California Resources Corporation (CRC): Business Model Canvas [11-2024 Updated]

California Resources Corporation (CRC) stands at the forefront of the energy sector with a robust business model that integrates sustainability with profitability. By leveraging key partnerships and advanced technologies, CRC is committed to not only meeting the energy demands of California but also championing carbon management and environmental stewardship. In this blog post, we will delve into the intricacies of CRC's Business Model Canvas, exploring how each component—from value propositions to revenue streams—contributes to its strategic vision and operational success.

California Resources Corporation (CRC) - Business Model: Key Partnerships

Collaborations with Aera Energy post-merger

On July 1, 2024, California Resources Corporation (CRC) completed the acquisition of Aera Energy, LLC. This merger significantly expanded CRC's operational footprint and production capabilities. As of September 30, 2024, revenue associated with Aera was reported at $765 million, with income before income taxes of $400 million. The merger involved the issuance of 21.3 million shares of common stock and a cash payment of approximately $990 million to extinguish Aera's outstanding debt.

Transportation contracts for natural gas and NGLs

CRC has established contracts for the transportation of natural gas and Natural Gas Liquids (NGLs) to enhance its distribution capabilities. As of September 30, 2024, transportation costs amounted to $60 million for the nine months ended. The company primarily sells crude oil to California refiners, utilizing third-party pipelines for transportation. The average realized price for natural gas during the nine months ended September 30, 2024, was $2.76 per Mcf, reflecting significant market dynamics.

Joint ventures for carbon capture and storage projects

CRC is actively engaged in carbon management initiatives through joint ventures, notably the Carbon TerraVault JV with Brookfield. This partnership focuses on developing carbon capture and storage (CCS) projects in California. CRC holds a 51% interest in the joint venture, with Brookfield contributing an initial investment of $500 million for CCS projects. As of September 30, 2024, CRC reported a contingent liability of $104 million related to the joint venture, reflecting Brookfield's commitments.

Partnership	Contribution/Investment	Financial Impact	Remarks
Aera Energy Merger	Issued 21.3 million shares, $990 million cash for debt	$765 million revenue, $400 million income before tax	Expanded operational footprint significantly
Transportation Contracts	$60 million in transportation costs	Average realized price $2.76 per Mcf	Enhances distribution capabilities for natural gas and NGLs
Carbon TerraVault JV	$500 million initial investment from Brookfield	$104 million contingent liability	Focus on carbon capture and storage projects

California Resources Corporation (CRC) - Business Model: Key Activities

Exploration and production of oil and natural gas

California Resources Corporation (CRC) focuses heavily on the exploration and production of oil and natural gas, primarily in California's rich basins such as the San Joaquin and Los Angeles basins. For the nine months ended September 30, 2024, CRC reported a total net production of 145 MBoe/d, an increase from 76 MBoe/d in the previous quarter, significantly influenced by the Aera Merger completed on July 1, 2024, which contributed approximately $475 million in oil, natural gas, and NGL sales.

Production Type	Q3 2024 Production (MBoe/d)	Q2 2024 Production (MBoe/d)	Change
Oil	113	46	+67
NGLs	11	11	0
Natural Gas	126	114	+12

As a result of the Aera Merger, the company’s total oil, natural gas, and NGL sales for the nine months ended September 30, 2024, reached $1,711 million, up from $1,672 million during the same period in 2023.

Carbon management and emissions reduction initiatives

CRC is increasingly focusing on carbon management and emissions reduction initiatives in response to regulatory pressures and market trends. The company reported carbon management business expenses of $36 million for the nine months ended September 30, 2024, up from $20 million in the same period of the previous year. The increase is attributed to higher lease costs for easements and compensation-related expenses associated with their carbon management projects.

Marketing and sale of energy commodities

Marketing and sale of energy commodities are crucial for CRC's business model. The revenue from marketing purchased commodities was $176 million for the nine months ended September 30, 2024, a decrease from $336 million in the previous year, primarily due to lower natural gas prices. This segment also includes electricity sales, which generated $120 million in revenue during the same period, down from $169 million year-over-year.

Revenue Stream	9 Months Ended September 30, 2024 (in millions)	9 Months Ended September 30, 2023 (in millions)	Change
Oil, Natural Gas, and NGL Sales	$1,711	$1,672	+ $39
Revenue from Marketing Purchased Commodities	$176	$336	- $160
Electricity Sales	$120	$169	- $49

California Resources Corporation (CRC) - Business Model: Key Resources

Extensive mineral rights and land in California

California Resources Corporation (CRC) holds significant mineral rights and land in California, which are crucial for its operations in the oil and gas sector. As of September 30, 2024, CRC's total property, plant, and equipment amounted to $6.75 billion, reflecting the value of its extensive land holdings and mineral rights.

The company has approximately 2.7 million gross acres of land under its control and operates over 12,000 active wells. This extensive acreage allows CRC to optimize its drilling and extraction processes, significantly contributing to its production capabilities.

Advanced drilling technology and expertise

CRC employs advanced drilling technologies and methodologies that enhance its operational efficiency. The implementation of modern drilling techniques has allowed the company to increase its net oil production volumes to 69 MBbl/d for the nine months ended September 30, 2024, up from 53 MBbl/d in the previous year. This increase is attributed to the additional production from the Aera fields following the Aera Merger on July 1, 2024, which significantly expanded CRC's operational capacity.

Moreover, CRC's energy operating costs have decreased to $7.26 per Boe for the nine months ended September 30, 2024, a reduction from $10.87 per Boe in the same period of the previous year, indicating improved cost management and efficiency.

Strong financial backing and credit facilities

CRC maintains a robust financial position bolstered by strong credit facilities. The company has a borrowing capacity of $1.1 billion under its Revolving Credit Facility, with total available liquidity of $1.14 billion as of September 30, 2024. This financial strength is critical for funding ongoing operations and capital investments.

Additionally, CRC has successfully issued $888 million in 2029 Senior Notes, enhancing its financial flexibility. The company's net income for the nine months ended September 30, 2024, was $343 million, reflecting its ability to generate significant earnings amidst fluctuating commodity prices and operational challenges.

Key Financial Metrics	Q3 2024	Q3 2023
Total Property, Plant, and Equipment	$6.75 billion	$3.44 billion
Net Oil Production Volumes	69 MBbl/d	53 MBbl/d
Energy Operating Costs (per Boe)	$7.26	$10.87
Revolving Credit Facility	$1.1 billion	$1.0 billion
Available Liquidity	$1.14 billion	$0.80 billion
Net Income	$343 million	$376 million

California Resources Corporation (CRC) - Business Model: Value Propositions

Commitment to environmental stewardship and sustainability

California Resources Corporation (CRC) actively pursues initiatives aimed at reducing its environmental impact. This includes investments in carbon management technologies and renewable energy projects. In 2024, CRC's carbon management business expenses increased to $36 million from $20 million in 2023, reflecting a commitment to sustainability. The company has integrated sustainability into its operational framework, focusing on reducing Scope 1 and Scope 2 emissions through innovative practices.

Reliable supply of locally sourced energy

CRC emphasizes the importance of providing a reliable supply of energy sourced from local assets. For the nine months ended September 30, 2024, CRC reported total net production sold of 145 MBoe/d, a significant increase driven by the Aera Merger. With a diversified portfolio across several basins in California, CRC is well-positioned to meet local energy demands effectively. This local sourcing strategy not only enhances reliability but also supports regional economic growth.

Energy Production Metrics	Q3 2024	Q3 2023
Total Net Production Sold (MBoe/d)	145	87
Oil Production (MBbl/d)	113	53
Natural Gas Production (MMcf/d)	126	136
NGL Production (MBbl/d)	11	11

Competitive pricing linked to market dynamics

CRC's pricing strategy is closely aligned with prevailing market conditions. For the nine months ended September 30, 2024, CRC achieved an average realized oil price of $77.10 per barrel, reflecting a $12.85 increase compared to the previous year. The company's ability to leverage market dynamics allows it to maintain competitive pricing while optimizing profitability. Additionally, CRC's revenue from oil, natural gas, and NGL sales amounted to $1.711 billion during the same period, showcasing robust operational performance.

Revenue Breakdown (Nine Months Ended September 30, 2024)	Amount (in millions)
Oil Sales	$1,505
Natural Gas Sales	$68
NGL Sales	$138
Total Revenue from Oil, Natural Gas, and NGLs	$1,711

California Resources Corporation (CRC) - Business Model: Customer Relationships

Focus on long-term contracts with refineries and buyers

California Resources Corporation (CRC) primarily focuses on long-term contracts with California refiners for its crude oil sales. In the nine months ended September 30, 2024, CRC reported oil, natural gas, and NGL sales of $1,711 million, an increase from $1,672 million in the same period of 2023. This growth was largely attributed to the Aera Merger completed on July 1, 2024, which provided additional production capacity and strengthened existing contracts with refineries.

Engagement with local communities for regulatory compliance

CRC actively engages with local communities to ensure regulatory compliance and maintain its social license to operate. This engagement includes regular dialogue with stakeholders and community outreach initiatives. The company has reported an increase in operational costs due to compliance and regulatory expenses, which rose to $161 million for the nine months ended September 30, 2024, compared to $42 million in the prior year.

Transparency in operations and environmental impact

Transparency is a key aspect of CRC's customer relationships. The company aims to maintain open communication regarding its operational practices and environmental impact. For instance, CRC's carbon management business expenses increased to $36 million in the nine months ended September 30, 2024, up from $20 million in the same period of 2023. This increase reflects the company's commitment to addressing environmental concerns and enhancing operational transparency.

Metrics	2024 (9 months)	2023 (9 months)
Oil, Natural Gas, and NGL Sales	$1,711 million	$1,672 million
Operational Costs	$1,776 million	$1,557 million
Carbon Management Business Expenses	$36 million	$20 million
Community Engagement Expenses	$161 million	$42 million

California Resources Corporation (CRC) - Business Model: Channels

Direct sales to refineries and industrial customers

California Resources Corporation (CRC) primarily sells its oil, natural gas, and natural gas liquids (NGLs) directly to California refineries. For the nine months ended September 30, 2024, CRC reported oil, natural gas, and NGL sales of $1,711 million, an increase from $1,672 million in the same period in 2023. The sales breakdown includes:

Commodity	Sales (in millions)	Percentage of Total Sales
Oil	$1,505	88%
NGLs	$138	8%
Natural Gas	$68	4%

Additionally, CRC's operations in the San Joaquin Basin and Los Angeles Basin contribute significantly to its production capacity, with total net production sold reaching 145 MBoe/d in the three months ended September 30, 2024, up from 76 MBoe/d in the previous quarter.

Partnerships with energy retailers

CRC has established partnerships with various energy retailers to enhance its market reach. These partnerships allow CRC to leverage existing distribution networks for its natural gas and electricity sales. For the nine months ended September 30, 2024, CRC generated electricity sales of $120 million, a decrease from $169 million in the same period in 2023, primarily due to lower prices.

Moreover, revenue from marketing purchased commodities was $176 million for the nine months ended September 30, 2024, compared to $336 million in the prior year. This revenue is generated through the marketing of third-party production and transportation services, which CRC provides leveraging its infrastructure.

Online platforms for investor and stakeholder communications

CRC utilizes online platforms to communicate with investors and stakeholders, providing updates on financial performance and operational strategies. As of September 30, 2024, CRC had available cash and cash equivalents of $213 million and a revolving credit facility with a borrowing capacity of $1.1 billion, reaffirming its financial stability.

The company’s liquidity, which includes cash and available credit, stood at $1.138 billion, facilitating ongoing communication with stakeholders regarding capital deployment and investment strategies.

California Resources Corporation (CRC) - Business Model: Customer Segments

Refineries in California

California Resources Corporation (CRC) primarily serves refineries located within California. These refineries require a consistent supply of crude oil, natural gas liquids (NGLs), and natural gas to support their operations. In the nine months ended September 30, 2024, CRC reported oil, natural gas, and NGL sales totaling $1,711 million, marking an increase from $1,672 million in the same period of 2023, largely driven by the enhanced production capabilities following the Aera merger.

Sales Type	Sales Amount (in millions)	Change from Previous Year
Oil Sales	$1,505	+ $351
NGL Sales	$138	- $13
Natural Gas Sales	$86	- $281

Industrial Energy Consumers

CRC also targets industrial energy consumers, which encompass a variety of sectors including manufacturing and heavy industry. These consumers rely on CRC's natural gas and electricity for their operations. The revenue from electricity sales for the nine months ended September 30, 2024, was $120 million, a decrease from $169 million in the prior year, which reflects the impact of lower electricity prices.

Revenue Source	Revenue (in millions)	Change from Previous Year
Electricity Sales	$120	- $49
Natural Gas Sales	$86	- $281

Environmental Agencies and Sustainability-Focused Organizations

CRC actively engages with environmental agencies and sustainability-focused organizations. The company is increasingly focusing on carbon management and emissions reduction, which aligns with regulatory requirements and sustainability goals. The carbon management business expenses increased to $36 million for the nine months ended September 30, 2024, up from $20 million in the previous year. This investment reflects CRC's commitment to sustainable practices and compliance with environmental regulations.

Expense Type	Expense Amount (in millions)	Change from Previous Year
Carbon Management Expenses	$36	+ $16
General and Administrative Expenses	$226	+ $25

California Resources Corporation (CRC) - Business Model: Cost Structure

Operational costs related to exploration and production

For the nine months ended September 30, 2024, California Resources Corporation (CRC) reported total operational costs of $654 million related to exploration and production activities, which translates to an average of $24.11 per barrel of oil equivalent (Boe). This is an increase from $636 million ($26.80 per Boe) for the same period in 2023. Notably, excess costs attributable to production-sharing contracts (PSCs) were $51 million, adjusting the effective operating costs to $603 million or $22.23 per Boe.

General and administrative expenses

General and administrative (G&A) expenses for CRC totaled $226 million for the nine months ended September 30, 2024, up from $201 million in the same period of 2023. This increase of $25 million was largely driven by costs associated with the Aera Merger. The breakdown for G&A expenses is as follows:

Category	2024 (in millions)	2023 (in millions)
Exploration and production, corporate and other	$219	$191
Carbon management business	$7	$10
Total G&A Expenses	$226	$201

Capital expenditures for technology and infrastructure

Capital expenditures (CapEx) for CRC for the nine months ended September 30, 2024, amounted to $167 million, reflecting an increase from $119 million in the prior year. Significant investments were directed toward technology and infrastructure enhancements, particularly following the Aera Merger.

The following table summarizes the key capital expenditures and associated costs:

Expenditure Category	2024 (in millions)	2023 (in millions)
Capital investments	$167	$119
Changes in accrued capital investments	$8	($10)
Proceeds from divestitures, net	$12	$0
Total Net Cash Used in Investing Activities	($1,010)	($133)

These figures illustrate CRC's ongoing commitment to enhancing its operational efficiency and expanding its production capabilities through targeted investments in infrastructure and technology.

California Resources Corporation (CRC) - Business Model: Revenue Streams

Sales from oil, natural gas, and NGLs

For the nine months ended September 30, 2024, California Resources Corporation (CRC) reported sales from oil, natural gas, and natural gas liquids (NGLs) totaling $1,711 million, an increase from $1,672 million for the same period in 2023. This increase was primarily driven by additional oil production from the Aera fields following the completion of the Aera Merger on July 1, 2024.

Commodity Type	Nine Months Ending September 30, 2024 (in millions)	Nine Months Ending September 30, 2023 (in millions)	Change (in millions)
Oil	$1,505	$1,154	$351
NGLs	$138	$151	($13)
Natural Gas	$86	$367	($281)
Total	$1,729	$1,672	$57

Revenue from carbon management services

CRC has also seen growth in its carbon management services, with expenses related to this segment amounting to $36 million for the nine months ended September 30, 2024, compared to $20 million for the same period in 2023. This increase reflects higher lease costs for easements and compensation-related expenses.

Gains from commodity derivatives and hedging strategies

The net gain from commodity derivatives for the nine months ended September 30, 2024 was $290 million, a significant recovery from a net loss of $131 million in the prior year. This gain was primarily attributed to changes in the fair value of outstanding commodity derivatives and the relationship between contract prices and forward curves. Payments on commodity derivatives were $35 million for the nine months ended September 30, 2024, down from $223 million in the same period of 2023.

Category	Nine Months Ending September 30, 2024 (in millions)	Nine Months Ending September 30, 2023 (in millions)
Net Gain (Loss) from Commodity Derivatives	$290	($131)
Payments on Commodity Derivatives	$35	$223

Updated on 16 Nov 2024

Resources:

1. 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.
2. 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.