Business Context and Reporting Period
Company: California Resources Corporation (CRC)
Filing Type: Form 8-K (Current Report)
Date of Report: March 7, 2024
Subject: Regulation FD Disclosure regarding litigation on the Kern County Environmental Impact Report (EIR).
Key Financial Metrics
This filing does not report specific revenue, profit, cash flow, or margin figures for a completed period. It references capital planning scenarios:
- Contingent Capital Program (2024): $200 million to $240 million (if new well permits are not obtained).
- Contingent Drilling Program: One rig operation (if new well permits are not obtained).
- Production Decline Rate: Expected 5% to 7% entry-to-exit decline (excluding pending Aera merger impacts).
Material Changes and Events
On March 7, 2024, a California appellate court issued an opinion identifying deficiencies in the Kern County EIR. The court enjoined reliance on this EIR for issuing oil and natural gas permit approvals until the deficiencies are remedied. This legal ruling creates uncertainty regarding the company's ability to secure new well permits in 2024.
Guidance, Outlook, and Risks
Management Commentary: CRC is assessing next steps and potential timelines. The company expects to continue executing the capital and drilling programs outlined in its Q4 2023 earnings release and 2023 Form 10-K, pending the resolution of the EIR issues.
Outlook Scenarios:
- If new well permits cannot be obtained in 2024, the company plans to reduce operations to a one-rig program with total capital spending between $200 million and $240 million.
- Under this restricted scenario, production is expected to decline at a rate of 5% to 7%.
Risks and Contingencies: The filing highlights risks related to the inability to obtain permits due to the court injunction. It also references the pending merger with Aera Energy, noting that the stated decline rates do not account for this transaction. All forward-looking statements are subject to standard risks detailed in the 2023 Form 10-K.
Investor Verification Checklist
- Verify the specific deficiencies cited in the appellate court opinion regarding the Kern County EIR.
- Monitor the timeline for remedying EIR deficiencies and the subsequent ability to obtain new drilling permits.
- Confirm the status and expected closing date of the pending Aera merger, as it impacts production decline assumptions.
- Review the Q4 2023 earnings release and 2023 Form 10-K for the baseline capital and drilling programs referenced in this filing.