California Resources Corporation (CRC) Bundle
Understanding California Resources Corporation (CRC) Revenue Streams
Understanding California Resources Corporation’s Revenue Streams
California Resources Corporation generates revenue primarily through sales of oil, natural gas, and natural gas liquids (NGLs), alongside electricity sales and marketing of purchased commodities. The following table summarizes the operating revenues for the nine months ended September 30, 2024, and September 30, 2023:
| Revenue Source | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Oil, natural gas and NGL sales | $1,711 | $1,672 |
| Net gain (loss) from commodity derivatives | $290 | ($131) |
| Revenue from marketing of purchased commodities | $176 | $336 |
| Electricity sales | $120 | $169 |
| Other revenue | $24 | $29 |
| Total operating revenues | $2,321 | $2,075 |
Year-over-year revenue growth indicates a significant increase in total operating revenues by 11.88% from $2,075 million in 2023 to $2,321 million in 2024. This growth is primarily attributed to increased oil, natural gas, and NGL sales, which rose from $1,672 million to $1,711 million, marking a year-over-year increase of approximately 2.33%.
Contribution of Different Business Segments to Overall Revenue
The breakdown of revenue contributions from various segments for the nine months ended September 30, 2024 is as follows:
- Oil, natural gas and NGL sales: 73.69% of total revenue
- Net gain from commodity derivatives: 12.49% of total revenue
- Revenue from marketing of purchased commodities: 7.58% of total revenue
- Electricity sales: 5.17% of total revenue
- Other revenue: 1.03% of total revenue
In detail, oil, natural gas, and NGL sales represent the largest portion of the company’s revenue, making up over 73% of total revenues. The net gain from commodity derivatives also significantly impacted revenue, contributing 12.49%. Revenue from marketing of purchased commodities saw a decrease from $336 million in 2023 to $176 million in 2024, indicating a drop of approximately 47.61%.
Analysis of Significant Changes in Revenue Streams
One of the most notable changes in revenue streams is the substantial increase in net gain from commodity derivatives, which improved from a loss of $131 million in 2023 to a gain of $290 million in 2024. This swing of $421 million reflects favorable changes in commodity prices and improved hedging strategies post-Aera Merger.
Additionally, electricity sales experienced a decline from $169 million in 2023 to $120 million in 2024, a decrease of 29.06%. This reduction can be linked to lower electricity prices and less demand compared to the previous year.
The following table provides a detailed breakdown of specific revenue sources for the nine months ended September 30, 2024, compared to the previous year:
| Revenue Source | 2024 (in millions) | 2023 (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Oil sales | $1,505 | $1,154 | $351 | 30.43% |
| NGL sales | $138 | $151 | ($13) | (8.61%) |
| Natural gas sales | $86 | $367 | ($281) | (76.60%) |
The analysis shows that oil sales increased significantly by 30.43%, while natural gas sales decreased drastically by 76.60%. This substantial drop in natural gas revenue is a critical aspect for investors to consider, as it reflects market volatility and changing demand dynamics within the energy sector.
A Deep Dive into California Resources Corporation (CRC) Profitability
Profitability Metrics
The profitability metrics of California Resources Corporation (CRC) provide critical insights into its financial health and operational efficiency. Below is a detailed breakdown of key profitability figures.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, CRC reported:
- Total operating revenues: $2,321 million
- Operating income: $552 million
- Net income: $343 million
- Gross profit margin: 23.8%
- Operating profit margin: 23.8%
- Net profit margin: 14.8%
Trends in Profitability Over Time
Comparatively, for the nine months ended September 30, 2023, CRC recorded:
- Total operating revenues: $2,075 million
- Operating income: $525 million
- Net income: $376 million
- Gross profit margin: 25.7%
- Operating profit margin: 25.3%
- Net profit margin: 18.1%
The following table summarizes the changes in profitability metrics from 2023 to 2024:
| Metric | 2023 | 2024 | Change |
|---|---|---|---|
| Total Operating Revenues (in millions) | $2,075 | $2,321 | +$246 |
| Operating Income (in millions) | $525 | $552 | +$27 |
| Net Income (in millions) | $376 | $343 | -$33 |
| Gross Profit Margin (%) | 25.7% | 23.8% | -1.9% |
| Operating Profit Margin (%) | 25.3% | 23.8% | -1.5% |
| Net Profit Margin (%) | 18.1% | 14.8% | -3.3% |
Comparison of Profitability Ratios with Industry Averages
The average net profit margin for the oil and gas industry was approximately 15.5% in 2024. CRC's net profit margin of 14.8% indicates a performance slightly below the industry average but is competitive given the current market conditions.
Analysis of Operational Efficiency
Operational efficiency is critical for maintaining profitability. For the nine months ended September 30, 2024, CRC reported:
- Energy operating costs: $186 million
- General and administrative expenses: $226 million
- Total operating expenses: $1,776 million
- Depreciation, depletion, and amortization: $246 million
In comparison, for the same period in 2023:
- Energy operating costs: $258 million
- General and administrative expenses: $201 million
- Total operating expenses: $1,557 million
- Depreciation, depletion, and amortization: $170 million
The following table illustrates operational expenses over the years:
| Expense Category | 2023 (in millions) | 2024 (in millions) |
|---|---|---|
| Energy Operating Costs | $258 | $186 |
| General and Administrative Expenses | $201 | $226 |
| Total Operating Expenses | $1,557 | $1,776 |
| Depreciation, Depletion, and Amortization | $170 | $246 |
Debt vs. Equity: How California Resources Corporation (CRC) Finances Its Growth
Debt vs. Equity: How California Resources Corporation Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported total long-term debt of $1,131 million. This includes:
- 2026 Senior Notes: $245 million at an interest rate of 7.125%, maturing on February 1, 2026.
- 2029 Senior Notes: $900 million at an interest rate of 8.25%, maturing on June 15, 2029.
The company had no outstanding amounts under its Revolving Credit Facility as of the same date.
Debt-to-Equity Ratio
The debt-to-equity ratio for California Resources Corporation is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
As of September 30, 2024, total equity stood at $3,501 million. Therefore, the debt-to-equity ratio is:
Debt-to-Equity Ratio = $1,131 million / $3,501 million = 0.32
This ratio is below the industry average of approximately 0.5, indicating a relatively conservative approach to leveraging.
Recent Debt Issuances and Credit Ratings
In June 2024, the company issued $600 million in 2029 Senior Notes, followed by a follow-on offering of an additional $300 million in August 2024. As of September 30, 2024, the company maintained compliance with all financial covenants associated with its debt. The credit ratings for the company are currently stable, reflecting a solid financial position.
Refinancing Activity
During the nine months ended September 30, 2024, the company repurchased $300 million in face value of its 2026 Senior Notes for $303 million, resulting in a $5 million loss on early extinguishment. Additionally, the company has amended its Revolving Credit Facility multiple times, most recently on November 1, 2024, increasing its aggregate commitments and extending maturity dates.
Balancing Debt Financing and Equity Funding
The company maintains a balanced approach to financing, utilizing both debt and equity to fund its growth initiatives. As of September 30, 2024, total equity increased due to net income of $343 million for the nine months ended. The company’s strategy includes capital investments of approximately $167 million for the nine months ended September 30, 2024.
| Financial Metrics | Value (in millions) |
|---|---|
| Total Long-term Debt | $1,131 |
| 2026 Senior Notes | $245 |
| 2029 Senior Notes | $900 |
| Total Equity | $3,501 |
| Debt-to-Equity Ratio | 0.32 |
| Recent Net Income | $343 |
| Capital Investments (9 months) | $167 |
Assessing California Resources Corporation (CRC) Liquidity
Assessing California Resources Corporation's Liquidity
The liquidity position of the company is primarily evaluated through the current and quick ratios, along with an analysis of working capital trends and cash flow statements.
Current and Quick Ratios
As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in millions) | Current Liabilities (in millions) | Current Ratio |
|---|---|---|
| $872 | $897 | 0.97 |
The quick ratio, which excludes inventories from current assets, is calculated as:
| Quick Assets (in millions) | Current Liabilities (in millions) | Quick Ratio |
|---|---|---|
| $797 | $897 | 0.89 |
Analysis of Working Capital Trends
The working capital, defined as current assets minus current liabilities, is as follows:
| Working Capital (in millions) |
|---|
| ($25) |
This negative working capital indicates potential liquidity concerns, suggesting the company may face challenges in meeting short-term obligations.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, reveal the following trends:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $404 | $522 |
| Investing Cash Flow | ($1,010) | ($133) |
| Financing Cash Flow | $351 | ($217) |
The operating cash flow decreased by $118 million, primarily due to lower natural gas prices and production volumes. The investing cash flow reflects significant capital investments, including $853 million for the acquisition related to Aera.
Potential Liquidity Concerns or Strengths
The company's liquidity position is supported by available cash and cash equivalents of $213 million and borrowing capacity under the Revolving Credit Facility of $1.1 billion. However, with outstanding letters of credit totaling $175 million, the available liquidity amounts to $1,138 million.
| Liquidity Components (in millions) | Amount |
|---|---|
| Available Cash and Cash Equivalents | $213 |
| Borrowing Capacity | $1,100 |
| Outstanding Letters of Credit | ($175) |
| Available Liquidity | $1,138 |
This analysis highlights a strong liquidity position, bolstered by the company's low leverage and effective cost control measures. However, the negative working capital indicates that careful monitoring of short-term liabilities is essential to maintain financial health moving forward.
Is California Resources Corporation (CRC) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will examine key financial ratios including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends and analysts' consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated as follows:
- Market Price per Share: $55.00 (as of September 30, 2024)
- Earnings per Share (EPS): $4.32 (for the three months ended September 30, 2024)
- P/E Ratio: $55.00 / $4.32 = 12.74
Price-to-Book (P/B) Ratio
The P/B ratio is calculated as follows:
- Market Price per Share: $55.00
- Book Value per Share: $24.00 (as of September 30, 2024)
- P/B Ratio: $55.00 / $24.00 = 2.29
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated as follows:
- Enterprise Value (EV): Market Capitalization + Total Debt - Cash and Cash Equivalents
- Market Capitalization: $55.00 89,461,673 shares = $4.93 billion
- Total Debt: $1.50 billion
- Cash and Cash Equivalents: $213 million
- EV = $4.93 billion + $1.50 billion - $0.213 billion = $6.22 billion
- EBITDA (for the nine months ended September 30, 2024): $552 million
- EV/EBITDA Ratio: $6.22 billion / $552 million = 11.27
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
- September 2023: $43.00
- December 2023: $50.00
- March 2024: $52.00
- June 2024: $54.00
- September 2024: $55.00
This indicates an upward trend of approximately 27.91% over the past 12 months.
Dividend Yield and Payout Ratios
The dividend yield and payout ratios are as follows:
- Annual Dividend Rate: $1.55 per share
- Dividend Yield: ($1.55 / $55.00) 100 = 2.82%
- Payout Ratio: ($1.55 / $4.32) 100 = 35.9%
Analyst Consensus on Stock Valuation
The consensus among analysts regarding the stock is:
- Buy: 6 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 12.74 |
| P/B Ratio | 2.29 |
| EV/EBITDA Ratio | 11.27 |
| Stock Price (Sept 2024) | $55.00 |
| Dividend Yield | 2.82% |
| Payout Ratio | 35.9% |
| Analyst Consensus | 6 Buy, 3 Hold, 1 Sell |
Key Risks Facing California Resources Corporation (CRC)
Key Risks Facing California Resources Corporation
Overview of Internal and External Risks
California Resources Corporation (CRC) faces a variety of internal and external risks that may impact its financial health. Key external risks include:
- Commodity Price Volatility: Fluctuations in oil and natural gas prices can significantly affect revenue. For instance, realized oil prices increased by $12.85 per barrel from $64.25 in the prior year to $77.10 in 2024.
- Regulatory Changes: Changes in environmental regulations in California can impose additional costs and operational restrictions.
- Market Conditions: Competitive pressures within the energy sector, including alternative energy sources, can affect market share and pricing power.
Internally, CRC faces challenges related to:
- Operational Efficiency: The integration of operations following the Aera Merger may result in operational disruptions and increased costs.
- Debt Levels: As of September 30, 2024, CRC had long-term debt of $1.131 billion, which could impact financial flexibility.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several risk factors:
- Transaction and Integration Costs: The Aera Merger incurred transaction and integration costs amounting to $56 million in 2024, which decreased operating cash flow.
- Severance Costs: A workforce reduction initiative due to the Aera Merger resulted in a $27 million charge in Q3 2024.
- Decreased Natural Gas Production: Natural gas production dropped by 22 MMcf/d from 136 MMcf/d in 2023 to 114 MMcf/d in 2024.
Mitigation Strategies
CRC has implemented several strategies to mitigate risks:
- Hedging Strategies: To combat commodity price volatility, CRC employs a hedging strategy aimed at protecting cash flows.
- Cost Control Measures: Initiatives to reduce operational costs and improve efficiency are ongoing, particularly in the context of the Aera Merger.
- Debt Management: The company has amended its Revolving Credit Facility to enhance liquidity, reaffirming a borrowing base of $1.5 billion.
| Risk Factor | Description | Impact (in millions) | Mitigation Strategy |
|---|---|---|---|
| Commodity Price Volatility | Fluctuation in oil and gas prices | $1,711 revenue in 2024 | Hedging strategies |
| Transaction Costs | Costs related to Aera Merger | $56 million | Cost control measures |
| Severance Costs | Workforce reduction costs | $27 million | Workforce planning |
| Debt Management | Long-term debt levels | $1,131 million | Amended credit facility |
Future Growth Prospects for California Resources Corporation (CRC)
Future Growth Prospects for California Resources Corporation
Analysis of Key Growth Drivers
The completion of the Aera Merger on July 1, 2024, has positioned the company for substantial growth. This merger has resulted in an increase in oil production, with net oil production rising to 69 MBbl/d from 53 MBbl/d for the nine months ended September 30, 2023. Additionally, the merger is expected to enhance operational efficiencies and cost savings through synergies.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total operating revenues reached $2,321 million, compared to $2,075 million for the same period in 2023, reflecting a growth of 11.9%. The company anticipates continued revenue growth driven by increased production volumes and stable commodity prices. Analysts estimate earnings per share (EPS) for the year to be approximately $4.54.
Strategic Initiatives or Partnerships that May Drive Future Growth
California Resources Corporation is focusing on carbon management projects, which are projected to receive between $5 million and $10 million in capital investment. The company is also exploring financing options specifically for its carbon management business, reflecting its commitment to sustainability and innovation in energy solutions.
Competitive Advantages that Position the Company for Growth
The company benefits from a strong liquidity position, with available cash and cash equivalents of $213 million and a revolving credit facility availability of $925 million. This financial strength allows for continued investment in growth initiatives and operational flexibility. Additionally, the company’s low leverage and effective cost control strategies enhance its competitive edge in the volatile energy market.
| Growth Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Operating Revenues | $2,321 million | $2,075 million | 11.9% |
| Net Oil Production | 69 MBbl/d | 53 MBbl/d | 30.2% |
| EPS Estimate | $4.54 | $5.38 | -15.6% |
| Cash and Cash Equivalents | $213 million | N/A | N/A |
| Revolving Credit Facility Availability | $925 million | N/A | N/A |
The company’s focus on strategic acquisitions, such as the Aera Merger, along with its commitment to innovation and sustainability, positions it well for future growth in the evolving energy sector. These initiatives, combined with strong financial metrics, provide a solid foundation for continued success.
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Resources:
- California Resources Corporation (CRC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of California Resources Corporation (CRC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View California Resources Corporation (CRC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.