California Resources Corp (CRC) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2026. California Resources Corporation (CRC) operates as an independent energy and carbon management company. The reporting period includes the full results of the Berry Corporation merger, which closed on December 18, 2025, significantly impacting year-over-year comparability. The company operates two primary segments: Oil and Natural Gas, and Carbon Management (Carbon TerraVault).
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Operating Revenues | $1,297 million | $978 million | $1,416 million | $1,890 million |
| Net Income (Loss) | $514 million | $172 million | $(197) million | $287 million |
| Diluted EPS | $5.76 | $1.92 | $(2.22) | $3.18 |
| Operating Cash Flow | $263 million | $165 million | $362 million | $351 million |
| Capital Investments | $149 million | $56 million | $280 million | $111 million |
| Long-Term Debt (Net) | $1,281 million | $1,283 million | $1,281 million | $1,283 million |
| Cash & Equivalents | $56 million | $72 million | $56 million | $72 million |
Material Changes vs. Prior Period
- Revenue Composition: While Q2 2026 revenues increased 33% year-over-year, YTD 2026 revenues decreased 25% compared to YTD 2025. This decline is primarily driven by a $643 million net loss from commodity derivatives in the first half of 2026, contrasting with a $163 million gain in the same period in 2025.
- Profitability: Q2 2026 net income surged to $514 million due to a $205 million derivative gain and a $56 million income tax benefit. Conversely, the YTD 2026 net loss of $197 million was driven by the massive derivative loss and a $49 million loss on early extinguishment of debt.
- Debt Restructuring: In June 2026, CRC issued $550 million in 2035 Senior Notes and used proceeds to redeem all remaining 2029 Senior Notes. This resulted in a $49 million loss on debt extinguishment for the six-month period.
- Production: Net production sold averaged 149 MBoe/d in Q2 2026, down from 154 MBoe/d in Q1 2026 due to inventory builds and natural decline, but up from 139 MBoe/d in Q2 2025 (including 22 MBoe/d from Berry assets).
Guidance, Outlook, and Risks
- Capital Program: The 2026 full-year capital program is estimated at $520 million to $560 million. The company plans to increase drilling activity to an average of 5 rigs in the second half of 2026.
- Carbon Management: CRC began first CO2 injection at its cryogenic gas processing facility in May 2026. The segment remains in a loss position ($13 million loss in Q2 2026) as it scales operations.
- Acquisitions: In June 2026, CRC agreed to acquire Crimson Midstream Holdings for approximately $63 million, pending regulatory approval.
- Market Risks: Oil prices remain volatile due to geopolitical tensions in the Middle East. CRC has hedged approximately 64% of expected oil production for the remainder of 2026 with a weighted average floor price of $64.88.
- Legal Contingencies: The company is disputing a $25 million claim from CalGEM regarding orphaned wells and faces ongoing decommissioning obligations related to offshore platforms (Signal Hill Services), with a $23 million liability accrued.
Investor Verification Checklist
- Derivative Impact: Verify the sensitivity of future earnings to commodity price movements given the $198 million net liability in derivative positions and the significant volatility in YTD results.
- Berry Integration: Assess the realization of synergies and cost savings from the Berry Merger, as integration costs and severance ($23 million YTD) impacted operating expenses.
- Debt Covenants: Confirm compliance with financial covenants under the new 2035 Senior Notes and the Revolving Credit Facility, especially given the recent debt refinancing.
- Legal Exposure: Monitor the outcome of the CalGEM dispute and the BSEE offshore platform challenge, as these could result in material additional liabilities.
- Carbon Segment Viability: Review the timeline for revenue generation from the Carbon TerraVault JV and the 45Q tax credit accruals to determine when the segment may become profitable.