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California Resources Corporation (CRC), whose operations span four oil and gas basins in the Golden State, announced its ambitious environmental, social and governance (ESG) goals last week.
As part of the 2021 third-quarter earnings conference call, CEO Mac McFarland stated that the company has set a “2045 full-scope net zero goal for scope 1 (direct) and scope 2 and 3 (indirect) greenhouse gas emissions. ". The company revealed the decarbonization shift earlier this year. California has taken a proactive stance on curbing oil and gas operations.
"This makes us one of the few industry peers to include Scope 3 emissions into our net-zero emission target, and puts us on the timetable five years earlier than most people, which keeps us in line with California’s 2045 net-zero target Consistent," McFarlane said on the phone with the analyst during the meeting. "The combination of CRC's low-carbon intensity production and our unique asset position in terms of carbon management opportunities is a key differentiating factor... This allows us to clearly see the full range of net zero goals."
Scope 1 emissions come directly from sources controlled or owned by CRC, while Scope 2 and 3 emissions are indirect.
The CRC stated that it believes that "net zero" refers to the point where the carbon emissions permanently stored, captured or removed by 2045 are equal to the company's range 1-3 emissions. The company stated that it plans to achieve its decarbonization target by prioritizing 50% and its free cash flow (FCF) is used for projects that reduce direct and indirect emissions or sequester enough carbon to offset emissions.
“CRC believes that its comprehensive net-zero target and 50% cash flow priority are an important ESG differentiator,” the company said.
In conjunction with its decarbonization goals, CRC has submitted a Level VI license for its Carbon TerraVault I Geological Carbon Capture and Storage (CCS) project. The company hopes to permanently store up to 40 million tons of carbon dioxide underground through the project.
In addition to outlining its goal of controlling greenhouse gas emissions, the CRC reported that the average net production in the third quarter of 2021 was 102,000 barrels of oil equivalent/day, including 62,000 barrels/day of oil. The company stated that it drilled 27 wells in the third quarter and launched 22 wells. In addition, independent sources pointed out that in September, it operated two drilling rigs in the San Joaquin Basin and added one drilling rig in the Los Angeles Basin.
Also in terms of operations in the third quarter of 2021, CRC stated that it operated 35 maintenance rigs and completed 76 capital repairs. The company said that the success of the drilling program in the fourth quarter and strong commodity prices — capital guidance increased to US$180-200 million in 2021 — enabled it to increase the drilling rigs originally planned for next year.
“Given the strength of our drilling program in 2021 and the current commodity environment, we added a fourth rig in the Buena Vista Shale in October,” McFarlane said.
The company also completed the sale of most of the Ventura Basin business after the end of the third quarter of 2021, and the subsequent closure of basin assets will take place in the next few quarters.
Citing the increase in natural gas prices, CRC stated that it has raised its 2021 operating cost guidance from US$670-695 million to US$70-720 million. However, the company noted that its gas revenue from its net long gas position "far offsets" the upward guidance correction.
McFarland said: "The third quarter results continue to reflect strong operating results and represent our best quarter in terms of free cash flow generation this year."
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The CRC reported that the FCF for the third quarter of 2021 was US$131 million, and its estimated full-year FCF guidance was raised from US$40-460 million to US$50-510 million.
CRC reported a net income of US$103 million (US$1.25 per share) for the third quarter of 2021, compared with a loss of US$29 million (minus US$1.68) a year ago. Operating income increased from 409 million U.S. dollars to 588 million U.S. dollars. The company adopted a dividend of 17 cents per share in the third quarter of 2021, and the total payable in the fourth quarter was approximately $14 million.
McFarland said: "The third quarter results continue to reflect strong operating results and represent our best quarter in terms of free cash flow generation this year." "These financial results enable CRC to further enhance our shareholder returns by launching quarterly cash dividends. strategy."
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