California Resources Corporation · NYSE:CRC
California Resources — 2016 Energy Conference Scotia Howard Weil
48 slides from California Resources's conference presentation, Mar 22, 2016
Slide 1: 2016 Energy Conference Scotia Howard Weil
2016 Energy Conference Scotia Howard Weil Todd Stevens| President & CEO| New Orleans, LA| March 23, 2016
Slide 2: Forward-Looking / Cautionary Statements
Scotia Howard Weil 0316 Forward-Looking / Cautionary Statements This press release 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 specifically incl
Slide 3: Cautionary Statements Regarding Hydrocarbon Quantities
Scotia Howard Weil 0316 Cautionary Statements Regarding Hydrocarbon Quantities We have provided internally generated estimates for proved reserves and aggregated proved, probable and possible reserves (“3P Reserves”) as of December 31, 2014 in this presentation, with each category of reserves estima
Slide 4: 2016 Strategic Focus
Scotia Howard Weil 03164 2016 Strategic Focus • Priorities and Responses • Deleverage the Balance Sheet for Flexibility • Protect the Base • Defend our Margins • Prepare for Change in Cycle
Slide 5: CRC at a Glance
Scotia Howard Weil 0316 NY00813G / 589203_1.WOR Sacramento Basin 14 MMBoe Proved Reserves 7 MBoe/d production San Joaquin Basin 451 MMBoe Proved Reserves 110 MBoe/d production Ventura Basin 47 MMBoe Proved Reserves 9 MBoe/d production Los Angeles Basin 132 MMBoe Proved Reserves 34 MBoe/d production
Slide 6: History of Proactive Strategic Decisions
Scotia Howard Weil 0316 History of Proactive Strategic Decisions 6 Swift, decisive actions have positioned company to weather the commodity downturn. Proactive discussions with lenders and solid asset base provide line of sight to a recovery. 0 5 10 15 20 25 30 0 20 40 60 80 100 120 Ju l-1 4 A u g-1
Slide 7: Living Within Cash Flow
Scotia Howard Weil 0316 Living Within Cash Flow -75 125 325 525 725 925 -25 25 75 125 175 225 275 325 1Q15 2Q15* 3Q15 4Q15* FY 2015 FY ($MM ) $ M M Adj. EBITDAX** Operating Cash Flow Capital Investment * Operating cash flow includes payment of a semi-annual cash property tax payment ** See Appendix
Slide 8: Strong Execution Track Record
Scotia Howard Weil 0316 Strong Execution Track Record 140 145 150 155 160 165 170 1Q15 2Q15 3Q15 4Q15 M b o e /d Total Production Guidance vs. Actual Production Guidance Range Actual 0 40 80 120 160 1Q15 2Q15 3Q15 4Q15 $ M M Capital Investment Guidance vs. Actual Capital Investment Guidance Range Ca
Slide 9: Sufficient Liquidity to Manage Near Term Obligations
Scotia Howard Weil 0316 Sufficient Liquidity to Manage Near Term Obligations 9 Based on our current capital program and at current price levels, we believe that we will have sufficient liquidity for all of 2016. 2016E Consensus* EBITDA Revolver Availability Annual Cash Interest Expense Annual Cash I
Slide 10: 2016 Strategic Focus
Scotia Howard Weil 031610 2016 Strategic Focus • Priorities and Response • Deleverage the Balance Sheet for Flexibility • Protect the Base • Defend our Margins • Prepare for Change in Cycle
Slide 11: Focus on Balance Sheet
Scotia Howard Weil 0316 Capitalization as of 12/31/15 ($MM) $25 $625 $433 $829 $2,250 $892 $0 $500 $1,000 $1,500 $2,000 $2,500 Ja n -1 6 Ju l-1 6 Ja n -1 7 Ju l-1 7 Ja n -1 8 Ju l-1 8 Ja n -1 9 Ju l-1 9 Ja n -2 0 Ju l-2 0 Ja n -2 1 Ju l-2 1 Ja n -2 2 Ju l-2 2 Ja n -2 3 Ju l-2 3 Ja n -2 4 Ju l-2 4 Te
Slide 12: Deleveraging Update
Scotia Howard Weil 0316 $94 $55 $64 $48 $37 $33 0 10 20 30 40 50 60 70 80 90 100 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 10/1/14 3/31/15 6/30/15 9/30/15 12/31/15 2/29/16 B re n t Oil ($ /B b l) Total D eb t ($ M ) Total Debt Long Term Notes Term Loan Revolving Credit Facility Oil Price D
Slide 13: Deleveraging Options
Scotia Howard Weil 031613 • We have accessed various deleveraging alternatives and are taking decisive steps to delever the balance sheet Deleveraging Options UPSTREAM • JV • M&A MIDSTREAM • MLP • Drop into Existing MLP • Sale • Triple Net Lease CAPITAL MARKETS • Debt Exchange AVAILABLE ASSETS • 14
Slide 14: 2016 Strategic Focus
Scotia Howard Weil 031614 2016 Strategic Focus • Priorities and Response • Deleverage the Balance Sheet for Flexibility • Protect the Base • Defend our Margins • Prepare for Change in Cycle
Slide 15: Consistent Replacement of Reserves from Resource Base
Scotia Howard Weil 0316 744 768 768 644 0 100 200 300 400 500 600 700 800 900 1000 FY 2013 Improved Recovery Extensions and Discoveries Purchases Performance Revisions Production FY 2014 Performance Related Revisions Extensions and Discoveries Improved Recovery Purchases Price Revisions Production F
Slide 16: Resource Base Enables Resilient Production Profile
Scotia Howard Weil 0316 Resource Base Enables Resilient Production Profile Rich asset portfolio and thoughtful capital allocation deliver high margin production and operational flexibility through the price cycle • Conventional assets have relatively low decline rates, long production life • Large i
Slide 17: 2016 Strategic Focus
Scotia Howard Weil 031617 2016 Strategic Focus • Priorities and Response • Deleverage the Balance Sheet for Flexibility • Protect the Base • Defend our Margins • Prepare for Change in Cycle
Slide 18: Opportunistically Built Hedge Portfolio
Scotia Howard Weil 0316 Opportunistically Built Hedge Portfolio* * As of March 17, 2016• Hedge book started at zero post spin; we target hedges on 50% of production • Strategy focuses on protecting cash flow for capital investments and covenant compliance • Q1 2016 averages include Brent-based puts
Slide 19: Defending Margins Through Efficiencies and Focus on Cash Costs
Scotia Howard Weil 0316 Defending Margins Through Efficiencies and Focus on Cash Costs $4.97 $5.00 $5.28 $5.57 $5.09 $5.13 $4.61 $4.80 $3.74 $3.88 $3.79 $3.55 $3.65 $3.63 $2.89 $2.10 $19.00 $19.03 $18.35 $16.65 $16.20 $16.59 $16.91 $15.51 $2.23 $1.06 $1.69 $4.49 $1.11 $0.52 $0.34 $0.49 $0 $5 $10 $15
Slide 20: 2016 Strategic Focus
Scotia Howard Weil 031620 2016 Strategic Focus • Priorities and Response • Deleverage the Balance Sheet for Flexibility • Protect the Base • Defend our Margins • Prepare for Change in Cycle
Slide 21: Progressing Inventory to VCI Threshold
Scotia Howard Weil 0316 Progressing Inventory to VCI Threshold 21 0 1,000 2,000 3,000 4,000 5,000 6,000 $40 $50 $60 Dri llin g an d W o rk o ve r In ve n to ry ( $MM ) Brent Marker Price ($/Bbl) Economic Project Inventory VCI 1.3 VCI 1.0
Slide 22: Diverse Assets with Flexible Development Opportunities
Scotia Howard Weil 0316 2015 Net Proved Reserves (MMBoe) 644 2015 % Oil– Net Proved1 72% Pre-Tax Proved PV-10 ($ billion)2 5.06 2015 Avg. Net Production (MBoe/d) 160 2015 % Oil Production 65% 2015 Net Acreage (million acres) 1 2.4 2015 Identified Gross Locations1 23,450 1 As of 12/31/15. Drilling lo
Slide 23: Large in Place Volumes with Significant Upside for CRC
Scotia Howard Weil 0316 Recovery Factors for Discovered Fields¹ 9 40 0 5 10 15 20 25 30 35 40 45 Cum Recovered to Date Remaining 3P + Contingent RF + 10% RF + 15% RF + 20% Original in Place Billion Boe 1 Does not include undiscovered unconventional resource potential. • In place volumes of ~40 Bn Bo
Slide 24: Proven Track Record in Sensitive Environments
Scotia Howard Weil 0316 Proven Track Record in Sensitive Environments • Operator of choice in coastal environments • Proven coexistence with sensitive environments • 2.6 billion gallons of reclaimed water supplied to agriculture in 2015 • Committed to excellence in safety and mechanical integrity 24
Slide 25: Well Positioned for Growth in Recovery
Scotia Howard Weil 0316 • World-class asset base with diverse and rich resources. • Capacity for significant production growth at higher prices as we develop low-decline, lower-risk opportunities. • Committed to capital budgets that live within our cash flows. • As we bring our capital structure in
Slide 26: Appendix
Scotia Howard Weil 0316 California Resources Corporation Appendix 26
Slide 27: End Notes
Scotia Howard Weil 0316 End Notes: 27 The organic reserves replacement ratio is calculated for a specified period using the proved oil-equivalent additions from extensions and discoveries, improved recovery, and performance-related provisions, divided by oil-equivalent production. Approximately 48%,
Slide 28: End Notes
Scotia Howard Weil 0316 End Notes: 28 (3) Our total production costs consist of variable costs that tend to vary depending on production levels, and fixed costs that do not vary with changes in production levels or well counts, especially in the short term. The substantial majority of our near-term
Slide 29: Non-GAAP Reconciliation for Adjusted EBITDAX
Scotia Howard Weil 0316 Non-GAAP Reconciliation for Adjusted EBITDAX For the Fourth Quarter Ended December 31, For the Twelve Months Ended December 31, ($ in millions) 2015 2014 2015 2014 Net Income/(loss) ($3,282) ($2,091) ($3,554) ($1,434) Interest expense 82 72 326 72 Income taxes expense/(benefi
Slide 30: Credit Facility Amendment Terms
Scotia Howard Weil 0316 Revised Amendment Previous Maximum Leverage First Lien Leverage Ratio suspended through 12/31/16; At and after 3/31/17 : < 2.25x Maximum First Lien Secured Leverage Ratio: 2.25x Minimum Interest Coverage 03/31/16 : > 2.00x 06/30/16 : > 1.50x 09/30/16 : > 1.25x 12/31/16 : > 0.
Slide 31: Credit Facility Amendment: Asset Sales and Debt Baskets
Scotia Howard Weil 0316 Revised Amendment Previous Sale of Borrowing Base Properties 100% of proceeds used to repay first the term loan, then the revolver Subject to potential repayment of revolver due to resultant borrowing base reduction Sale of Non-Borrowing Base Properties • 100% of proceeds use
Slide 32: CRC Leading California Producer
Scotia Howard Weil 0316 CRC Leading California Producer California Pure-Play Top California Producers in 2015* • An independent E&P company spun off by Occidental Focused on high-return assets in California • Largest private mineral acreage-holder, with 2.4 million net acres1 ~60% of total net m
Slide 33: Best in Class Corporate Decline Rate
Scotia Howard Weil 031633 Best in Class Corporate Decline Rate Unlabeled operators include : AMXG, AREX, BBG, BCEI, CLR, CPE, CRK, CWEI, CXO, EGN, EOG, EPE, EXXI, FANG, GDP, HK, JONE, LPI, MPO, NFX, OAS, PDCE, PE, PVA, PXD, ROSE, RSPP, SFY, SM, SN, TPLM, WTI, XEC Source: ITG IR, raw data provided by
Slide 34: Self-Funded Capital Investment Program
Scotia Howard Weil 0316 San Joaquin $85 65% Los Angeles $45 35% Drilling $130 32% Dev. Facilities $120 30% Workovers $55 14% Exploration $15 4% Other1 $81 20% Commentary 2015 Drilling Capital Actuals – By Basin 2015 Total Capital Actuals 2015 Drilling Capital Actuals – By Drive • 2015 actual capital
Slide 35: CRC Price Realizations
Scotia Howard Weil 0316 $95.12 $94.21 $97.97 $93.00 $48.80 $103.80 $104.02 $104.16 $92.30 $49.19 $110.90 $111.70 $108.76 $99.51 $53.64 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 2011 2012 2013 2014 2015 $ /B b l WTI Realizations Brent $4.11 $2.81 $3.66 $4.34 $2.75 $4.31 $2.94 $3.73 $4.39 $2.66 0.0 0
Slide 36: San Joaquin Basin
Scotia Howard Weil 0316 San Joaquin Basin • Oil and gas discovered in the late 1800s • Accounts for ~69% of CRC production • ~25 billion barrels OOIP in CRC fields1 • Cretaceous to Pleistocene sedimentary section (>25,000 feet) • Source rocks are organic rich shales from Moreno, Kreyenhagen, Tumey,
Slide 37: Elk Hills Field
Scotia Howard Weil 0316 0 20 40 60 80 100 120 140 1998 2000 2002 2004 2006 2008 2010 2012 2014 N et MB o e/ d • CRC’s flagship asset, a 100 year-old field with exploration opportunities • Large fee property with multiple stacked reservoirs • Light oil from conventional and unconventional production
Slide 38: Building Life of Field Plans – Elk Hills Field
Scotia Howard Weil 031638 • Multiple mechanisms within Elk Hills Field Primary Waterflood Unconventional • Longer term base production decline ~15% • Transition to steam flood & EOR projects would further flatten declines Building Life of Field Plans – Elk Hills Field 0 20,000 40,000 60,000 80
Slide 39: Effective Management of Elk Hills Field Operating Costs
Scotia Howard Weil 0316 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 2012 2014 2015 Elk Hills Field Opex per Well 39 Effective Management of Elk Hills Field Operating Costs* *Transition from primary to secondary production in Elk Hills has been occurring during this period. The Wilm
Slide 40: Steamflood Example Kern Front
Scotia Howard Weil 0316 0 2000 4000 6000 8000 10000 12000 14000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 N et B OP D Steamflood Example Kern Front 40 • Single digit base declines • Multi-year Investments of drilling and facilities spending • 2008-2015 Investmen
Slide 41: Los Angeles Basin
Scotia Howard Weil 0316 Los Angeles Basin • Large, world class basin with thick deposits • Kitchen is the entire basin, hydrocarbons did not migrate laterally; basin depth (>30,000 ft) • ~10 billion barrels OOIP in CRC fields1 • Most significant discoveries date to the 1920s – past exploration focus
Slide 42: Wilmington Field
Scotia Howard Weil 0316 - 50 100 150 200 250 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 M M B o e Net Proved Reserves Production to Date Overview Field Map Proved Reserves & Cumulative Production Structure Map & Acquisition History * • CRC’s flagship coastal asse
Slide 43: Big Fields Continue To Get Bigger
Scotia Howard Weil 031643 • Example of Wilmington (“mature waterflood”) • Growing Proven Reserves 120% Reserves Replacement since 2011* • Increased inventory of well locations Drilled 530 wells Additional 677 wells identified in mature field • Replaced 128% of wells drilled Big Fields Continue
Slide 44: Ventura Basin
Scotia Howard Weil 0316 Ventura Basin • Estimated ~3.5 billion barrels OOIP in CRC fields1 • Operate 29 fields (about 40% of basin) • ~300,000 net acres • Multiple source rocks: Miocene (Monterey and Rincon Formations), Eocene (Anita and Cozy Dell Formations) • 2015 average net production of 9 MBoe/
Slide 45: Sacramento Basin
Scotia Howard Weil 0316 Sacramento Basin • Exploration started in 1918 and focused on seeps and topographic highs. In the 1970s the use of multifold 2D seismic led to largest discoveries • Cretaceous Starkey, Winters, Forbes, Kione, and the Eocene Domengine sands • Most current production is less th
Slide 46: Creating a Recovery Value Chain
Scotia Howard Weil 0316 • Conventional fields in various stages of development • Base assets in place – advancing recovery with traditional means • Moving recoveries from primary through EOR • Primary (94 fields) • Production with natural energy of reservoir or gravity drainage • Waterflood (17 fiel
Slide 47: A Net Water Supplier
Scotia Howard Weil 0316 A NET WATER SUPPLIER • CRC’s delivery of reclaimed produced water to agriculture in 2015 exceeded the amount of fresh water we purchased by nearly 1 billion gallons • We expedited the North Kern Drought Relief project in 2015, achieving a 30% increase in our water supply to a
Slide 48: Non-GAAP Reconciliation for PV-10
Scotia Howard Weil 0316 Non-GAAP Reconciliation for PV-10 ($ in millions) At December 31, 2015 PV-10 of Proved Reserves $5,059 Present value of future income taxes discounted at 10% (1,035) Standardized Measure of Discounted Future Net Cash Flows $4,024 PV-10 is a non-GAAP financial measure and repr
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