CRC: VALUE-DRIVEN ANALYST & INVESTOR DAY October 3, 2018 New York City, New York
Agenda Strategic Overview Value Driven Exploration & Development Todd Stevens, President and CEO Darren Williams, EVP Operations and Geoscience Operating in California Strengthening the Balance Sheet Charlie Weiss, EVP Public…
CRC OVERVIEW VIDEO See the Investor Relations page at www.crc.com to access this video.
Five Main Takeaways 1. CRC is well-positioned to prosper in the mid-cycle environment as Californias premier operator 2. Conventional delivers strong & differentiated value 3. The application of capital and technology will allow CRC…
The VCI Difference Delivers Real Value Delivering Smart Growth and Real Value Value-directed investments Value Disciplined capital allocation Focus Enhanced returns over full-cycle time frame Prioritization of projects and drives…
CRCs Value-Driven Strategic Approach Capture Value of Ensure Effective Drive Operational Strengthen Portfolio Capital Allocation Excellence Balance Sheet Pursue value-driven Utilize VCI-based Streamline processes Reinvest to grow…
World-Class Fields Delivering Value-Driven Growth CRC has over 50 billion original BOE in place in four key basins CRCs Resources and Recovery 135 fields; 9 large fields each with over 1 30 billion original BOE in place Original BOE…
CRCs Value-Driven Asset Playbook Delivers Results Through the Cycle 1. Optimize and extend current assets through comprehensive life of field plans 2. Apply operating expertise and technical knowledge to step out 3. Leverage…
Assets of a Major with Flexibility of an Independent 100% 90% 80% Sentinel Peak Berry % of California's Production 70% ARCO Mobil 60% Aera Unocal NPR1 50% Tenneco Texaco 40% Chevron Exxon 30% 20% Shell CRC*…
Leading Market Position with Deep Regional Insight Top California Producers in 2017…
Strength of Portfolio Allocation Strategy Supported by Diverse Assets SACRAMENTO BASIN SAN JOAQUIN BASIN Gas Optionality Greater Elk Hills Flagship Asset Large scale gas asset Sustain base via low-cost with significant workovers and…
Enhanced Inventory Growth and Expanded 3P Position First Half 2018 Highlights Unproven Reserves1 Growth Mid-year reserves audited by Ryder Scott Proved reserves today only 5% lower despite 25% 2,500 decrease in price from the Spin…
Unlocking Value with a Deep Inventory of Actionable Projects at 75 Brent 50 Steamflood Fully burdened, growth- 45 Full Cycle Cost1 (/Boe) Waterflood focused portfolio 40 Primary 35 Shale 30 Achieve a VCI of 1.3 or Gas 25…
Strategic Consolidation of Elk Hills Assets Estimated Annualized Elk Hills Synergies (MM) 15MM Implemented to Date 0 5 10 15 20 25 Existing CRC Surface Acreage CRC acquired Chevrons non-operating working Acquired Surface Acreage…
Strengthening the Balance Sheet Remains a Priority Target 2x-3x Leverage Ratio 1 Continue to Employ Leverage Core Adjusted EBITDAX Leverage 10.0x ALL of the ABOVE Approach Total Debt / Adj. EBITDAX1 8.0x 6.0x Capital…
Dynamic Capital Allocation Through Commodity Cycle High-Price Scenario Invest to accelerate production growth and explore/pilot new resources Over Add facilities (steam and water handling) to support pace of growth 1.5B High cash…
Closely Monitoring Industry Fundamentals to Remain Proactive Brent Daily Price Frequency Low-Price Mid-Price High-Price 120 Scenarios Scenarios Scenarios 100 Excess Balanced Tight Spare Capacity; Capacity; Market Geopolitical…
Pressure Tested Through Cycle and Focused on Long-Term Value SEPARATION VALUE TRANSITION TO OFFENSE VALUE- 480 ANNOUNCEMENT PRESERVATION DRIVEN 110 GROWTH Brent Crude Oil Price (/BBL) Quarterly Capital (MM) Spin 360 Date 80…
Disciplined Capital Plan Leverages Portfolio of Projects and Management Expertise 2019 Expected Capital Allocation Core Program and Expected Outcomes Expect to Buena Vista Live Within Elk Hills Long Beach Cash Flow 30-40% Kern…
Creating Culture of Collaboration and Innovation Changing mindsets as OneCRC to Pull Value Forward Pre-Spin Post-Spin Growth regardless of cost Value-driven growth Cash cow for corporate Maximize value and margin parent with limited…
Investment Proposition: Delivering Smart Growth and Real Value Portfolio of world- Deep operational Disciplined and Robust inventory Integrated and class assets knowledge and effective capital of high value complementary investable…
OPERATING IN CALIFORNIA Charlie Weiss, EVP Public Affairs
Californias Immense Appetite for Oil and Gas Californians consume more gasoline than entire countries with populations four times larger 2018 CRC Analyst & Investor Day 24
Californias Compelling Needs Worlds 5th largest economy runs first and foremost on energy 330 billion miles driven annually 34% of U.S. Port Traffic with the busiest ports in the country Wealthiest state but with highest poverty…
Californias Growing Dependence on Imported Energy 800,000 Oil Product Consumption Because as long as [California's] cars are 700,000 moving... [we] are burning up gasoline that is 600,000 being shipped from Iraq, from Russia, from…
California Policies Impact Natural Gas Prices Aliso Canyon Effect on Inventory Lack of Natural Gas Storage and Peak Demand Daily SoCalGas natural gas inventories 20 14 12 10 8 Source: EIA 6 Impact of Solar Generation…
Powering Californias Economic Engine 2014-2017 Economic Contributions 828 million in California state, local and payroll taxes CRCs operations in Long Beach have generated more than 591 million 4.7 billion in revenues for the in…
Increasing Energy Literacy Californias ambitious goals and vibrant future require: Energy equality for disadvantaged communities Resilience through diverse mix of affordable traditional and renewable energy Responsible local energy…
CRCs Regulatory Strategy Advances Californias Leading Standards Growing Permit Inventory CRCS CONSISTENT REGULATORY STRATEGY (Permitted drilling rig days at end of period) 1200 Reflect Californians values Solicit community input…
REGULATORY VIDEO See the Investor Relations page at www.crc.com to access this video.
Reflecting Californians Values Institutional Shareholder Services Highest environmental rating (1 of 10) High social rating (2 of 10) Humanitarian Company of the Year American Red Cross, LA Region Kern County named February 5 CRC…
CRC Positioned as Californias Operator of Choice Proudly share states commitment to natural resources Proven track record in sensitive coastal, urban and agricultural settings Design and maintain facilities with a highly qualified…
CRC Serves as Net Water Supplier in Drought-Ridden State CRC delivered a company Water Strategy Objectives record 4.9 billion gallons of reclaimed water to agriculture Create long-term value from produced water in 2017, an 85%…
CRC Advancing Californias Sustainability Strategy Four CRC Goals by Year End 2030 1 Water: Increase volume of recycled produced water by 30% above 2013 baseline 2 Renewables: Integrate renewables into oil and gas operations by adding…
CONVENTIONAL DELIVERS STRONG RETURNS Francisco Leon, EVP Corporate Development & Strategic Planning
Optimizing Portfolio Management to Drive Value Balanced portfolio can be flexed through the changes in commodity cycle and optimized for oil to Shale Peers gas price ratio Midstream constraints. Increasing state demand and premium…
World-Class Hydrocarbon Province with Significant Potential Remaining Recoverable Resources California a Top Oil Province (BBOE*) Five of the largest conventional, onshore fields in California the lower 48 Permian (Wolfcamp +…
California Delivers More for Less Oil Production (MMBOPD) August Rig Count 4.0 Anadarko 600 3.5 Appalachia Bakken 484 3.0 Eagle Ford 500 Haynesville 2.5 Niobrara Permian 400 2.0 California 1.5 300 1.0 200 0.5 - 100 2007 2008 2009…
California Imports Waterborne With 100% CRC Brent Realization in 2Q18 Brent based pricing + CRCs unconstrained market access provide meaningful pricing uplift 85 80 75 70 / Bbl 65 60 55 50 7 Mar-17 May-17 45 Jul-17…
Californias Lower-Risk Value Proposition: Better All-In Value Creation Permian Permian transactions 36% rely on undeveloped Buyer Seller Location Deal Size (MM) / Flowing Boe results to succeed 64% Diamondback Energen Delaware…
CRC Remained Cash Flow Positive Through Downturn Spin-off 1 2 2 1 Source: Evercore Mind the (Perception) Gap August 27, 2018. Evercore peer universe includes COP, OXY, EOG, CLR, MRO, APC, WLL, DVN, COG, APA, ECA, PXD, SWN,…
California Creates Value with Biggest Bang for the Buck 350,000 3.0x 300,000 2.6x 2.5x 250,000 2.0x 200,000 1.5x 150,000 1.0x 1.1x 1.0x 1.0x 100,000 0.9x 0.8x 50,000 0.5x 337 342 115 121 109 102 100 75 54 52 11 29 0…
CRC Portfolio Strength Reflected in Actionable Project Pipeline 50 Inventory of Actionable Projects at 75 Brent Locations not captured as actionable include: Full Cycle Cost1 (/Boe) 40 Steamflood CRC shales and dry gas projects…
CRC Generates Strong Cash Margins by Mechanism Type 80 100% 80% 60 60% % Oil 40 40% 20 20% 0 0% 1Based on current run rates for production expense, oil and gas G&A and taxes other than on income applied to 75…
Example Life Cycle of Wellbore with Stacked Reservoirs 1 3 A 3 2 2 B 1 NPV 10 (MM) IRR (%) VCI 2018 CRC Analyst & Investor Day 47
Example Life Cycle of Wellbore with Multiple Recoveries 450 30% 1 400 25% 350 300 20% Recovery Factor 250 BOEPD 3 2 15% 200 3 2 150 10% 100 5% 1 50 0 0% 0 5 10 15 years Primary Workover Water Flood…
CRCs BOE Recovery per Foot Competes With Major Shale Plays Normalizing estimated ultimate recovery (EUR) vs. measured depth shows CRC advantage Better recovery factors driven by low decline rate waterfloods and steamfloods Diverse…
Capital Allocation Provides Value Today and Over Long-Term 1. 2. 3. 1. 2. 3. 1. 2. 3. 4. 2018 CRC Analyst & Investor Day 50
Disciplined Capital Allocation Through Price Cycle 1. 2. 3. 1. 2. 3. 1. 2. 3. 2018 CRC Analyst & Investor Day 51
CRCs Compelling Value Proposition Competes with Major Shale Plays 2 1External type curve economics from Wood Mackenzies Key Play reports and Global Economic Model (GEM), CRC 2017 Drilling and capital workover economics based on…
Bang for the Buck - Drilling Results Since January 2017 281 producers drilled and online over last 18 months Each Drive Delivers High Value Drive Mechanisms are Competitive with Industry Peers VCI 2.11 for average portfolio…
Value-Driven CRC differentiated conventional assets compete favorably versus the shale model, delivering attractive VCI-based returns and compelling value to shareholders Our portfolio management approach to capital allocation is…
DRIVING OPERATIONAL EXCELLENCE Shawn Kerns, EVP Operations and Engineering
Unparalleled California Expertise Largest Operator in Extensive Field California Growth Areas Operations Experience Operate across Core Areas of observed field 12,000 wells 135 fields Decades behavior and demonstrated shallow base…
Elk Hills Flagship Asset in San Joaquin Basin Large field with 100% NRI 10 billion original BOE in place within multiple reservoirs Produces 60,000 BOE/d with annual 10% base decline Infrastructure provides low-cost advantage…
ELK HILLS VIDEO See the Investor Relations page at www.crc.com to access this video.
Significant Synergies and Capital Benefits From Elk Hills Acquisition Operations streamlining Gas compression consolidation Tank battery consolidation, operations and chemicals Shut down redundant sales equipment Gas Processing…
Leveraging Infrastructure for Nearby Low-Cost Field Development Coring up with Elk Hills Southern San Joaquin Valley Consolidation Elk Hills serves as the hub Power, pipelines, compression Connecting fields and building out Lower…
Buena Vista Field Applying our Asset Playbook to Adjacent Field Large field adjacent to Elk Hills 7 billion original BOE in place, 10% Rf Buena Vista Decades of production history, 10% annual base decline 18,000 3P reserves of 245…
LOS ANGELES BASIN VIDEO See the Investor Relations page at www.crc.com to access this video.
LA Basin World-Class Wilmington Field World-class waterflood 7 billion original BOE in place, 34% Rf Partnership with State of California and City of Long Beach Operational excellence Decades of operational experience Low annual…
Renewed Investment in Analog Field Huntington Beach Onshore Large underdeveloped field 2 billion original BOE in place, 30% Rf Waterflood, low annual base…
Low-Cost Capital Workovers Deliver Value and Volume Existing assets in multiple stacked pay zones 12,000 wellbores with pay behind pipe Workover Program CRC owned processing facilities 14,000 Low-risk, high-reward well work…
Big Data and Advanced Analytics Applied Across Value Chain HSE LAND SUBSURFACE OPERATIONS CORPORATE INCIDENT COMPETITOR SEISMIC WELL TESTING VENDOR PREDICTION and INTELLIGENCE ANALYSES SETUP PREVENTION DOWNTIME LEASE WORKOVER…
Proprietary Add Pay Tool Automated tool identifies workover candidates Instant review of thousands of months of production data Ranking of behind pipe add pay opportunities Integrating machine learning tools with technical staff…
Proprietary Well Downtime Prediction and Reduction Tool CRC has a large inventory of wells on artificial lift 7,000 wells are manually reviewed monthly Dynamometer cards measure lift efficiency 3 million dynamometer cards generated…
Expanding Reserves Across the Recovery Value Chain Pipeline of Reserves and Resources Proven ability to manage reserves during 4,500 downturn 4,000 Low base decline, resilient asset base Targeted new reserve adds 3,500 3,000…
Elk Hills CO2 Project: Advancing Contingent Resources Many CRC fields suitable for additional EOR Project scope recovery techniques Utilizing 6 MMCF/day miscible gas from Elk Hills plant Permits approved, injection begins 4Q18 Large…
Poised for Improved Capital Execution CRC is 1 driller in California D&C Cost Improvements Preferred customer; 2/3rds of California rigs 2.00 Experienced - top driller by footage Leader in deep drilling in state Capital efficiency…
Focused Efforts Driving Margin and Cash Flow Performance Focused on improving operations Annual operating costs reduced by 170 million since the Spin Sustainable changes to capture margin expansion Realizing 64% operating margin in…
Driving Operational Excellence - Key Takeaways Coring up positions with large resources in place Driving operational efficiencies and applying new technology Capturing reserve growth opportunities across the recovery value chain…
VALUE-DRIVEN GROWTH Darren Williams, EVP Operations and Geoscience
Value-Driven Exploration and Development Growth Sacramento Basin Gas optionality in exploration and Expected 2019 Capital Allocation development opportunities Multi-TCF impact exploration Growth/Appraisal 30-40% Program Core South…
Significant Growth Potential of Californias Prolific Hydrocarbon Basins Unproven Reserves Super basins, giant fields, world-class hydrocarbon province 1400 Probable Possible 1200 Underexplored and underdeveloped; big fields get…
Demonstrated Track Record of Operational Excellence and Growth Production Growth Delivering value-driven growth Consistently delivered growth projects across operated asset base Multiple recovery mechanisms Laser-focused Operate…
Applying Modern Technology Drives New Growth 2012 exploration discovery on flanks of Buena Pre-Drill Exploration Prospect Map Vista field with Reservoir Thickness and Depth Contours Drilled 12 times between 1935 and 1984 No sustained…
Developing Entire Southern San Joaquin Basin into Core Area Redevelopment, expansion and additional recovery in existing CRC operated fields Large Inventory of Development Projects Large fields with low recovery factors Original MMBOE…
Successful Exploration Layers On Even More Value Commercially-focused and value-driven exploration program Extension of Pleito Ranch Field Through Exploration Successful project generated VCI 21 Deliberate play expansion delivers…
Appraisal of Kettleman North Dome Unlocks Growth Large producing field in Northern San Kettleman Appraisal Summary Joaquin Basin RESOURCE STATUS and ACTIVITY 20+ square mile, 4-way closure with 4000 stacked reservoirs Multiple…
VENTURA VIDEO See the Investor Relations page at www.crc.com to access this video.
Expanding CRCs Asset Playbook to Ventura Basin Prolific basin with a long history, including the first commercial oil well in California Operate more than 20 fields CRC Operated Fields in the Ventura Basin 9 billion original BOE in…
Exploration and Development of Core South Mountain Asset Giant field and flagship asset in basin with 2.5 billion original BOE in place Stacked Pay in the Ventura Basin CRC has consolidated land position and field ownership 10,000 of…
Sacramento Basin Provides Gas Optionality Prolific gas basin THOMPKINS HILL 1,000 mcfd CRC is largest operator in basin, operates 86% of 125 BCF cum production 2017 average production of 33 MMCF/D WILLOWS Rio Vista is core asset…
Conventional Exploration Program Keeps Growing Value-driven, near field exploration program Using Seismic Attributes to Identify and De- Program generates meaningful returns and has repeatable Risk Exploration Prospects success…
Conventional Exploration Program Generates Real Value 9 well exploration program since mid-year 2017 Multiple Small Joint Ventures Delineation and expansion of proven play trends plus SIGNED SEVEN new impact play concepts JVs…
Upside Through Shale Reservoir Development in California Industry activity in California focused on conventional reservoirs and plays Kreyenhagen Play Fairway and Producing Wells World-class source rocks with unconventional Vclay…
Hybrid Play Development in California Low Permeability Resource Play Targets Emerging/developing play concepts Integrating reservoir characterization approaches from successful lower 48 resource plays to California reservoirs 5000…
Multiple Assets Provide CRC with Significant Value-Driven Growth Potential Oil-focused development of existing producing assets 1.1+* Multiple recovery mechanisms BBOE DEVELOPMENT Leveraging CRC operating expertise and…
CONTINUED FINANCIAL STRENGTHENING INTO 2019 Mark Smith, Sr. EVP & CFO
Strengthening and Simplifying the Balance Sheet Remains a Priority Remain committed to debt reduction with a goal of: Returning to a simplified balance sheet Targeting a near investment grade balance sheet 2x-3x target leverage…
Gaining Momentum with Preliminary Strong Third Quarter 2018 Performance Preliminary 3Q18 Estimate Preliminary YTD18 Estimate 90 Gross Wells 250 Gross Wells Drilled1 Drilled1 Includes 55 CRC wells ACTIVITY Includes 150 CRC wells…
Significant Reduction in Total Debt from Post-Spin Peak Chose options to maximize deleveraging and minimize recurring cost to the income statement on a per share basis. Continue to seek opportunistic transactions that reduce overall…
Goal: Simplification of the Balance Sheet Capitalization (MM) Recent Highlights 6/30/2018 Received 8th Amendment to repurchase 300 million in 2L notes and 1st Lien 2014 Revolving Credit Facility (RCF) 277 senior notes at any…
Opportunistic Hedging Program Captures More Upside Exposure in 2019 Crude Oil Impacted by Hedges Hedging program originally 100% % of Production* Impacted by Swaps and Sold protected near-term funding 90% of capital program and…
Strategic Development Joint Ventures Reversion Estimates 550 Million Portfolio Flexibility Total Potential and Optionality JV Capital 65 200 Million Enables High Margin 75 Estimated Last Date Invested Through of BSP Capital…
Summary of Mid-Year 2018 Reserves Changes 96% 731…
Current Enterprise Value Deeply Discounted 28 24 20 Infrastructure2 16 Value (Billion) Surface & Minerals3 12 Unproved4 Current EV 8 of 8.1 Bn5 PUD 1 4 PD1 0 65 Brent 75 Brent 85 Brent 1-5 Seeendnotes in the…
Unlocking Value with Deep Inventory of Actionable Projects at 75 Brent 50 Steamflood Fully burdened, growth- 45 Full Cycle Cost2 (/Boe) Waterflood focused portfolio 40 Primary 35 Shale 30 Achieve a VCI1 of 1.3 or Gas 25…
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