California Resources Corporation · NYSE:CRC
California Resources — Q4 2015 Earnings Presentation
32 slides from California Resources's earnings presentation, Feb 29, 2016
Slide 1: Fourth Quarter and Year End 2015 Earnings Review
Fourth Quarter and Year End 2015 Earnings Review Todd Stevens| President & CEO| Los Angeles, CA| February 29, 2016 Mark Smith | Sr. EVP & CFO
Slide 2: Forward-Looking / Cautionary Statements
Forward-Looking / Cautionary Statements 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 specifically include our expectations as t
Slide 3: Diverse Resource Base; Shareholder Value Focus; California Heritage
Diverse Resource Base • Interests in 4 of the 12 largest fields in the lower 48 states • 644 MMBoe proved reserves (12/31/2015) • Largest producer in California on a gross operated basis with significant exploration and development potential Shareholder Value Focus Portfolio of Lower-Risk, Lower- •
Slide 4: Management Priorities and Response
Management Priorities and Response Priorities Execution 1. Address Balance Sheet Balanced 2015 operating cash flows of $403 million with capital investment of $401 2. Adjust Activity Levels for Current million Environment Exceeded 2015 production target with 90% • Live within means and align of targ
Slide 5: Living Within Cash Flow
Living Within Cash Flow 325 925 275 725 225 FY ($MM ) 525 $ MM 175 125 325 75 125 25 -25 1Q15 2Q15* 3Q15 4Q15* FY 2015 -75 Adj. EBITDAX** Operating Cash Flow Capital Investment * Operating cash flow includes a semi-annual cash property tax payment ** See Appendix for reconciliations to GAAP 5 4Q15 E
Slide 6: Capital Allocation Approach
Capital Allocation Approach • Portfolio Management since spin-off • Three principal drivers: o Maximize long-term value – VCI > 1.3 o Oil production growth o Financial discipline – self-funding business • Results in combination of projects that provide quick payback (workovers) and longer term value
Slide 7: Strong Execution Track Record
Strong Execution Track Record Total Production Capital Investment Guidance vs. Actual Guidance vs. Actual 170 160 165 120 160 Mboe/d $MM 155 80 150 40 145 140 0 1Q15 2Q15 3Q15 4Q15 1Q15 2Q15 3Q15 4Q15 Production Guidance Range Actual Capital Investment Guidance Range Capex Actual Delivered productio
Slide 8: Best in Class Corporate Decline Rate
Best in Class Corporate Decline Rate Unlabeled operators include : AMXG, AREX, BBG, BCEI, CLR, CPE, CRK, CWEI, CXO, EGN, EOG, EPE, EXXI, FANG, GDP, HK, JONE, LPI, MPO, NFX, OAS, PDCE, PE, PVA, PXD, ROSE, RSPP, SFY, SM, SN, TPLM, WTI, XEC Source: ITG IR, raw data provided by Drilling Info, Inc. 8 4Q1
Slide 9: Resilient Asset Base
Resilient Asset Base Elk Hills Field 90.0 1,200 80.0 1,000 70.0 Net Development Capital ($MM) 60.0 800 50.0 Mboe/d 600 40.0 30.0 400 20.0 200 10.0 - - 2010 2011 2012 2013 2014 2015 Net Production MBOED Net Development Capital ($MM) 9 4Q15 Earnings
Slide 10: Defending Margins Through Efficiencies and Focus on Cash Costs
Defending Margins Through Efficiencies and Focus on Cash Costs Cash Costs $/Boe $35 2014 Average = $29.57 $30 $2.23 $1.06 $1.69 $4.49 2015 Average = $24.91 $25 $1.11 $0.52 $0.34 $0.49 $20 $19.00 $19.03 $18.35 $16.65 $16.20 $16.59 $16.91 $15 $15.51 $10 $3.74 $3.88 $3.79 $3.55 $3.65 $3.63 $5 $2.89 $2.
Slide 11: Focus on Balance Sheet
Focus on Balance Sheet Capitalization as of 12/31/15 ($MM) • Deleveraging is a priority 1st Lien Secured RCF1 1st Lien Secured Term Loan 739 1,000 • Ratings action initiated transition to Senior 2nd Lien Notes 2,250 secured borrowing base facility Senior Unsecured Notes 2,154 Total Debt 6,143 • Borr
Slide 12: Deleveraging Update
Deleveraging Update Total Debt $7,000 100 $94 90 $6,000 80 $5,000 70 Brent Oil ($/Bbl) Total Debt ($M) $64 60 $4,000 $55 $48 50 $3,000 $37 40 $33 $2,000 30 20 $1,000 10 $0 0 10/1/14 3/31/15 6/30/15 9/30/15 12/31/15 2/29/16 Long Term Notes Term Loan Revolving Credit Facility Oil Price Given the signi
Slide 13: Deleveraging Options
Deleveraging Options • We have assessed various deleveraging alternatives and are taking decisive steps to delever the balance sheet UPSTREAM MIDSTREAM CAPITAL MARKETS • JV • MLP • Debt Exchange • M&A • Drop into Existing MLP • Sale • Triple Net Lease AVAILABLE ASSETS AVAILABLE ASSETS TRANSACTION •
Slide 14: Amendment – Summary of General Terms & Conditions
Amendment – Summary of General Terms & Conditions Revised Amendment Previous Maximum Leverage First Lien Leverage Ratio suspended through 12/31/16; Maximum First Lien Secured Leverage Ratio: 2.25x At and after 3/31/17 : < 2.25x Minimum Interest 03/31/16 : > 2.00x 06/30/16 : > 1.50x 09/30/16 : > 1.25
Slide 15: Amendment – Summary of Liability Management Terms
Amendment – Summary of Liability Management Terms Revised Amendment Previous Sale of Borrowing Base 100% of proceeds used to repay first the term loan, then the Subject to potential repayment of revolver revolver due to resultant borrowing base reduction Properties Sale of Non-Borrowing Base • 100%
Slide 16: Progressing Inventory to VCI Threshold
Progressing Inventory to VCI Threshold Economic Project Inventory 2500 Drilling and Workover Inventory ($MM) 2000 1500 1000 500 0 $40 $50 Brent Marker Price ($/Bbl) VCI 1.3 VCI 1.0 16 4Q15 Earnings
Slide 17: Diverse Assets with Flexible Development Opportunities
Diverse Assets with Flexible Development Opportunities 2015 Net Proved Reserves (MMBoe) 644 • Diversity of basins, drive mechanisms 2015 % Oil– Net Proved1 72% Pre-Tax Proved PV-10 ($ billion)2 5.06 • Predictable production, low decline rates 2015 Avg. Net Production (MBoe/d) 160 • Multiple stacked
Slide 18: Self-Funded Capital Investment Program
Self-Funded Capital Investment Program Commentary 2015 Total Capital Actuals • 2015 actual capital investment of $401 million Other1 Total: $401 million $81 was directed almost entirely toward oil-weighted 20% Drilling investments $130 32% • Total and oil production increased 1% and 5% Exploration r
Slide 19: Capex Reduction
Capex Reduction 2015 Actual FY 2016E Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1Q 2Q 3Q 4Q RIGS 4 3 3 3 3 3 3 3 3 3 3 1 0 0 0 0 Quarterly Operations $133 $95 $95 $78 $50* CAPEX, $mm • 2016 Capital Investment Plan to focus on mechanical integrity and safe operations • Monitor cash flow througho
Slide 20: Opportunistically Built Hedge Portfolio
Opportunistically Built Hedge Portfolio* Q1 2016 Q2 2016 Q3 2016 Q4 2016 2017 2018 Calls Barrels per Day 35,500 35,500 3,000 3,000 30,000 23,300 Wtd Avg Ceiling Price per Barrel $66.15 $66.15 $74.42 $74.42 $55.68 $57.99 Puts Barrels per Day 33,800 55,500 28,000 3,000 - - Wtd Avg Floor Price per Barr
Slide 21: CRC – Price Realizations
CRC – Price Realizations Oil Price Realization* Gas Price Realization* WTI Realizations Brent NYMEX Realizations $120 $110.90 $111.70 $108.76 $110 5.0 $99.51 4.5 $100 $103.80 $104.02 $4.31 $3.73 $4.39 $93.00 4.0 $90 $95.12 $94.21 $97.97 $104.16 3.5 $4.11 $2.94 $4.34 $92.30 $3.66 $80 3.0 $2.75 $/Mcf
Slide 22: CRC Executing on Controllable Items
CRC Executing on Controllable Items 3000 2500 Operating Cash Flow 2000 $ MM 1500 2,371 1000 500 403 0 FY 2014 Volume Price Costs Interest Working FY 2015 Capital and Other 22 4Q15 Earnings
Slide 23: Cost Variance
Cost Variance 4Q14 3Q15 4Q15 Production costs $16.65 $16.91 $15.51 ($/Boe) Taxes other than on income $54 $42 $30 ($MM) Exploration $68 $5 $7 expense ($MM) Interest expense NA $82 $82 ($MM) 23 4Q15 Earnings
Slide 24: Modest Production Decline Despite Drastically Lower Capital Investment
Modest Production Decline Despite Drastically Lower Capital Investment 170,000 Quarterly capital Investment of $520mm -3,000 $500 160,000 -6,000 -1,000 150,000 $400 Capital Investment ($MM) 140,000 $300 Boe/D 165,000 130,000 155,000 $200 120,000 $100 110,000 Quarterly Capital Investment of $78mm 100
Slide 25: Focus on Oil Enhances Base & Margins
Focus on Oil Enhances Base & Margins Production By Stream (MBoe/d) Average 160 Mboe/d Total 159 Mboe/d Production Average 104 MBbl/d Oil 99 MBbl/d Mboe/d Production 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16E FY 2014 FY 2015 FY 2016E Oil NGL Gas Guidance 25 4Q15 Earnings
Slide 26: 4Q15 Results Summary Comparison
4Q15 Results Summary Comparison 4Q14 3Q15 4Q15 Adjusted EPS* ($0.02) ($0.22) ($0.20) Oil Production 105 MBbl/d 103 MBbl/d 102 MBbl/d Total Production 165 MBoe/d 158 MBoe/d 155 MBoe/d Realized Oil Price w/hedge ($/Bbl) $68.54 $47.79 $45.88 Realized NGL Price ($/Bbl) $34.41 $16.92 $19.56 Realized Natu
Slide 27: 1Q16 Guidance
1Q16 Guidance Anticipated Realizations Against the Prevailing Index Prices for 1Q16 Oil 83% to 87% of Brent NGLs 45% to 49% of Brent Natural Gas 96% to 100% of NYMEX Production, Capital and Income Statement Guidance Production 145 to 150 MBOE per day Capital $18 to $28 million Production Costs $14.5
Slide 28: Poised to Take Advantage of a Commodity Price Recovery
Poised to Take Advantage of a Commodity Price Recovery World-Class Resource Base: Sacramento Basin 14 MMBoe Proved Reserves 7 MBoe/d production Large inventory of assets across basins and drive mechanisms that provide strong returns through the commodity price cycle San Joaquin Basin 451 MMBoe Pro
Slide 29: Appendix
California Resources Corporation Appendix 29 4Q15 Earnings
Slide 30: Non-GAAP Reconciliation for Adjusted EBITDAX
Non-GAAP Reconciliation for Adjusted EBITDAX For the For the Twelve Fourth Quarter Months Ended Ended December 31, December 31, ($ in millions) 2015 2014 2015 2014 Net Income/(loss) ($3,282) ($2,091) ($3,554) ($1,434) Interest expense 82 72 326 72 Income taxes expense/(benefit) (1,757) (1,431) (1,92
Slide 31: Non-GAAP Reconciliation for PV-10
Non-GAAP Reconciliation for PV-10 At December 31, ($ in millions) 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 $4,024 Flows PV-10 is a non-GAAP financial measure and represents the year-end pres
Slide 32: Non-GAAP Reconciliation for Adjusted EPS
Non-GAAP Reconciliation for Adjusted EPS For the For the Third For the Twelve Fourth Quarter Quarter Ended Months Ended Ended December 31, September 30, December 31, ($ in millions) 2015 2014 2015 2015 2014 Adjusted net Income/(loss) $(77) $(7) $(104) $(311) $650 Asset impairments (4,852) (3,402) -