California Resources Corporation Announces Its Fourth Quarter and Full Year 2014 Financial Results

California Resources Corporation (NYSE:CRC), the newly independent California-based oil and gas exploration and production company, today announced a core loss¹ of $7 million ($0.02 per diluted share) for the fourth quarter of 2014, compared with core income of $212 million ($0.55 per diluted share) for the fourth quarter of 2013. Core income, excluding unusual and infrequent items, was $650 million ($1.67 per diluted share) for the full year 2014, compared with $869 million ($2.24 per diluted share) for the full year 2013.

Highlights Include:

• Record quarterly total production of 165,000 BOE per day and crude oil production of 105,000 barrels per day
• 4Q-2014 EBITDAX² of $454 million
• 4Q-2014 core loss of $7 million or ($0.02 per diluted share)
• $2.1 billion after-tax non-cash charges, including GAAP required adjustments for commodity prices, spin-off related items and rig terminations
• 203 percent preliminary proved reserve replacement from the Capital Program, ending 2014 with 768 million BOE proved reserves
• Completed spin-off from Occidental Petroleum
• Expected 2015 Capital Program of $400 to $450 million to keep annual production essentially flat

The reported net loss for the fourth quarter of 2014 was $2.1 billion ($5.47 per diluted share), compared with net income of $212 million ($0.55 per diluted share) for the fourth quarter of 2013. The fourth quarter loss was driven primarily by non-cash, after-tax impairment charges of $2.0 billion ($3.4 billion pre-tax), required under accounting rules to reflect the recent decline in commodity prices, as well as $64 million of other after-tax unusual and infrequent charges ($107 million pre-tax) including spin-off and transition related items.

Todd Stevens, President and Chief Executive Officer, said, "We successfully completed the spin-off from Occidental Petroleum on November 30, 2014 and became an independent California company trading on the NYSE with a vision to provide Californians with long-term, affordable and reliable energy exclusively from California resources. Reflecting the underlying quality of our world class asset base, our oil production set another quarterly record with a 12 percent increase from the fourth quarter of 2013 and a five percent increase from the third quarter of 2014. The industry is experiencing a challenging commodity price environment and we have adjusted rapidly by reducing our rig count from 27 in late November to six by year-end 2014 and three rigs currently. We have decreased our capital investment levels to live within our cash flows and will use this period of reduced activity to grow our inventory of available future projects. These steps will position CRC to capitalize on more favorable market fundamentals swiftly when prices improve. In the meantime, our low-decline and predictable asset base is capable of generating significant and sufficient cash flow in the current commodity price environment.”

Fourth Quarter Results

Core results were a loss of $7 million ($0.02 per diluted share) for the fourth quarter of 2014, compared with core income of $212 million ($0.55 per diluted share) for the fourth quarter of 2013. The 2014 quarter reflected higher oil volumes, higher realized gas prices and lower per unit production costs, more than offset by significantly lower realized oil and NGL prices and higher interest expense as a result of our capital structure as a newly independent-company. EBITDAX for the fourth quarter of 2014 was $454 million compared with $684 million for the fourth quarter of 2013.

Daily oil and gas production volumes averaged 165,000 barrels of oil equivalent (BOE) in the fourth quarter of 2014, a record level for our operations, compared with 157,000 BOE in the fourth quarter of 2013. Average oil production increased by 12 percent or 11,000 barrels per day, to a record 105,000 barrels per day in the fourth quarter of 2014, reflecting our focus on oil drilling. NGL and natural gas production decreased slightly by 1,000 barrels and 8 million cubic feet (MMcf) per day, respectively, in line with our planned shift in our capital investments toward higher margin oil projects.

Realized crude oil prices decreased 31 percent to $68.54 per barrel for the fourth quarter of 2014 from $99.32 per barrel for the fourth quarter of 2013. The decrease reflects the drop in global oil prices during this period and our widening differentials to Brent. Realized NGL prices decreased 40 percent to $34.41 per barrel in the fourth quarter of 2014 from $57.73 per barrel in the fourth quarter of 2013. Natural gas realized prices increased nine percent in the fourth quarter of 2014 to $4.00 per thousand cubic feet (Mcf), compared with $3.68 per Mcf in the fourth quarter of 2013.

Full Year 2014 Results

Core income for the full year 2014 was $650 million ($1.67 per diluted share) compared with $869 million ($2.24 per diluted share) for the same period of 2013. Higher oil production and higher realized natural gas prices in 2014 were more than offset by lower realized oil prices in 2014 and higher production costs, depreciation rates, property taxes, selling, general and administrative costs and interest expense. Production costs increased mainly due to higher natural gas and other energy costs. EBITDAX for the twelve months of 2014 was $2.5 billion, compared with $2.7 billion for the twelve months of 2013. ²

The 2014 daily oil and gas production volumes averaged 159,000 BOE, compared with 154,000 BOE in 2013. Average oil production increased 9,000 barrels per day, or by 10 percent, to 99,000 barrels per day in 2014. NGL and natural gas production decreased by 1,000 barrels and 14MMcf per day, respectively.

Realized crude oil prices decreased 11 percent to $92.30 per barrel for the full year 2014, compared with $104.16 per barrel for the twelve months of 2013. NGL prices decreased five percent to $47.84 per barrel for the twelve months of 2014 from $50.43 per barrel for the twelve months of 2013. Natural gas prices increased 18 percent in the twelve months of 2014 to $4.39 per Mcf, compared with $3.73 per Mcf in the twelve months of 2013.

With respect to the impairment charges being reported, accounting rules require the company to evaluate its properties in light of, among other factors, the year-end forward price curve and projects it has determined not to pursue in the current environment. The company continues to expect to develop these properties as energy prices recover to more sustainable levels.

The other non-core pre-tax charges included $52 million for rig idling and other price-related charges, and $55 million for spin-off and transition related items.

2014 Operational Activity

CRC drilled 1,048 wells in 2014, of which 73 wells were drilled for primary production, 259 wells were drilled in our waterflood fields, 532 were focused on steamfloods and 184 were focused on unconventional reservoirs.

In our exploration program, we had notable success in our conventional reservoir drilling results in proven play trends offsetting the Pleito Ranch Field in the San Joaquin Basin and the Bardsdale Field in the Ventura Basin.

Current Market Conditions

The oil and gas industry experienced a steep decline in commodity prices, particularly in oil, beginning in the second half of 2014. CRC rapidly adjusted by reducing capital investments, and by reducing its rig count to six in December 2014 from 27 rigs at the end of November. The Company also has identified significant cost reductions, some of which were already implemented by year-end 2014.

Based on preliminary discussions with the Board and subject to their final approval next week, CRC plans for its capital program in 2015 to be in the range of $400 million to $450 million with a focus on steamflood and waterflood activities. CRC’s average crude oil production in 2015 is expected to be higher than the 2014 average, and natural gas and NGL production are expected to be lower. The Company expects its total average daily 2015 production to be relatively flat compared to 2014.

Mr. Stevens added, “Our fast actions underscore the operational flexibility of our asset base as we pursue our previously stated goals of delivering economic growth for shareholders while living within our cash flow.”

Reserves

The Company’s proved oil and gas reserves as of December 31, 2014 increased to 768 million BOE from 744 BOE at December 31, 2013. CRC’s 2014 capital program of $2.1 billion added 118 million barrels of proved reserves for a 203 percent proved reserve replacement rate for the year. This resulted in an organic finding and development cost from the capital program of $17.68 per BOE. Acquisitions added an additional 6 million barrels of proved reserves. Partially offsetting these additions were negative revisions of 42 million BOE. The negative revisions were mainly the result of performance related adjustments to certain legacy projects concentrated in the San Joaquin Basin, primarily at Elk Hills. Production for the year was approximately 58 million BOE.

Hedging Update

As previously reported, the Company purchased put options in the fourth quarter of 2014 with a $50 per barrel Brent strike price (based on a monthly average). CRC’s initial program covered almost all of its oil production for the first six months of 2015. More recently, CRC put into place additional hedging instruments to protect the pricing for almost two-thirds of its expected third quarter 2015 oil production. For this program, the Company chose a combination of Brent-based collars with strike prices between $55 and $72 per barrel for 30,000 barrels per day for July through September, as well as put options at $50 per barrel Brent for 40,000 barrels per day combined with a $75 per barrel Brent call for 30,000 barrels per day of oil production in March through June of 2015.

Conference Call Details

To participate in today’s conference call, either dial (866) 777-2509 (International calls please dial +1 (412) 317-5413) or access via webcast at www.crc.com, fifteen minutes prior to the scheduled start time to register. Participants may also pre-register for the conference call at http://dpregister.com/10059305.

A digital replay of the conference call will be archived for approximately 30 days and available online in Investor Relations at www.crc.com.

About California Resources Corporation

California Resources Corporation is an independent oil and natural gas exploration and production company and the largest combined oil and natural gas producer in California on a gross-operated basis. The Company operates its world class resource base exclusively within the State of California. Using advanced technology, California Resources Corporation focuses on safely and responsibly supplying affordable energy for California by Californians.

Forward-Looking Statements

Portions of this press release contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. Factors that could cause results to differ include, but are not limited to: commodity pricing fluctuations; supply and demand considerations for California Resources Corporation's products; access to capital markets; higher-than-expected costs; the regulatory approval environment; negative developments arising from the spin-off of California Resources Corporation; not successfully completing, or any material delay of, field developments, expansion projects, capital investments, efficiency projects, acquisitions or dispositions; lower-than-expected production from development projects or acquisitions; exploration risks; general economic slowdowns; liability under environmental regulations including remedial actions; litigation; disruption or interruption of production, processing or marketing or facility damage due to accidents, labor unrest, weather, natural disasters or cyber attacks; changes in law or regulations; or changes in tax rates. Words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,” “believe,” “expect,” “aim,” “goal,” “target,” “objective,” “likely” or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Unless legally required, California Resources Corporation does not undertake any obligation to update any forward-looking statements, as a result of new information, future events or otherwise. Material risks that may affect California Resources Corporation's results of operations and financial position appear in “Risk Factors” in our Form 10.