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California Resources: The Environmental Energy Play


  • Excellent asset base that is misunderstood for a variety of reasons.
  • Best balance sheet in the industry.
  • Hidden opportunity to be a clean air solution for California.
  • Stock is a potential double.

Environmental technology concept. Sustainable development goals. SDGs.

metamorworks/iStock via Getty Images

The Company

California Resources (NYSE:CRC) is an energy company based in...you guessed it, California. It operates oil and gas wells with 60% oil, 27% natural gas, 13% NGL's (no shale, no fracking) with all of its production in California, which believe it or not, is a

This article was written by

CashFlow Hunter profile picture
I am a finance executive with over 25 years of experience in the markets, nearly 20 of them as a hedge fund portfolio manager. My broad and deep experience investing in debt and equity markets using cash and derivatives gives me unique insights into markets and a focus on risk/reward and liquidity. I have degrees from Wharton and MIT and love to continue learning, whether its market related or an outside interest.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of CRC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

Whats the deal with warrants?
Tika1 profile picture
RBC adjusted target price $65. Still about 50% gain from here.
CRC warrants look interesting under your scenario of a possible double in the stock. GLTA
I regret not publishing my own article on CRC for seeking Alpha for the $150 I could have earned and gone out to dinner with my wife! Live and learn!

Now drinking heavily!
And yes, just in case you have not yet figured it out - I am a shareholder of CRC. My largest position.
More Info -- see Stanford Center on Carbon Storage -- all focused in California for Carbon Sequestration and Underground Storage -- can get lost in all this but Elk Hills is the star player:

Correction -- Elk Hills has 47,000 surface acres, not 45,000. Here is an overview from Wikipedia: en.wikipedia.org/...
CRC owns outright and in fee simple Elk Hills - which alone is 45,000 surface acres. Elk Hills is in the boonies - west of Bakersfield. The former Naval Petroleum Reserve from 1920. It is fenced as the former military site it once was - only 2 entrances to the land - and both have security checkpoints. CRC also has at Elk Hills a 550 MW gas fired power plan which feeds into California grid - and generates steam for the CRC wells - also entirely 100% owned ooutright by CRC. Elk Hills is an ideal site -- perhaps best in the USA - for CSUS -- both geologically and legally. Geology is ideal for CSUS as you can see from the presentation on CRC website and also --- major consideration -- don't have the possible legal problems and disputes with (1) neighbors; or (2) disputes between the mineral leaseholders and surface land owners - as to who own the CSUS CO2 sequestration rights - and who has the long term liability exposure for CO2 - who gets the revenue stream - and how do you get all players, all surface owners, all neighbors on board for a large Mega project? Think of the lawyers, the litigation, the time, the protracted hassle, etc. etc. etc. for anywhere else other than Elk Hills.

So ELK Hills is where CSUS will first happen in California. Look on google earth for Elk Hills and you can see it all clearly.

This same company - same assets - had an enterprise value of over $7 billion before the market crash of 2019-2020 and its BK filing in 2020. It is worth more today than ever before, yet its enterprise value is under $4 billion. Everyone burned by the BK filing. Awful hedges bankers made them take when they emerged from chapter 11 will run through 2022. But now they only have $400 million in unsecured debt instead of $4 billion in debt. They are making a ton of money now even with their horrible hedges. But there assets have never been worth more than what they are today.

CRC also owns outright a total of 80,000 surface acres in fee in California, including 80 acres of undeveloped property in Huntington Beach, CA. Again -- historical oil and gas operation from OXY - spun out in 2014 - and OXY started as a Southern California oil company back in the 20th century.

CRC's wholly owned 550 MW modern gas fired power plant in Elk Hills is worth $750 million just by itself.

CRC has a lot of reserve value including natural gas reserves - and NG now in California sells for over $6.15 at southern California gate. Virtually no pipelines to Southern California -- also see CRC presentation.

This company will be fine going forward. Everyone in California still drives cars and California gas right now for premium is $4.75 per gallon - with all the road taxes put on the gas sold. So days of bashing oil and gas companies might be winding down given the large increase in gas prices. Politicians do not want higher gas prices and the blame for making them higher.

Stars are aligning now. In 1 year, I expect at least a 50% gain from here - maybe more.
Appreciate your remarks on CRC. Especially the inclusion of the major shareholders. Foretold the news of one major shareholder selling over the course of the last month or so. Unfortunate timing with news about increased supply and the DOE potentially released from the SR. I guess this could be a buying opportunity if you think there is more room to advance.
CashFlow Hunter profile picture
@cdraughon oil names can whip around with oil prices. But I think this company has a lot more than just oil going for it.
06 Oct. 2021
During the next two years, WESTCARB negotiated with the landowners on and around the land where it wanted to drill a test well. But the property owners eventually declined to participate. WESTCARB moved on to another spot, but this second group of property owners and underground-rights holders wanted indemnity from all long-term liability. The consortium refused, since insurance policies for CCS projects weren’t available—the first one hit the market early this year. (In the future, most experts expect government to assume long-term responsibility for commercial-scale sites, but currently no such law exists.) Eventually, with the liability question unresolved, the Thornton project collapsed.

Thornton offers a preview of the turmoil ahead as CCS experiments grow. A Harvard study found that 11 of 19 DOE test sites surveyed (there are 25 projects nationwide) reported significant legal obstacles. A 2008 Congressional Research Service report concluded, “Although the general public is still largely unfamiliar with CCS, there are early indications that community acceptance may prove a significant challenge.”

Indeed, WESTCARB has been trying for years to set up test sites in Solano County, a large agricultural region 60 miles northeast of San Francisco that’s home to more than 400,000 people. Solano County’s principal planner, Jim Leland, says he’s received phone calls from WESTCARB about every six months, but nothing has come of it yet.

In August, WESTCARB, which has now enlisted the help of Shell Oil in its search for a test site, approached farmers in Birds Landing, an unincorporated community of 130 in Solano County. WESTCARB contacted Janith Norman, a city council member in nearby Rio Vista, to discuss the project. But Norman remains skeptical. “I told them, ‘You are telling me about how this might benefit WESTCARB, but you aren’t telling me anything about how this might harm anyone living in the area.'” Mother Jones
Brendan Hall, CFA profile picture
@esop I dont follow at all. WESTCARB was studying lands by SF and drilling a test well. CRC is studying sinks that they already own and have studied for years. Completely different....CRC has the ONLY 2 permits on file with the EPA for Class VI injection wells...they are further along the process than your comment suggests. Help me make the connection based on yesterday's CRC presentation.
CashFlow Hunter profile picture
@Brendan Hall I agree. Totally different situation.
Thanks for your analysis.
John Silcox profile picture
Tomorrow could definitely be a catalyst for the stock if CRC is able to demonstrate that potential revenue from the carbon capture projects is close to happening, and not just theoretical and still multiple years away.
KCI Research Ltd. profile picture
Nice article. It does look like previous debt holders selling is keeping a lid on shares here.

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