Debt | Production | Capital Markets | Private Equity Activity

California Resources Ups 2015 Production Estimate; Talks Outlook

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   |    Tuesday,December 15,2015

California Resources Corporation announced that it expects total average production for the full year 2015 to increase approximately one percent to an average of approximately 160 thousand barrels of oil equivalent per day and crude oil to increase by approximately five percent to 104 thousand barrels per day. Cash costs, excluding interest charges, are expected to fall by 11% from 2014 levels and 2015 capital investments are expected to total approximately $400 million, enabling CRC to drill and complete 311 wells and invest about $160 million in its infrastructure and facilities.

CRC is actively working on a 2016 budget that will reflect our primary investment tenet of investing within cash flow from operations. Reflecting this principle and the recent further deterioration in oil prices, CRC is releasing both of its contracted drilling rigs in the San Joaquin basin moving into 2016. A rig will be maintained in the Los Angeles basin on an intermittent basis. Despite the drilling rig releases, the company currently intends to maintain a workover fleet of 30 rigs.

CRC continues to focus on its longer term debt reduction target. This month, CRC closed a bond exchange which reduces the principal on its outstanding debt by $563 million while increasing interest by just $21 million per year. CRC has been pursuing multiple transactions to achieve further deleveraging. Detailed discussions on specific transactions progressed throughout the fourth quarter. However, in light of the recent further drop in commodity prices, we do not expect to announce any further deleveraging transactions in 2015.

Commenting on CRC's 2015 highlights, Todd Stevens, President and CEO, said, "We are extremely proud of our team's accomplishments during our first year as a stand-alone company. In a challenging commodity environment, we increased our production despite spending below the level of investment we expected would be required to maintain production. This production increase is a testament to our employees' effective management of our low-decline asset base. The attributes of our world class assets provide us with increased flexibility to withstand a prolonged downturn in commodity prices.

"We meaningfully reduced our debt levels during the quarter through our successful debt exchange and have significantly progressed on other potential deleveraging transactions. Although the recent deterioration in commodity prices is likely to delay the execution of additional deleveraging transactions, we are working diligently to further reduce our debt levels as soon as possible in the new year. We are committed to acting in the best interests of our shareholders over the long term and will not pursue a transaction in the current environment simply to meet our stated objective of signing up a deal by year end.

"Looking forward, we are building a dynamic capital budget for 2016 designed to allow us to adjust our investment levels based on commodity prices, and our high level of operational control allows us to make capital allocation decisions quickly. We are committed to living within our means and will be prepared to invest exclusively for mechanical integrity and safety projects if necessary or to increase overall activity as prices recover."