VCI-based • Streamline processes • Reinvest to grow cash production decision-making flow • Apply technology • Del
Slide 8: World-Class Fields Delivering Value-Driven Growth
World-Class Fields Delivering Value-Driven Growth • CRC has over 50 billion original BOE in place in four key basins CRC’s Resources and Recovery ▪ 135 fields; 9 large fields each with over 1 30 billion original BOE in place Original BOE in Place ▪ 25 10 billion BOE produced to date (20% Recovery Fa
Slide 9: CRC's Value-Driven Asset Playbook Delivers Results Through the Cycle
CRC’s Value-Driven Asset Playbook Delivers Results Through the Cycle 1. Optimize and extend current assets through comprehensive life of field plans 2. Apply operating expertise and technical knowledge to step out 3. Leverage infrastructure and apply technology to improve margins 4. Value-driven app
Slide 10: Assets of a Major with Flexibility of an Independent
Assets of a Major with Flexibility of an Independent 100% 90% 80% Sentinel Peak Berry 70% ARCO Mobil Aera 60% Unocal NPR1 50% Texaco 40% Tenneco Chevron Exxon 30% % of California's Production California's of % 20% Shell CRC* 10% 0% 1980 1990 2000 2010 2017 Source: DOGGR, in some cases predecessor vo
Slide 11: Leading Market Position with Deep Regional Insight
Leading Market Position with Deep Regional Insight Top California Producers in 2017 TULARE 200 SANDS 000’ Largest 3-D Seismic <5, 163 SHALLOW Position in California 142 ETCHEGOIN 150 SANDS 122 100 MONTEREY 50 30 18 SANDS AND SHALES Gross Operated GrossOperated MBOE/d - CRC Chevron USA Aera Energy Se
Slide 12: Strength of Portfolio Allocation Strategy Supported by Diverse Assets
Strength of Portfolio Allocation Strategy Supported by Diverse Assets SACRAMENTO BASIN SAN JOAQUIN BASIN Gas Optionality Greater Elk Hills – Flagship Asset Large scale gas asset Sustain base via low-cost with significant workovers and use JVs and Core operations Leverage technology exploration poten
Slide 13: Enhanced Inventory Growth and Expanded 3P Position
Enhanced Inventory Growth and Expanded 3P Position First Half 2018 Highlights Unproven Reserves1 Growth • Mid-year reserves audited by Ryder Scott • Proved reserves today only 5% lower despite 25% 2,500 decrease in price from the Spin 2,250 • Life-of-field studies increased unproven resources >250%
Slide 14: Deep Inventory of Actionable Projects at $75 Brent
Unlocking Value with a Deep Inventory of Actionable Projects at $75 Brent 50 Steamflood 45 • Fully burdened, growth- Waterflood 40 focused portfolio Primary 35 ($/Boe) Shale 1 30 • Achieve a VCI of 1.3 or Gas 25 greater at $75 Brent and 20 $3.00 NYMEX 15 10 • Deliver robust cash flow Full Cycle Cost
Slide 15: Strategic Consolidation of Elk Hills Assets
Strategic Consolidation of Elk Hills Assets Estimated Annualized Elk Hills Synergies ($MM) $15MM Implemented to Date $0 $5 $10 $15 $20 $25 • CRC acquired Chevron’s non-operating working Existing CRC Surface Acreage Acquired Surface Acreage interest ranging between 20% to 22% in different Elk Hills U
Slide 16: Strengthening the Balance Sheet Remains a Priority
Strengthening the Balance Sheet Remains a Priority Target 2x-3x Leverage Ratio 1 Continue to Employ Leverage Core Adjusted EBITDAX Leverage 10.0x ALL of the ABOVE Approach 1 8.0x 6.0x Capital Disciplined Asset Markets Capital Monetizations 4.0x Solutions Investment 2.0x Joint ventures Total Debt / A
Slide 17: Dynamic Capital Allocation Through Commodity Cycle
Dynamic Capital Allocation Through Commodity Cycle High-Price Scenario • Invest to accelerate production growth and explore/pilot new resources Over • Add facilities (steam and water handling) to support pace of growth $1.5B • High cash generation • VCI 1.3 floor to reinvest for value 50% 50% Mature
Slide 18: Closely Monitoring Industry Fundamentals
Closely Monitoring Industry Fundamentals to Remain Proactive Brent Daily Price Frequency Low-Price Mid-Price High-Price $120 Scenarios Scenarios Scenarios $100 Excess Balanced Tight Spare Capacity; Capacity; Market Geopolitical Premiums Recessions; Conventional $80 Mid-Cycle $60 Pricing Frequency (D
Slide 19: Pressure Tested Through Cycle and Focused on Long-Term Value
Pressure Tested Through Cycle and Focused on Long-Term Value SEPARATION VALUE TRANSITION TO OFFENSE VALUE- $480 ANNOUNCEMENT PRESERVATION DRIVEN $110 GROWTH Spin $360 Date $80 $240 $50 $120 Brent Crude Price ($MM) Capital Quarterly Brent Crude Oil Price ($/BBL) Price Oil Crude Brent Capital $20 $0 0
Slide 20: Disciplined Capital Plan Leverages Portfolio of Projects
Disciplined Capital Plan Leverages Portfolio of Projects and Management Expertise 2019 Expected Capital Allocation Core Program and Expected Outcomes Expect to Buena Vista Live Within Elk Hills Long Beach Cash Flow 30-40% Kern Front Core Deliver Mount Poso 20-30% Growth Approx. Double-Digit EBITDAX
Slide 21: Creating Culture of Collaboration and Innovation
Creating Culture of Collaboration and Innovation Changing mindsets as OneCRC to Pull Value Forward Pre-Spin Post-Spin • Growth regardless of cost • Value-driven growth • Cash cow for corporate • Maximize value and margin parent with limited • Doing things differently/ exposure to reinvestment upside
Slide 22: Investment Proposition: Delivering Smart Growth and Real Value
Investment Proposition: Delivering Smart Growth and Real Value Portfolio of world- Robust inventory Deep operational Integrated and Disciplined and class assets of high value knowledge and complementary effective capital investable throughout growth projects technical expertise infrastructure alloca
Slide 23: Operating in California
OPERATING IN CALIFORNIA Charlie Weiss, EVP Public Affairs
Slide 24: California's Immense Appetite for Oil and Gas
California’s Immense Appetite for Oil and Gas Californians consume more gasoline than entire countries with populations four times larger 2018 CRC Analyst & Investor Day | 24
Slide 25: California's Compelling Needs
California’s Compelling Needs • World’s 5th largest economy runs first and foremost on energy ▪ 330 billion miles driven annually ▪ 34% of U.S. Port Traffic – with the busiest ports in the country • Wealthiest state but with highest poverty rate • CRC is actively engaged in solving California’s chal
Slide 26: California's Growing Dependence on Imported Energy
California’s Growing Dependence on Imported Energy 800,000 Oil Product Consumption “Because as long as [California's] cars are 700,000 moving... [we] are burning up gasoline that is 600,000 being shipped from Iraq, from Russia, from Venezuela and all sorts of other places... so 500,000 Imported Oil
Slide 27: California Policies Impact Natural Gas Prices
California Policies Impact Natural Gas Prices Aliso Canyon Effect on Inventory Lack of Natural Gas Storage and Peak Demand >$20 $14 $12 $10 $8 Daily SoCalGas SoCalGas natural Daily inventories gas Source: EIA $6 Impact of Solar Generation $4 $2 So Cal City Gate Wheeler Ridge NG Futures $0 01/2017 04
Slide 28: Powering California's Economic Engine
Powering California’s Economic Engine 2014-2017 Economic Contributions • $828 million in California state, local and payroll taxes CRC’s operations in Long Beach have generated more than • $591 million $4.7 billion in revenues for the in revenues to the State Lands Commission city and state since 20
Slide 29: Increasing Energy Literacy
Increasing Energy Literacy • California’s ambitious goals and vibrant future require: ▪ Energy equality for disadvantaged communities ▪ Resilience through diverse mix of affordable traditional and renewable energy ▪ Responsible local energy production to supplant imports ▪ Predictable permitting for
Slide 30: CRC's Regulatory Strategy Advances California's Leading Standards
CRC’s Regulatory Strategy Advances California’s Leading Standards Growing Permit Inventory CRC’S CONSISTENT REGULATORY STRATEGY (Permitted drilling rig days at end of period) ✓ Reflect Californians’ values 1200 ✓ Solicit community input 1000 ✓ Advance community interests ✓ Build strategic alliances
Slide 31: Regulatory Video
REGULATORY VIDEO See the Investor Relations page at www.crc.com to access this video.
Slide 32: Reflecting Californians' Values
Reflecting Californians’ Values • Institutional Shareholder Services ▪ Highest environmental rating (1 of 10) ▪ High social rating (2 of 10) • Humanitarian Company of the Year ▪ American Red Cross, LA Region • Kern County named February 5 “CRC Day” ▪ 20 years of service and investment at Elk Hills •
Slide 33: CRC Positioned as California's Operator of Choice
CRC Positioned as California’s Operator of Choice • Proudly share state’s commitment to natural resources • Proven track record in sensitive coastal, urban and agricultural settings • Design and maintain facilities with a highly qualified workforce, including the California Building and THUMS Island
Slide 34: CRC Serves as Net Water Supplier in Drought-Ridden State
CRC Serves as Net Water Supplier in Drought-Ridden State CRC delivered a company Water Strategy Objectives record 4.9 billion gallons of reclaimed water to agriculture • Create long-term value from produced water in 2017, an 85% increase • Help farmers and communities solve a key challenge since 201
Slide 35: CRC Advancing California's Sustainability Strategy
CRC Advancing California’s Sustainability Strategy Four CRC Goals by Year End 2030 1 Water: Increase volume of recycled produced water by 30% above 2013 baseline 2 Renewables: Integrate renewables into oil and gas operations by adding 10 MW above 2013 baseline 3 Methane: Reduce methane emissions by
Slide 36: Conventional Delivers Strong Returns
CONVENTIONAL DELIVERS STRONG RETURNS Francisco Leon, EVP Corporate Development & Strategic Planning
Slide 37: Optimizing Portfolio Management to Drive Value
Optimizing Portfolio Management to Drive Value Balanced portfolio can be flexed through the changes in commodity cycle and optimized for oil to Shale Peers gas price ratio Midstream constraints. Increasing state demand Realizations at large and premium to WTI Market discount to WTI Capital allocatio
Slide 38: World-Class Hydrocarbon Province with Significant Remaining Resources
World-Class Hydrocarbon Province with Significant Potential Remaining Recoverable Resources California – a Top Oil Province (BBOE*) • Five of the largest conventional, onshore fields in California the lower 48 Permian (Wolfcamp + Sprayberry) ▪ Over 35 billion BOE produced since 1876 Bakken ▪ Still d
Slide 39: California Delivers More for Less
California Delivers More for Less Oil Production (MMBOPD) August Rig Count 4.0 Anadarko 600 3.5 Appalachia Bakken 484 3.0 Eagle Ford 500 Haynesville 2.5 Niobrara Permian 400 2.0 California 1.5 300 1.0 200 0.5 - 100 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 15 - Rig Count California
Slide 40: California Imports Waterborne With 100% Brent Realization
$85 $80 California Imports Waterborne With 100% CRC Brent Realization in 2Q18 $75 Brent based pricing + CRC’s unconstrained market access provide meaningful pricing uplift $70 $85 $65 $80 $60 $75 $ / Bbl / $ $70 $55 $65 $50 $60 $ / Bbl / $ $45 $55 $50 $40 Jan-17 Mar-17 $45May-17 Jul-17 Sep-17 Nov-17
Slide 41: California's Refineries Ready for IMO Reduced Sulfur Standards
California’s Refineries Ready for IMO Reduced Sulfur Standards Refinery Capacity 12 10 Nelson Complexity Index 8 15 8 6 MMBOPD 4 YOY Crude Demand Growth 6/17-6/18 2 10% 8% PADD 5 - 6% PADD 4 PADD4 PADD1 PADD2 PADD 3 PADD 5 California 4% PADD 1 Increasing Complexity* Source: EIA PADD 2 2% California’
Slide 42: California's Lower-Risk Value Proposition
California’s Lower-Risk Value Proposition: Better All-In Value Creation Permian Permian transactions 36% rely on undeveloped results to succeed Buyer Seller Location Deal Size ($MM) $ / Flowing Boe 64% Diamondback Energen Delaware $9,200 $94,500 Diamondback Ajax Resources Midland $1,245 $103,000 Dev
Slide 43: CRC Remained Cash Flow Positive Through Downturn
CRC Remained Cash Flow Positive Through Downturn Spin-off 1 2 2 1 Source: Evercore “Mind the (Perception) Gap” August 27, 2018. Evercore peer universe includes COP, OXY, EOG, CLR, MRO, APC, WLL, DVN, COG, APA, ECA, PXD, SWN, CXO, RRC, NFX, FANG, XEC, WPX, EGN, QEP, OAS, JAG, CHK, PE, HES, CPE, AR, E
Slide 44: California Creates Value with Biggest Bang for the Buck
California Creates Value with Biggest “Bang for the Buck” $350,000 3.0x $300,000 2.6x 2.5x $250,000 2.0x $200,000 1.5x $150,000 1.0x 1.1x 1.0x $100,000 0.9x 1.0x 0.8x $50,000 0.5x $337 $342 $115 $121 $109 $102 $100 $75 $54 $52 $11 $29 $0 0.0x Permian Gulf Coast Rocky Mountains Northeast Mid-Continen
Slide 45: Portfolio Strength Reflected in Actionable Project Pipeline
CRC Portfolio Strength Reflected in Actionable Project Pipeline 50 Inventory of Actionable Projects at $75 Brent • Locations not captured as actionable include: ▪ 40 Steamflood CRC shales and dry gas projects economic ($/Boe) Waterflood at higher gas market prices 1 30 Primary ▪ Higher risk – i.e. e
Slide 46: CRC Generates Strong Cash Margins by Mechanism Type
CRC Generates Strong Cash Margins by Mechanism Type $80 100% 80% $60 60% $40 % Oil % 40% $20 20% $0 0% 1Based on current run rates for production expense, oil and gas G&A and taxes other than on income applied to $75 Brent and $3.00 NYMEX, assuming current realizations by recovery mechanism. 2018 CR
Slide 47: Example Life Cycle of Wellbore with Stacked Reservoirs
Example Life Cycle of Wellbore with Stacked Reservoirs 1 3 A 3 2 2 B 1 NPV 10 ($MM) IRR (%) VCI 2018 CRC Analyst & Investor Day | 47
Slide 48: Example Life Cycle of Wellbore with Multiple Recoveries
Example Life Cycle of Wellbore with Multiple Recoveries 450 30% 1 400 25% 350 300 20% 3 250 2 15% BOEPD 200 3 2 150 10% Recovery Factor 100 5% 1 50 0 0% 0 5 10 15 years Primary Workover Water Flood Recovery NPV 10 ($MM) IRR (%) VCI 2018 CRC Analyst & Investor Day | 48
Slide 49: BOE Recovery per Foot Competes With Major Shale Plays
CRC’s BOE Recovery per Foot Competes With Major Shale Plays Normalizing estimated ultimate recovery (EUR) vs. measured depth shows CRC advantage • Better recovery factors driven by low decline rate waterfloods and steamfloods • Diverse reservoir portfolio provides 6,000’ optionality to drill deep la
Slide 50: Capital Allocation Provides Value Today and Over Long-Term
Capital Allocation Provides Value Today and Over Long-Term 1. 2. 3. 1. 2. 3. 1. 2. 3. 4. 2018 CRC Analyst & Investor Day | 50
Slide 51: Disciplined Capital Allocation Through Price Cycle
Disciplined Capital Allocation Through Price Cycle 1. 2. 3. 1. 2. 3. 1. 2. 3. 2018 CRC Analyst & Investor Day | 51
Slide 52: CRC's Dynamic Portfolio Provides Flexibility
CRC’s Dynamic Portfolio Provides Flexibility 100% Gas 75% Shale Primary 50% Waterflood Portfolio Mix Portfolio 25% Steamflood 0% Workover 800 800 800 600 600 600 400 400 400 200 200 200 Oil BOEPD BOEPD Oil Oil 0 BOEPD 0 0 YEAR 5 YEAR 5 YEAR 5 For illustration of portfolio optionality based on normal
Slide 53: Compelling Value Proposition Competes with Major Shale Plays
CRC’s Compelling Value Proposition Competes with Major Shale Plays 2 1External type curve economics from Wood Mackenzie’s Key Play reports and Global Economic Model (GEM), CRC 2017 Drilling and capital workover economics based on internal estimates calculated using Wood Mackenzie’s Key Play report p
Slide 54: Bang for the Buck - Drilling Results Since January 2017
“Bang for the Buck” - Drilling Results Since January 2017 • 281 producers drilled and Drive Mechanisms are online over last 18 months Each Drive Delivers High Value Competitive with Industry Peers • VCI ~2.11 for average portfolio program • High success rate in both core & growth areas ~90% of wells
Slide 55: Value-Driven Summary
Value-Driven CRC differentiated conventional assets compete favorably versus the shale model, delivering $ attractive VCI-based returns and compelling value to shareholders Our portfolio management approach to capital allocation is tailored for the asset base and cyclical nature of the commodity env
Slide 56: Driving Operational Excellence
DRIVING OPERATIONAL EXCELLENCE Shawn Kerns, EVP Operations and Engineering
Slide 57: Unparalleled California Expertise
Unparalleled California Expertise Largest Operator in Extensive Field California Growth Areas Operations Experience Operate across Core Areas of observed field ~12,000 wells 135 fields behavior and Decades demonstrated shallow base decline rates CRC’s experienced team Elk Hills built this position K
Slide 58: Elk Hills Flagship Asset in San Joaquin Basin
Elk Hills Flagship Asset in San Joaquin Basin • Large field with 100% NRI ▪ 10 billion original BOE in place within multiple reservoirs ▪ Produces 60,000 BOE/d with annual 10% base decline • Infrastructure provides low-cost advantage ▪ On-site gas processing and liquids extraction ▪ Large power plan
Slide 59: Elk Hills Video
ELK HILLS VIDEO See the Investor Relations page at www.crc.com to access this video.
Slide 60: Significant Synergies and Capital Benefits From Elk Hills Acquisition
Significant Synergies and Capital Benefits From Elk Hills Acquisition • Operations streamlining ▪ Gas compression consolidation ▪ Tank battery consolidation, operations and chemicals ▪ Shut down redundant sales equipment Gas Processing • Incremental revenue capture ▪ Oil processing facility consolid
Slide 61: Leveraging Infrastructure for Nearby Low-Cost Field Development
Leveraging Infrastructure for Nearby Low-Cost Field Development • Coring up with Elk Hills Southern San Joaquin Valley Consolidation ▪ Elk Hills serves as the hub ▪ Power, pipelines, compression ▪ Connecting fields and building out • Lower cost shared resources ▪ Central control facilities and autom
Slide 62: Buena Vista Field
Buena Vista Field – Applying our Asset Playbook to Adjacent Field • Large field adjacent to Elk Hills Buena Vista ▪ 7 billion original BOE in place, 10% Rf ▪ Decades of production history, 10% annual base decline 18,000 ▪ 3P reserves of 245 MMBOE* with 650 locations 15,000 • Analogous to Elk Hills 1
Slide 63: Los Angeles Basin Video
LOS ANGELES BASIN VIDEO See the Investor Relations page at www.crc.com to access this video.
Slide 64: LA Basin – World-Class Wilmington Field
LA Basin – World-Class Wilmington Field • World-class waterflood ▪ 7 billion original BOE in place, 34% Rf ▪ Partnership with State of California and City of Long Beach • Operational excellence ▪ Decades of operational experience ▪ Low annual base decline of 8% ▪ 640 identified locations • Big field
Slide 65: Renewed Investment in Analog Field Huntington Beach Onshore
Renewed Investment in Analog Field Huntington Beach Onshore • Large underdeveloped field ▪ 2 billion original BOE in place, 30% Rf ▪ Waterflood, low annual base decline <8% ▪ Acquired in 2013 w/ 94 surface acres • Wilmington is an analog ▪ Multiple stacked pay zones ▪ Primary, waterflood and steamfl
Slide 66: Low-Cost Capital Workovers Deliver Value and Volume
Low-Cost Capital Workovers Deliver Value and Volume • Existing assets in multiple stacked pay zones ▪ 12,000 wellbores with pay behind pipe Workover Program ▪ CRC owned processing facilities 14,000 • Low-risk, high-reward well work opportunities 12,000 ▪ Adding pay behind pipe 10,000 ▪ Upgrading art
Slide 67: Big Data and Advanced Analytics Applied Across Value Chain
Big Data and Advanced Analytics Applied Across Value Chain HSE LAND SUBSURFACE OPERATIONS CORPORATE INCIDENT COMPETITOR SEISMIC WELL TESTING VENDOR PREDICTION and INTELLIGENCE ANALYSES SETUP PREVENTION DOWNTIME LEASE WORKOVER PREDICTION SUPPLY MANAGEMENT IDENTIFICATION CHAIN LIFT STIMULATION OPTIMIZ
Slide 68: Proprietary Add Pay Tool
Proprietary “Add Pay” Tool • Automated tool identifies workover candidates ▪ Instant review of thousands of months of production data Ranking of behind pipe – add pay opportunities ▪ Integrating machine learning tools with technical staff Screenshot of add pay dashboard ▪ Assist teams to high-grade
Slide 69: Proprietary Well Downtime Prediction and Reduction Tool
Proprietary Well Downtime Prediction and Reduction Tool • CRC has a large inventory of wells on artificial lift ▪ >7,000 wells are manually reviewed monthly ▪ Dynamometer cards measure lift efficiency ▪ 3 million dynamometer cards generated each month • Improved well performance ▪ Preventative actio
Slide 70: Expanding Reserves Across the Recovery Value Chain
Expanding Reserves Across the Recovery Value Chain Pipeline of Reserves and Resources • Proven ability to manage reserves during 4,500 downturn 4,000 ― Low base decline, resilient asset base ― Targeted new reserve adds 3,500 3,000 • Large resource base continues to grow 2,500 ― Proven techniques in
Slide 71: Elk Hills CO2 Project: Advancing Contingent Resources
Elk Hills CO2 Project: Advancing Contingent Resources Many CRC fields suitable for additional EOR • Project scope recovery techniques ▪ Utilizing 6 MMCF/day miscible gas from Elk Hills plant ▪ ▪ Large resource, known production profiles Permits approved, injection begins 4Q18 ▪ Anticipated response
Slide 72: Poised for Improved Capital Execution
Poised for Improved Capital Execution • CRC is #1 driller in California D&C Cost Improvements ▪ Preferred customer; 2/3rds of California rigs 2.00 ▪ Experienced - top driller by footage ▪ Leader in deep drilling in state • Capital efficiency 1.50 ▪ Reducing casing strings 30% lower ▪ Fit for purpose
Slide 73: Focused Efforts Driving Margin and Cash Flow Performance
Focused Efforts Driving Margin and Cash Flow Performance • Focused on improving operations ▪ Annual operating costs reduced by $170 million since the Spin ▪ Sustainable changes to capture margin expansion ▪ Realizing 64% operating margin in 1H18 • Field operations more empowered and efficient ▪ Shar
Slide 74: Driving Operational Excellence - Key Takeaways
Driving Operational Excellence - Key Takeaways • Coring up positions with large resources in place • Driving operational efficiencies and applying new technology • Capturing reserve growth opportunities across the recovery value chain • Utilizing experience from analog fields to drive value creation
Slide 75: Value-Driven Growth
VALUE-DRIVEN GROWTH Darren Williams, EVP Operations and Geoscience
Slide 76: Value-Driven Exploration and Development Growth
Value-Driven Exploration and Development Growth Sacramento Basin Expected 2019 Capital Allocation • Gas optionality in exploration and development opportunities • Multi-TCF impact exploration Growth/Appraisal 30-40% Program Core South Valley 20-30% Ventura Northern San Joaquin Basin Growth Other The
Slide 77: Significant Growth Potential of California's Prolific Hydrocarbon Basins
Significant Growth Potential of California’s Prolific Hydrocarbon Basins Unproven Reserves Super basins, giant fields, world-class hydrocarbon province 1400 • Probable Possible ▪ Underexplored and underdeveloped; big fields get bigger 1200 1000 ▪ CRC holds ~2.3 MM net acres in prolific hydrocarbon b
Slide 78: Demonstrated Track Record of Operational Excellence and Growth
Demonstrated Track Record of Operational Excellence and Growth Production Growth • Delivering value-driven growth ▪ Consistently delivered growth projects across operated asset base ▪ Multiple recovery mechanisms • Laser-focused ▪ Operate the analog and own the play ▪ Continuous learning and risk-ta
Slide 79: Applying Modern Technology Drives New Growth
Applying Modern Technology Drives New Growth • 2012 exploration discovery on flanks of Buena Pre-Drill Exploration Prospect Map Vista field with Reservoir Thickness and Depth Contours ▪ Drilled 12 times between 1935 and 1984 ▪ No sustained oil production or identification of hydrocarbon accumulation
Slide 80: Developing Entire Southern San Joaquin Basin into Core Area
Developing Entire Southern San Joaquin Basin into Core Area • Redevelopment, expansion and additional recovery in existing CRC operated fields Large Inventory of Development Projects ▪ Large fields with low recovery factors Original MBOE Field Area Rf Projects in Place ▪ >500 identified development
Slide 81: Successful Exploration Layers On Even More Value
Successful Exploration Layers On Even More Value • Commercially-focused and value-driven exploration program Extension of Pleito Ranch Field Through Exploration ▪ Successful project generated VCI > 21 ▪ Deliberate play expansion delivers immediate, actionable development inventory to asset teams ▪ O
Slide 82: Appraisal of Kettleman North Dome Unlocks Growth
Appraisal of Kettleman North Dome Unlocks Growth • Large producing field in Northern San Kettleman Appraisal Summary Joaquin Basin RESOURCE STATUS and ACTIVITY ▪ 20+ square mile, 4-way closure with >4000’ stacked reservoirs Multiple stacked sands ▪ 3.5–5.0 billion original BOE in place, Completed wo
Slide 83: Ventura Video
VENTURA VIDEO See the Investor Relations page at www.crc.com to access this video.
Slide 84: Expanding CRC's Asset Playbook to Ventura Basin
Expanding CRC’s Asset Playbook to Ventura Basin • Prolific basin with a long history, including the first commercial oil well in California ▪ Operate more than 20 fields CRC Operated Fields in the Ventura Basin ▪ ~9 billion original BOE in place in CRC fields, Rf ~14% ▪ ~250,000 net mineral acres (7
Slide 85: Exploration and Development of Core South Mountain Asset
Exploration and Development of Core South Mountain Asset • Giant field and flagship asset in basin with > 2.5 billion original BOE in place Stacked Pay in the Ventura Basin ▪ CRC has consolidated land position and field ownership • >10,000’ of underdeveloped and underexplored stacked oil pay ▪ >4,00
Slide 86: Sacramento Basin Provides Gas Optionality
Sacramento Basin Provides Gas Optionality • Prolific gas basin THOMPKINS HILL ▪ CRC is largest operator in basin, operates ~ 86% of 1,000 mcfd 125 BCF cum production ▪ 2017 average production of 33 MMCF/D WILLOWS • Rio Vista is core asset with > 5 TCF original gas in place 7,500 mcfd 650 BCF cum ▪ >
Slide 87: Conventional Exploration Program Keeps Growing
Conventional Exploration Program Keeps Growing • Value-driven, near field exploration program Using Seismic Attributes to Identify and De- ▪ Program generates meaningful returns and has repeatable Risk Exploration Prospects success ▪ Unparalleled portfolio of > 150 prospects Potential 2019 ▪ >2.5 bi
Slide 88: Conventional Exploration Program Generates Real Value
Conventional Exploration Program Generates Real Value • 9 well exploration program since mid-year 2017 Multiple Small Joint Ventures ▪ Delineation and expansion of proven play trends plus SIGNED SEVEN new impact play concepts JVs • Reduced risk via joint ventures 2,3 ▪ 7 exploration wells funded by
Slide 89: Upside Through Shale Reservoir Development in California
Upside Through Shale Reservoir Development in California • Industry activity in California focused on conventional reservoirs and plays Kreyenhagen Play Fairway and Producing Wells D R • World-class source rocks with unconventional Vclay log shale development potential ▪ Kreyenhagen, Moreno and Lowe
Slide 90: Hybrid Play Development in California
Hybrid Play Development in California Low Permeability Resource Play Targets • Emerging/developing play concepts ▪ Integrating reservoir characterization approaches from successful lower 48 resource plays to California reservoirs ➢ 5000’ gross interval • Hybrid/low permeability resource plays ➢ Mult
Slide 91: Multiple Assets Provide Significant Value-Driven Growth Potential
Multiple Assets Provide CRC with Significant Value-Driven Growth Potential Oil-focused development of existing producing assets 1.1+* Multiple recovery mechanisms BBOE DEVELOPMENT Leveraging CRC operating expertise and infrastructure unproven reserves 2.5+ Near-field program targeting proven reservo
Slide 92: Continued Financial Strengthening into 2019
CONTINUED FINANCIAL STRENGTHENING INTO 2019 Mark Smith, Sr. EVP & CFO
Slide 93: Strengthening and Simplifying the Balance Sheet Remains a Priority
Strengthening and Simplifying the Balance Sheet Remains a Priority Remain committed to debt reduction with a goal of: ▪ Returning to a simplified balance sheet ▪ Targeting a near investment grade balance sheet ▪ 2x-3x target leverage ratio Continue on path of debt reduction to increase flexibility a
Slide 94: Preliminary Strong Third Quarter 2018 Performance
Gaining Momentum with Preliminary Strong Third Quarter 2018 Performance Preliminary 3Q18 Estimate Preliminary YTD18 Estimate ~90 Gross Wells ~250 Gross Wells Drilled1 Drilled1 Includes ~55 CRC wells ACTIVITY Includes ~150 CRC wells ~136 Mboe/d2 ~131 Mboe/d2 62% Oil 62% Oil PRODUCTION ~$200 Million ~
Slide 95: Significant Reduction in Total Debt from Post-Spin Peak
Significant Reduction in Total Debt from Post-Spin Peak Chose options to maximize deleveraging and minimize recurring cost to the income statement on a per share basis. Continue to seek opportunistic transactions that reduce overall debt and fixed charges. 7,000 6,000 Includes Debt 6,7651 Repurchase
Slide 96: Goal: Simplification of the Balance Sheet
Goal: Simplification of the Balance Sheet Capitalization ($MM) Recent Highlights 6/30/2018 • Received 8th Amendment to repurchase $300 million in 2L notes and 1st Lien 2014 Revolving Credit Facility (RCF) $ 277 senior notes at any discount 1st Lien 2017 Term Loan 1,300 nd 1st Lien 2016 Term Loan 1,0
Slide 97: Opportunistic Hedging Program Captures More Upside Exposure in 2019
Opportunistic Hedging Program Captures More Upside Exposure in 2019 Crude Oil Impacted by Hedges • Hedging program originally 100% protected near-term funding 90% of capital program and financial covenants with 80% 70% minimum liquidity impact $58.83 • Current program built to 60% $60.30 provide pro
Slide 98: Strategic Development Joint Ventures
Strategic Development Joint Ventures Reversion Estimates $550 Million Portfolio Flexibility Total Potential and Optionality JV Capital $65 $200 Million $75 Enables High Margin Estimated Last Date Invested Through of BSP Capital Q2 2018 Production Growth Investment $85 ~3.5-4.0 MBoe/d 2018 2019 2020
Slide 99: Summary of Mid-Year 2018 Reserves Changes
Summary of Mid-Year 2018 Reserves Changes 96% 731 MMBOE <$10/BOE 15 Year Half-Year Proven Organic Proved Reserves 1 Reserves Replacement Up 18% from YE 2017 F&D Cost R/P (excl. price-related revisions – unaudited) CRC Reserves Changes (Net MMBOE) YE 17 YE 18 Price July 1P RRR3 Reserve YE 2017 1H 201
Slide 100: Current Enterprise Value Deeply Discounted
Current Enterprise Value Deeply Discounted $28 $24 $20 2 $16 Infrastructure Surface & Minerals3 $12 Unproved4 Current EV Value ($Billion) Value $8 of $8.1 Bn5 PUD1 $4 PD1 $0 $65 Brent $75 Brent $85 Brent 1-5 See endnotes in the Appendix. See the Investor Relations page at www.crc.com for important i
Slide 101: Unlocking Value with Deep Inventory of Actionable Projects at $75 Brent
Unlocking Value with Deep Inventory of Actionable Projects at $75 Brent 50 Steamflood 45 • Fully burdened, growth- Waterflood 40 focused portfolio Primary 35 ($/Boe) Shale 2 30 • Achieve a VCI1 of 1.3 or Gas 25 greater at $75 Brent and 20 $3.00 NYMEX 15 10 • Deliver robust cash flow Full Cycle Cost
Slide 102: 2018 Capital Investment Program Aligned with Mid-Cycle Pricing
2018 Capital Investment Program Aligned with Mid-Cycle Pricing Production Enhancement Plans for 2018 • CRC 2018 capital plan directed to oil-weighted projects in core fields: Elk Hills, Dynamic plan that can be scaled up or Wilmington, Kern Front, Huntington Beach, and continued delineation of down
Slide 103: Targeting Double-Digit EBITDAX Growth
Targeting Double-Digit EBITDAX Growth Estimated Crude Oil Production Outcomes 130 Targeting 10-15% discretionary cash flow for 120 balance sheet strengthening1 110 ~7% Midpoint Portfolio Production CAGR Planning 100 Scenarios Combined with mid-cycle commodity prices, (MB/d) Oil Production Oil 90 CRC
Slide 104: Continuous Efforts Provide Pathway to Reasonable Leverage
Continuous Efforts Provide Pathway to Reasonable Leverage Estimated Leverage Ratios 10.0x 1 8.0x 6.0x 4.0x Total Debt/Adj. EBITDAX Debt/Adj. Total 2.0x 0.0x 2 2016 2017 2018E 2019E 2020E 2021E 2022E $65 $75 $85 Core Adj. EBITDAX1 Leverage 1See the Investor Relations page at www.crc.com for a reconci
Slide 105: All of the Above Approach to Simplify Balance Sheet
All of the Above Approach to Simplify Balance Sheet Reduce Debt Through Cash Flow Reduce Reduce Outstanding Fixed Debt Charges Capital Simplify Asset Market Balance Monetizations Solutions Sheet Extend Capital Maturities Structure EBITDAX Growth 2018 CRC Analyst & Investor Day | 105
Slide 106: Five Main Takeaways
Five Main Takeaways 1. CRC is well-positioned to prosper in the mid-cycle environment as California’s premier operator 2. Conventional delivers strong & differentiated value 3. The application of capital and technology will allow CRC to grow its core and growth areas, improve efficiencies and delive
Slide 107: Investment Proposition: Delivering Smart Growth and Real Value
Investment Proposition: Delivering Smart Growth and Real Value Portfolio of world- Robust inventory Deep operational Integrated and Disciplined and class assets of high value knowledge and complementary effective capital investable throughout growth projects technical expertise infrastructure alloca
Slide 108: Appendix
APPENDIX
Slide 109: Investment Grade Assets with a Non-Investment Grade Balance Sheet
Investment Grade Assets with a Non-Investment Grade Balance Sheet 2017 Operational Metrics1 CCC+ 2017 Financial Metrics1 CRC’s S&P Corporate Family Rating 3 Yr F&D, All-In ($/BOE) Recycle Ratio (3 Yr Avg) $15 3.0 $10 2.0 Free Cash Flow ($MM) Debt/PV10 $300 1.4 $5 1.0 $200 1.2 $0 0.0 $100 1.0 CRC A A
Slide 110: Opportunistically Built Oil Hedge Portfolio
Opportunistically Built Oil Hedge Portfolio 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 FY20 FY21 Strategy Sold Calls Barrels per Day 5,000 15,000 15,000 5,000 - - - - Weighted Average Protect cash flow, $60.30 $58.83 $66.15 $68.45 - - - - operating margins Ceiling Price per Barrel Purchased Barrels per Day - - 2
Slide 111: CRC – Price Realizations
CRC – Price Realizations Oil Price Realization (with Hedges) Gas Price Realization 80 WTI Realizations Brent NYMEX 4.00 $74.90 $3.26 $3.14 70 $67.18 $2.95 $67.88 $3.00 $2.87 $61.54 3.00 $2.75 60 $54.66 $62.87 $64.11 * $50.92 $52.18 $2.90 $2.81 $62.77 2.00 $2.47 $2.56 $2.77 * $/Mcf $/Bbl 50 $56.92 $2
Slide 112: Diverse Assets with Flexible Development Opportunities
Diverse Assets with Flexible Development Opportunities • World-class resource base positioned to grow • Utilizing current prices1, 1H18 PV-10 of proved reserves of $10.5 BN 1H18 Net Proved 2Q18 Avg. Net 2Q18 % Oil 2Q18 Net Year-End 2017 Drive Mechanisms Competitive Advantage Reserves1 Production Pro
Slide 113: Wilmington Production Sharing Contracts
Wilmington Production Sharing Contracts • Over 25% of CRC’s oil production is subject to Effect of Oil Price on Net Production Production Sharing Contracts (PSC) • PSC Mechanics Gross Production ▪ CRC pays partners’ share of the Operating and Capital Cost ▪ CRC recovers partners’ portion of the cost
Slide 114: Wilmington Production Sharing Contract
Wilmington Production Sharing Contract LBU PSC • Over 90% of CRC’s Long Beach production is 50,000 covered under Production Sharing Contracts Base Incremental End of 40,000 (PSCs) with the State and the City of Long Beach LBU Base 30,000 • CRC’s net production decreases when prices 20,000 Incrementa
Slide 115: CRC Production Presents Favorable Crude Qualities and Distillation Cuts
CRC Production Presents Favorable Crude Qualities and Distillation Cuts Crude Gravity 50 39 38 40 32 30 23 18 20 10 API API Crude Gravity 0 2 Alaska North CA Weighted CRC WTI Brent Slope Total 1 Distillation Cuts Source: EIA Energy Mapping System CRC 2 California Refinery Throughput CA Refinery Inpu
Slide 116: Attractive California Natural Gas Market Complements Strong Oil Position
Attractive California Natural Gas Market Complements Strong Oil Position • CRC produced ~196,000 Mcf/d in Q218 ▪ 3% of California’s 2016 demand, 34% of native supply • Ability to service markets throughout California ▪ 80% sold to Southern California markets via SoCal Gas, Kern and Mojave ▪ 20% sold
Slide 117: CRC Natural Gas Liquids Marketing
CRC Natural Gas Liquids Marketing • Largest NGL producer in CA ~17,000 Bbls/d • Breakdown of NGL production: ▪ Propane – 53% ▪ Butane – 31% ▪ Natural Gasoline – 16% • ~65% of the propane is sold into the Mexican market ▪ Balance sold locally Butane • Normal and Iso Butane moves to LA and San Bay Are
Slide 118: Steamflood Overview
Steamflood Overview 20 TULARE • Steam injection contributes to over 1.2 MMBO/d of production worldwide SANDS ETCHEGOIN SHALLOW 40 SANDS • Thermal techniques account for over 40% of US EOR production; 95% of these are in California • Up to 75% of the oil-in-place can be recovered MONTEREY SANDS AND 2
Slide 119: Steamflood – Single Pattern Mechanics
Steamflood – Single Pattern Mechanics Up-front steam costs scale with gas price Injection Production Well Well Ramp-Up Peak Mature Steam Generator Steam Injection Rate Oil and Water Steam and Hot Oil Zone near Condensed Water Water Bank original reservoir temperature Oil Rate Facilities Established
Slide 120: Greenfield Steamflood Type Pattern
Greenfield Steamflood Type Pattern 100 Kern Front Actuals 75 N. Antelope Lost Hills $NYMEX Hills Kern Front VCI $3.5 $3 $2.5 Composite McDonald 50 Type Curve Anticline $65 1.9 2.0 2.1 Midway BOEPD McKittrick Sunset $75 2.5 2.6 2.7 25 $85 3.1 3.2 3.3 Oxnard $ BRENT 0 0 1 2 3 4 CRC OPERATED FIELDS CRC
Slide 121: Waterflood Overview
Waterflood Overview 20 TULARE • Water-flooding techniques are the most commonly used EOR production methods SANDS ETCHEGOIN SHALLOW 40 SANDS • 20 – 40% of the oil-in-place can be recovered • The oil rate decline for waterfloods is generally ~10% MONTEREY SANDS AND • Low capital intensity and robust
Slide 122: Waterflood – Single Pattern Mechanics
Waterflood – Single Pattern Mechanics Fill Up Recovery Redevelopment Injection Rate Injection Rate Oil Rate Oil Rate Establish Facilities & Reservoir Fill- Expected Water Rate High initial rates targeting bypassed up / Plateau Period Breakthrough & Oil Decline pay using horizontal wells and other 6
Slide 123: Waterflood – New Pattern Composite Type Well
Waterflood – New Pattern Composite Type Well 60 Mount Poso Actuals Kettleman 45 Buena Vista Actuals EUR Mount Poso VCI 165 190 215 Elk Hills 30 Paloma $65 2.2 2.6 2.9 Buena Vista BOEPD Composite $75 2.8 3.2 3.7 15 Type Curve Rincon South Mountain $85 3.3 3.8 4.4 Saticoy $ BRENT 0 0 1 2 3 4 CRC OPERA
Slide 124: Waterflood – Redevelopment Type Well
Waterflood – Redevelopment Type Well 160 Huntington Beach Actuals 120 EUR VCI 140 165 190 80 East Wilmington Actuals Elk Hills $65 1.9 2.3 2.6 Composite Type well BOEPD West Wilmington $75 2.4 2.9 3.3 40 Actuals San Miguelito $85 2.8 3.4 4.0 Elk Hills Actuals Huntington $ BRENT 0 Beach Wilmington 0
Slide 125: Deeper Horizons Primary Overview
Deeper Horizons Primary Overview 20 TULARE • CRC experiences repeatable success in deeper (>10,000 ft.) producing horizons and projects with SANDS high IPs ETCHEGOIN SHALLOW 40 SANDS • Generally characterized by sandstones with shallower declines as compared with non-California shale wells • Natural
Slide 126: Primary Type Well – Deeper Horizons
Primary Type Well – Deeper Horizons 900 Kettleman 750 BV Nose Actuals EUR 600 Bardsdale VCI 400 430 460 Actuals Elk Hills Paloma 450 BV Nose Rio Viejo $65 2.2 2.3 2.5 BOEPD Yowlumne Pleito Ranch Wheeler Ridge Composite Type well 300 Actuals Pleito Ranch $75 2.6 2.8 3.0 Saticoy Bardsdale 150 $85 3.1
Slide 127: California Shale Overview
California Shale Overview 20 TULARE • Upper Monterey Shale Reservoirs (Infill): naturally fractured, low permeability reservoirs. Produce from SANDS conventional structural and stratigraphic traps containing hydrocarbons migrated from source kitchen. ETCHEGOIN Successful commercial developments with
Slide 128: California Shale Type Well
California Shale Type Well 500 Kettleman 400 Elk Hills (2001-2003) Rose New Pool Type Curve Elk Hills N. Shafter VCI Infill New Pool 300 Railroad Gap $65 1.5 2.2 Gunslinger Asphalto BOEPD Actuals 200 Buena Vista Gunslinger Rose/N. Shafter Infill Shale $75 1.7 2.6 Actuals Elk Hills Actuals Curve 100
Slide 129: Sacramento Basin – Gas Overview
Sacramento Basin – Gas Overview 20 TULARE • CRC is the largest gas producer in California SANDS ETCHEGOIN SHALLOW 40 SANDS • Operates 85% of the gas production in the Sacramento Basin • Gas production is a natural hedge to rising steam and electrical energy costs MONTEREY SANDS AND 200 • At current
Slide 130: CRC's Executive Management Team
CRC’s Executive Management Team Mr. Stevens was selected to lead CRC in July 2014. Previously, he served for 20 years with Occidental Todd A Stevens Petroleum as VP of Corporate Development, Oxy Oil & Gas VP – California Operations, and Occidental VP – President and CEO Acquisition and Corporate Fin
Slide 131: CRC's Executive Management Team
CRC’s Executive Management Team Prior to this role, Mr. Pineci was Vice President and Controller of Occidental, overseeing its finance and accounting functions. Previously, he served as Senior Vice President, Occidental Oil and Gas, as well as Vice Roy Pineci President, Internal Audit for Occidental
Slide 132: End Notes
End Notes From Slide 100 1 CRC estimate of reserves value as of December 31, 2017, including reserves acquired in the Elk Hills transaction at the indicated Brent prices. Includes field-level operating expenses, G&A and taxes other than on income. Assumes $3.00/MMBTU NYMEX in all cases. 2 Reflects t