Business Context and Reporting Period
Company: California Resources Corporation (CRC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: CRC is an independent energy and carbon management company operating primarily in California and Utah. The company is organized into two segments: Oil and Natural Gas (exploration, development, and production) and Carbon Management (Carbon TerraVault, focused on carbon capture and storage).
Key Developments: The reporting period was significantly impacted by the completion of the Berry Merger on December 18, 2025, an all-stock transaction that added 56 MMBoe of proved developed reserves and C&J Well Services. The company also integrated assets from the Aera Merger (closed July 1, 2024) for a full year.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Operating Revenues | $3,669 million | $3,198 million |
| Net Income | $363 million | $376 million |
| Net Cash Provided by Operating Activities | $865 million | $610 million |
| Oil & Gas Segment Profit | $688 million | $815 million |
| Carbon Management Segment Loss | $(86) million | $(94) million |
| Long-Term Debt (Net) | $1,283 million | $1,132 million |
| Liquidity (Cash + Credit Availability) | $1,401 million | N/A |
| Proved Reserves (Total) | 654 MMBoe | 545 MMBoe |
| Average Daily Net Production | 138 MBoe/d | 110 MBoe/d |
Material Changes vs. Prior Period
- Production Growth: Average daily net production increased 25% to 138 MBoe/d, driven by the full-year inclusion of Aera assets and the partial-year inclusion of Berry assets. Oil production rose to 109 MBbl/d.
- Revenue Mix: Oil, natural gas, and NGL sales increased to $2.91 billion. Electricity revenue grew to $233 million due to higher resource adequacy pricing and improved plant uptime compared to 2024.
- Profitability: While Net Income decreased slightly to $363 million, this was despite a significant increase in operating costs ($1.25 billion vs. $966 million) and depreciation, depletion, and amortization ($511 million vs. $388 million) due to the expanded asset base.
- Asset Impairments: The company recognized $59 million in asset impairments, primarily related to proved natural gas properties in the Sacramento basin ($57 million).
- Debt Structure: The company issued $400 million in 2034 Senior Notes to fund the Berry Merger debt repayment and fully redeemed its 2026 Senior Notes ($245 million).
Guidance, Outlook, and Risks
Management Commentary and Outlook
- 2026 Capital Program: Expected to range between $430 million and $470 million. This includes $410–$435 million for oil and gas, $12–$20 million for carbon management, and $8–$15 million for corporate activities.
- Permitting: Following the enactment of Senate Bill 237, CalGEM resumed issuing new well permits in Kern County in January 2026. The company expects to obtain additional permits to support its 2026 drilling program.
- Carbon Management: The company expects to begin CO2 injection at its Elk Hills cryogenic gas plant in spring 2026. It aims to achieve an 80% reduction in Scope 1 and 2 emissions by 2045.
- Shareholder Returns: The Board increased the annual dividend policy to $1.62 per share and authorized a share repurchase program of up to $1.78 billion through December 2027.
Risks and Contingencies
- Regulatory Environment: Operations remain subject to stringent California regulations. While SB 237 improved permitting clarity, the company faces risks from potential future legislative changes, environmental activism, and litigation regarding CCS projects.
- Refinery Closures: The closure of the Phillips 66 Wilmington refinery and the planned cessation of Valero's Benicia refinery operations may impact marketing options and transportation costs, though the company does not expect a material adverse effect.
- Commodity Prices: Realized oil prices decreased to $66.52/Bbl (without derivatives) in 2025 compared to $76.92/Bbl in 2024. The company maintains hedges on approximately 65% of anticipated 2026 oil production.
- Integration Risks: The company is integrating Berry assets and expects to incur a $22 million reorganization charge in Q1 2026 related to severance.
Investor Verification Checklist
- Berry Merger Integration: Verify the realization of targeted $80–$90 million in annual run-rate synergies and the impact of the $22 million Q1 2026 reorganization charge on near-term earnings.
- Permitting Status: Monitor the actual issuance of new well permits in Kern County under SB 237 to ensure the 2026 capital program can be executed as planned.
- Refinery Impact: Assess the long-term impact of the San Pablo Bay Pipeline suspension and refinery closures on transportation costs and realized price differentials.
- Carbon Project Economics: Review the progress of EPA Class VI permit approvals for Carbon TerraVault projects and the monetization of 45Q tax credits, which are critical to the segment's viability.
- Debt Covenants: Confirm continued compliance with the Revolving Credit Facility covenants, particularly the leverage ratio and minimum hedge requirements, given the increased debt load from the 2034 Senior Notes.