Q2 2024 California Resources Corp Earnings Call

Operator: Good day, and welcome to the California Resources Corporation's second quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. And please note that this event is being recorded. At this time, I would now like to turn the conference over to Joanna Park, Vice President of Investor Relations and Treasurer. Please go ahead.

Operator: Good day and welcome to the California Resources Corporation, 2nd quarter, 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal confidence specialists by pressing the star key; call it by zero.

Speaker Change: Good day and welcome to the California Resources Corporation's second quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one on your telephone keypad. To withdraw your questions, please press stars and two. And please note that this event is being recorded.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Joanna Park: At this time, I would now like to turn the conference over to Joanna Park, Vice President of Investigation and Treasury. Please go ahead.

Speaker Change: And please note that this event is being recorded. At this time, I would now like to turn the conference over to Joanna Park, Vice President of Investor Relations and Treasurer. Please go ahead.

Joanna Park: Good morning and welcome to California Resources Corporation's 2nd quarter conference call. This is our first call following the closing of our era merger, and we are excited to share our progress. Prepared comments today will come from our CEO, Francisco Leon, and our CFO, Noel Molina.

Joanna Park: Good morning, and welcome to California Resources Corporation's second quarter conference call. This is our first call following the closing of our era merger, and we are excited to share our progress. Prepared comments today will come from our CEO, Francisco Leon, and our CFO, Nelly Molina. Following the remarks, we will be available to take your questions. Also with us on the call, we also have other members of our senior leadership team.

Joanna Park: Good morning and welcome to California Resources Corporation's second quarter conference call. This is our first call following the closing of our era merger and we are excited to share our progress.

Speaker Change: Prepared comments today will come from our CEO , Francisco Leon, and our CFO , Nelly Molina. Following the remarks, we will be available to take your questions. With us on the call, we also have other members of our senior leadership team.

Joanna Park: Following the remarks, we will be available to take your questions. With us on the call, we also have other members of our senior leadership team. By now, I hope you have had a chance to review our earnings release and our supplemental slides. We have also provided information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures on our website, as well as in our earnings release. Today, we will be baking some forward-looking statements based on current expectations. Actual results may differ due to factors described in our earnings release and in our periodic SEC filings.

Joanna Park: By now, I hope you have had a chance to review our earnings release and our supplemental slides. We have also provided information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures on our website, as well as in our earnings release. Today, we will be making some forward-looking statements based on current expectations. However, actual results may differ due to factors described in our earnings release and in our periodic SEC filings. Thank you for joining us today. I will now turn the call over to Francisco.

Speaker Change: By now, I hope you have had a chance to review our earnings release and our supplemental slides.

Speaker Change: We have also provided information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures on our website as well as in our earnings release.

Speaker Change: Today we will be making some forward-looking statements based on current expectations.

Speaker Change: Actual results may differ due to factors described in our earnings release and in our periodic SEC filings. Thank you for joining us today. I will now turn the call over to Francisco.

Joanna Park: Thank you for joining us today.

Francisco Leon: I will now turn the call over to Francisco. Thanks, Joanna, and welcome everyone. We are incredibly excited about the road ahead and the value creation levers we have for existing and future shareholders. TRC is a markedly stronger company today, and we are demonstrating what it means to be a different kind of energy company.

Francisco Leon: Thanks, Joanna, and welcome, everyone. We are incredibly excited about the road ahead and the value creation levers we have for existing and future shareholders. TRC is a markedly stronger company today, and we're demonstrating what it means to be a different kind of energy. Before discussing our second quarter financial and operating highlights, I want to spend a few minutes outlining the strength of our business strategy. We are committed to generating value for shareholders, and we do that by increasing our company's cash flow per share.

Francisco Leon: Thanks, Joanna, and welcome, everyone.

Francisco Leon: We are incredibly excited about the road ahead and the value creation levers we have for existing and future shareholders.

Francisco Leon: TRC is a markedly stronger company today, and we're demonstrating what it means to be a different kind of energy company.

Francisco Leon: Before discussing our second quarter financial and operating highlights, I want to spend a few minutes outlining the strength of our business strategy. We are committed to generating value for shareholders, and we do that by increasing our company's casual per share. Despite California permitting headwinds, our focus on improving margins combined with our strong and consistent share repurchase program resulted in mid-teens casual per share growth from 2021 to 2023. With the closing of the Era merger, we again are targeting to grow casual per share in 2024. Importantly, we achieve this four-year growth without sacrificing our balance sheet strength.

Francisco Leon: Before discussing our second quarter financial and operating highlights, I want to spend a few minutes outlining the strength of our business strategy.

Francisco Leon: We are committed to generating value for shareholders, and we do that by increasing our company's cash flow per share.

Francisco Leon: Despite California's permitting headwinds, our focus on improving margins combined with our strong and consistent share repurchase program resulted in mid-teens cash flow per share growth from 2021 to 2023. With the closing of the era merger, we again are targeting to grow cash flow per share in 2024. Importantly, we achieve this four-year growth without sacrificing our balance sheet strength.

Francisco Leon: Despite California permitting headwinds...

Francisco Leon: Our focus on improving margins, combined with our strong and consistent share repurchase program, resulted in mid-teens cash flow per share growth from 2021 to 2023.

Francisco Leon: With the closing of the era merger, we again are targeting to grow cash flow per share in 2024.

Francisco Leon: Importantly, we achieve this four-year growth without sacrificing our balance sheet strength.

Francisco Leon: As we integrate with Era, we will deliver our synergy targets in the next 15 months, as we head to an improved permitting backdrop by the second half of next year.

Francisco Leon: As we integrate with AIRA, we will deliver our synergy targets in the next 15 months, as we head to an improved permitting backdrop by the second half of next year. Recent economic developments have provided a riskier outlook for the domestic and global economy, placing greater importance on the sustainability of our Our low-decline assets, strong hedge book, and cash flow capability, supported by a strong balance sheet, provide us with a significant fortress in any volatile environment. The AERA transaction adds improved cash flow capacity and scale. And so, let me take a few minutes to discuss the merits of the AERA.

Francisco Leon: As we integrate with AERA, we will deliver our synergy targets in the next 15 months as we head to an improved permitting backdrop by the second half of next year.

Francisco Leon: Recent economic developments have provided a riskier outlook for the domestic and global economy, placing greater importance on sustainability of earnings. Our low decline assets, strong hedge book, and casual capability supported by a strong balance sheet provide us with a significant fortress in any volatile environment.

Francisco Leon: Recent economic developments have provided a riskier outlook for the domestic and global economy.

Francisco Leon: placing greater importance on sustainability of earnings.

Francisco Leon: Our low decline assets, strong hedge book, and cash flow capability, supported by a strong balance sheet, provide us with a significant fortress in any volatile environment.

Francisco Leon: The area transaction adds improved casual capacity and scale, and so let me take a few minutes to discuss the merits of the era.

Francisco Leon: The ARA transaction adds improved cash flow capacity and scale. And so, let me take a few minutes to discuss the merits of the ARA deal.

Francisco Leon: CEO. We expanded our conventional energy business, improving the reliability of cash flows, and enhanced our growing carbon management business to decarbonize California. We created operational scale and strengthened the durability of our business. Our daily production volumes doubled. California needs oil, and we will be here to provide it. The era transaction also increased our average enterprise, and today our fields deliver 90% average net revenue interest. When you compare this to the Permian, where average enterprise are less than 80%, this is an advantage that boosts our profitability. We're also capturing meaningful cost savings and see more synergies than originally forecasted.

Francisco Leon: We expanded our conventional energy business, improving the reliability of cash flows, and enhanced our growing carbon management business to decarbonize California. We created operational scale and strengthened the durability of our business. Our daily production volumes doubled. California needs oil, and we will be here to provide it.

Francisco Leon: We expanded our conventional energy business, improving the reliability of cash flows, and enhanced our growing carbon management business to decarbonize California.

Francisco Leon: We created operational scale and strengthened the durability of our business.

Francisco Leon: Our daily production volumes doubled.

Francisco Leon: California needs oil and we will be here to provide it.

Francisco Leon: The ERA transaction also increased our average NRI, and today, our fields deliver 90% average net revenue. When you compare this to the Permian, where average NRIs are less than 80%,

Francisco Leon: The ERA transaction also increased our average NRIs.

Francisco Leon: And today, our fields deliver 90% average net revenue interest.

Francisco Leon: When you compare this to the Permian...

Francisco Leon: where average NRIs are less than 80%.

Francisco Leon: This is an advantage that boosts our profitability. We're also capturing meaningful cost savings and seeing more synergies than originally forecast. We now expect $235 million in total synergies, which reflects $60 million of savings achieved with the refinancing of Eris Debt and $25 million of additional operational synergies. We expect to capture these run rate savings over the next 15 months to improve our bottom line. Our cash flow forecast is expected to more than double from where it would have been on a standalone basis and has led us to increase our dividend per share today by 25%, as we continue to consistently return more cash to shareholders.

Francisco Leon: This is an advantage that boosts our profitability.

Francisco Leon: We're also capturing meaningful cost savings and see more synergies than originally forecasted.

Francisco Leon: We now expect 235 million in total synergies, which reflect 60 million of savings achieved with the refinancing of ARISDED and 25 million of additional operational synergies. We expect to capture these run rate savings over the next 15 months to improve our bottom line. Our castle forecast is expected to more than double from a wood, where it would have been on a standalone basis, and has led us to increase our dividend per share today by 25% as we continue to consistently return more cash to shareholders. Lastly, CRC is a sustainability leader in California, and we operate our business the right way.

Francisco Leon: We now expect $235 million in total synergies, which reflects $60 million of savings achieved with the refinancing of heirs' debt and $25 million of additional operational synergies.

Francisco Leon: We expect to capture these run rate savings over the next 15 months.

Francisco Leon: to improve our bottom line.

Francisco Leon: Our cash flow forecast is expected to more than double.

Francisco Leon: from where he would have been on a stand-alone basis.

Francisco Leon: and has led us to increase our dividend per share today by 25 percent.

Francisco Leon: as we continue to consistently return more cash to shareholders.

Francisco Leon: Lastly, CRC is a sustainability leader in California, and we operate our business the right way. Today, we have more direct control of in-field emissions and more capacity to accelerate the decarbonization of our portfolio in California's emissions due to the advantage and unequal location of our assets. We have already made great strides.

Francisco Leon: Lastly, CRC is a sustainability leader in California, and we operate our business the right way.

Francisco Leon: Today, we have more direct control of infield emissions and more capacity to accelerate the decarbonization of our portfolio in California's emissions due to the advantage and unequal location over assets. Over the last five weeks, since the closing of the merger, we have already made great strides. We are executing on our opportunities that will optimize our field operations, combining infrastructure and leveraging our combined scale to develop more cost-efficient supply chains. As an example, our teams are already connected; our two largest fields in the San Joaquin Basin, to improve and expand natural gas deliverability. The interconnect allows CRC to take natural gas from our L-Kills field to Belrich for use in steam-floor operations.

Francisco Leon: Today, we have more direct control of in-field emissions and more capacity to accelerate the decarbonization of our portfolio in California's emissions due to the advantage and unequal location of our assets.

Francisco Leon: Over the last five weeks, since the closing of the merger, we have already made great strides.

Francisco Leon: We are executing on opportunities that will optimize our field operations, combining infrastructure and leveraging our combined scale to develop a more cost-efficient supply chain. As an example, our teams have already connected our two largest fields in the San Joaquin Basin to improve and expand natural gas deliverability. The interconnect allows CRC to take natural gas from our Elk Hills field to Bell Ridge for use in steam float operations. This connection will provide an additional outlet for Elk Hills gas during maintenance activities at our midstream infrastructure in Elk Hills and will benefit Bell Ridge by lowering fuel costs for steam generation for EOR.

Francisco Leon: We are executing on our opportunities that will optimize our field operations.

Francisco Leon: combining infrastructure and leveraging our combined scale to develop more cost-efficient supply chains.

Francisco Leon: As an example, our teams already connected our two largest fields in the San Joaquin Basin to improve and expand natural gas deliverability.

Francisco Leon: The interconnect allows CRC to take natural gas from our Elk Hills field to Bell Ridge for use in steam float operations.

Francisco Leon: This connection will provide an additional outlet for L-Kills gas during maintenance activities at our mid-stream infrastructure in L-Kills and will benefit Belrich by lowering fuel costs for steam generation for EOR. Another early win is the streamlining of well-monitoring activity to the nearby Belrich Control Facility. ERA made dedicated investments in this area and applied AI technology to improve well performance and uptime with fewer staff. We are adopting their best practices and optimizing nearby satellite fields to benefit for more efficient, well-surveillance efforts across a broader base. Similarly, across the well-service value chain, we are seeing early gains from vertical integration of services, resulting in lower cost of our well maintenance and PNA activities.

Francisco Leon: This connection will provide an additional outlet for Elk Hills gas during maintenance activities at our midstream infrastructure in Elk Hills, and will benefit Bell Ridge by lowering fuel costs for steam generation for EOR.

Francisco Leon: Another early win is the streamlining of well-monitoring activity to the nearby Bell Ridge Control Facility. AIRA made dedicated investments in this area and applied AI technology to improve well performance and uptime with fewer staff. We are adopting their best practices and optimizing nearby satellite fields to benefit from more efficient well surveillance efforts across a broader base. Similarly, across the world, service value, we are seeing early gains from vertical integration of services, resulting in lower costs of our well maintenance and P&A activities. These examples highlight the strong industrial logic behind the merger.

Francisco Leon: Another early win is the streamlining of well monitoring activity to the nearby Bell Ridge Control Facility.

Francisco Leon: AIRA made dedicated investments in this area and applied AI technology to improve well performance and uptime with fewer staff.

Francisco Leon: We are adopting their best practices and optimizing nearby satellite fields to benefit from more efficient well surveillance efforts across a broader base.

Francisco Leon: Similarly, across the World Service Value Chain.

Francisco Leon: We are seeing early gains from vertical integration of services, resulting in lower costs of our well maintenance and P&A activities.

Francisco Leon: These examples highlight the strong industrial logic behind the merger. The proximity of our neighboring fields positioned us to find the most synergies out of this powerful combination, and we're just only getting started. On the carbon management front, we submitted another vault for permitting to the EPA for 102 million metric tons to a reservoir in central California. This will be CTV 6. As a reminder, we now have over 300 million tons on their permit review. Like the other reservoir, CTV 6 is centrally located near major emission regions in California. In terms of execution, we're targeting the receipt of California first-class 6 EPA permit and the FID of our cryogenic gas plant CCS project by year end.

Francisco Leon: These examples highlight the strong industrial logic behind the merger.

Francisco Leon: The proximity of our neighboring fields positions us to find the most synergies out of this powerful combination, and we're just only getting started. On the carbon management front, we submitted another vault for permitting to the EPA for a 102 million metric tons CO2 reservoir in Central California. This will be CTV 6.

Francisco Leon: The proximity of our neighboring fields position us to find the most synergies out of this powerful combination, and we're just only getting started.

Francisco Leon: On the carbon management front, we submitted another vault for permitting to the EPA.

Francisco Leon: for a 102 million metric ton CO2 reservoir in Central California. This will be CTV-6.

Francisco Leon: As a reminder, we now have over 300 million tons under permit review. Like the other reservoirs, Seed PV6 is centrally located near major emission regions in California. In terms of execution, we're targeting the receipt of a California First Class 6 EPA permit and the FID of our cryogenic gas plant CCS project by year-end. Our goal is to inject CO2 into CTV1 before the end of 2025. From a greenfield emissions perspective, CTV expanded its storage only CDMA with NLC energy to 430,000 metric tons per annum of CO2 emissions.

Francisco Leon: As a reminder, we now have over 300 million tons under permit review.

Francisco Leon: Like the other reservoirs, CPV-6 is centrally located near major emission regions in California.

Francisco Leon: In terms of execution, we're targeting the receipt of California's first Class VI EPA permit and the FID of our cryogenic gas plant CCS project by year-end.

Francisco Leon: Our goal is to inject CO2 into CTV 1 before the end of 2025. From a Greenfield emissions perspective, CTV expanded our storage-only CDMA with LLC energy to 430,000 metric tons per annum of CO2 emissions. This project is slated for early 2028. We now have nearly 3 million metric tons per annum of CO2 projects under consideration throughout the state. You can find all the details in our CTV update released today.

Francisco Leon: Our goal is to inject CO2 into CTV-1 before the end of 2025.

Francisco Leon: From a greenfield emissions perspective, CTV expanded our storage-only CDMA with NLC energy to 430,000 metric tons per annum of CO2 emissions. This project is slated for early 2028.

Francisco Leon: This project is slated for early 2028. We now have nearly 3 million metric tons per annum of CO2 projects under consideration throughout the state. You can find all the details in our CTV update released today.

Francisco Leon: We now have nearly 3 million metric tons per annum of CO2 projects under consideration throughout the state.

Francisco Leon: You can find all the details in our CTV update released issued today.

Francisco Leon: Now, I would like to move to another important opportunity for us, and that is to support the growth of data centers to service California customers while aligning with California net zero ambitions in what we referred to as the Carbon Valley, or Silicon Valley and the Central Valley meet. CTV's assets are uniquely positioned in the heart of a state that is home to two of the top 10 data center markets in the US: Silicon Valley and Los Angeles. We offer viable solutions for the demands of the tech industry today and a solid runway to meet the needs of tomorrow.

Francisco Leon: Now, I would like to move to another important opportunity for us, and that is to support the growth of data centers to service California customers while aligning with California's Net Zero ambitions, in what we refer to as the carbon balance, or where Silicon Valley and the Central Valley meet. CTV's assets are uniquely positioned in the heart of a state that is home to two of the top 10 data center markets in the U.S., Silicon Valley and Los Angeles.

Francisco Leon: Now I would like to move up to another important opportunity for us.

Francisco Leon: and that is to support the growth of data centers to service California customers.

Francisco Leon: while aligning with California Net-Zero ambitions.

Francisco Leon: in what we refer to as the Carbon Valley, or Silicon Valley and the Central Valley meet.

Francisco Leon: CTV's assets are uniquely positioned in the heart of a state that is home to two of the top 10 data center markets in the U.S.

Francisco Leon: We offer viable solutions for the demands of the tech industry today and a solid runway to meet the needs of tomorrow. First, we can provide data centers with the key ingredients they need to operate, large plots of land, access to fiber networks, and water. Power Infrastructure, Natural Gas, and Related Interconnections. Our L-Kills complex, for example, is in the sweet spot and can meet data center needs and provide accelerated time-to-market benefits that other potential competitors simply cannot match.

Francisco Leon: Silicon Valley, and Los Angeles.

Francisco Leon: We offer viable solutions for the demands of the tech industry today, and a solid runway to meet the needs of tomorrow.

Francisco Leon: First, we can provide data centers with the key ingredients they need to operate. Large plots of land, access to fiber networks, water, power infrastructure, natural gas, and related interconnections. Our LKILS complex, for example, is in the sweet spot and can meet the data center needs and provide accelerated time-to-market benefits that other potential competitors simply cannot match. Our second advantage is that we can utilize our resources and energy expertise to support the development of carbon-free base load power before the end of the decade. California has few in-state dispatchable sources, and we believe retrofitting combined cycle natural gas with CCS is a solution that delivers both the market needs of low emission and reliable power.

Francisco Leon: First, we can provide data centers with the key ingredients they need to operate.

Francisco Leon: large plots of land, access to fiber networks, water, power infrastructure, natural gas, and related interconnections.

Francisco Leon: Our LKills complex, for example, is in the sweet spot and can meet the data center needs and provide accelerated time-to-market benefits that other potential competitors simply cannot match.

Francisco Leon: Our second advantage is that we can utilize our resources and energy expertise to support the development of carbon-free base load power before the end of the decade. California has few in-state dispatchable resources. And we believe retrofitting combined cycle natural gas with CCS is a solution that delivers both the market needs of low emission and reliable power. Alternatively, our 320 million metric tons of pore space throughout the state can support the decarbonization of over 2 gigawatts of new or alternative power to service co-locators and big tech alike. CTV's offerings align with the state's ambitious carbon neutrality goals without exacerbating power shortages or pressuring power prices in California, which are already among the highest in the nation. With that, I'll hand it over to Noel.

Francisco Leon: Our second advantage is that we can utilize our resources and energy expertise to support the development of carbon-free base load power before the end of the decade.

Francisco Leon: California has few in-state dispatchable sources.

Francisco Leon: And we believe retrofitting combined cycle natural gas with CCS is a solution that delivers both the market needs of low emission and reliable power.

Francisco Leon: Alternatively, our 320 million metric tons of core space throughout the state to support the decarbonization of over two gigawatts of new or alternative power to service co-locators and big tech alike. CTV's offerings align with the state's ambitious carbon neutrality goals without exacerbating power shortages or pressuring power prices in California, which are already among the highest in the nation.

Francisco Leon: Alternatively, our 320 million metric tons of pore space throughout the state to support the decarbonization of over 2 gigawatts of new or alternative power to service

Francisco Leon: co-locators and big tech alike.

Francisco Leon: CTV's offerings align with the state's ambitious carbon neutrality goals.

Francisco Leon: without exacerbating power shortages or pressuring power prices in California, which are already among the highest in the nation.

Noel Molina: With that, I'll hand it over to Nellie. Thanks, Francisco. Our second quarter financial results were solid, extending our strong track record of performance. Pre-cash flow in the quarter reflected as strong oil cells, which were higher than we anticipated. Our earnings were in line with expectations, and we continued to strengthen our capital structure, adding deeper liquidity with an expanded credit facility. All of this was done in combination with higher cash returns to shareholders.

Francisco Leon: With that, I'll hand it over to Nelly.

Nelly Molina: Our second quarter financial results were solid, extending our strong track record of performance. Pre-cash flow in the quarter reflected strong oil sales, which were higher than we anticipated. Our earnings were in line with expectations, and we continue to strengthen our capital structure, adding deeper liquidity with an expanded credit facility. All of this was done in combination with higher cash returns to shareholders. Let me summarize our results for the second quarter. Our business generated $139 million in adjusted EBITDAX and delivered $63 million in free cash flow.

Nelly Molina: Thanks, Francisco.

Nelly Molina: Our second quarter financial results were solid, extending our strong track record of performance.

Speaker Change: Pre-cash flow in the quarter reflected strong oil sales, which were higher than we anticipated.

Nelly Molina: Our earnings were in line with expectations and we continue to strengthen our capital structure, adding deeper liquidity with an expanded credit facility.

Nelly Molina: All of this was done in combination with higher cash returns to shareholders.

Noel Molina: Let me summarize our results for the second quarter. Our business generated 139 million in-adjusted EB docs and delivered 63 million in-free cash flow. Results were driven by consistent base production from our low decline assets, with total volumes in line and oil production at the high end of expectations. The second quarter production averaged 76,000 barrels of oil equivalent per day, and oil averaged 47,000 barrels per day, above the midpoint of our quarterly oil guide. Our realized oil price in the quarter was $81.29 per barrel after hedges, or 96% of Brent. We ran a one-week program throughout the quarter.

Nelly Molina: Let me summarize our results for the second quarter.

Nelly Molina: Our business generated $139 million in adjusted EBITDAX and delivered $63 million in free cash flow.

Nelly Molina: Results were driven by consistent base production from our low-declination assets with total volumes in line and oil production at the high end of expectations. Second quarter production averaged 76,000 barrels of oil equivalent per day, and oil averaged 47,000 barrels per day, above the midpoint of our quarterly oil guide. Our realized oil price in the quarter was $81.29 per barrel after hedges, or 96% of Brent. We run a one-week program throughout the quarter.

Nelly Molina: Results were driven by consistent base production from our low decline assets with total volumes in line and oil production at the high end of expectations.

Nelly Molina: Second quarter production averaged 76,000 barrels of oil equivalent per day, and oil averaged 47,000 barrels per day, above the midpoint of our quarterly oil guide.

Nelly Molina: Our realized oil price in the quarter was $81.29 per barrel after hedges, or 96% of Brent.

Nelly Molina: We run a one-week program throughout the quarter.

Noel Molina: Austin expenses were, on average, in line and reflect our recent efforts to enhance margins.

Nelly Molina: Costs and expenses were on average in line and reflect our recent efforts to enhance our One of the largest validations of synergies was demonstrated when we refinanced all of ERA's outstanding long-term debt at better rates. We issued 600 million of new unsecured notes with a coupon 625 basis points below ERA's legacy second lien loan. These reduce the annual interest expense by about $60 million. During the quarter, we returned $57 million to shareholders, including $35 million in share buybacks and $22 million in dividends, or 90% of our quarterly free cash flow. Year-to-date, we have returned $136 million to shareholders.

Nelly Molina: All expenses were on average in line and reflect our recent efforts to enhance margins.

Noel Molina: One of the largest valuations of synergy was demonstrated when we refinanced all of their outstanding loan-term bets at better rates. We issued 600 million of new unsecured notes with a coupon 625 basis points below ERA's legacy second-line loan. These reduced the annual interest expense by about 60 million.

Nelly Molina: One of the largest validation of synergies was demonstrated when we refinanced all of ERA's outstanding long-term debt at better rates.

Nelly Molina: We issued 600 million of new unsecured notes with a coupon 625 basis points below ERA's legacy second lien loan.

Nelly Molina: These reduce the annual interest expense by about $60 million.

Noel Molina: During the quarter, we returned 57 million to shareholders, including 35 million in share buybacks and 22 million in dividends, or 90% of our quarterly free cash flow. Year-to-date, we have returned 136 million to shareholders.

Nelly Molina: During the quarter, we returned $57 million to shareholders, including $35 million in share buybacks and $22 million in dividends, or 90% of our quarterly free cash flow.

Nelly Molina: To date, we have returned $136 million to shareholders.

Nelly Molina: As part of the merger, we also improved our liquidity position by increasing our borrowing base to $1.5 billion and electric commitments to $1.1 billion. At merger close, we used the available cash on hand to repay $990 million of ERA's outstanding debt, transaction costs, and financing fees, leaving CRC with roughly $1 billion of liquidity. Turning now to our guidance for the second half of 2024, and building on the $60 million of interest expense savings mentioned earlier, we now expect $235 million in total synergies.

Noel Molina: As part of the murder, we also improved our liquidity position by increasing our borrowing base to 1.5 billion and electric commitments to 1.1 billion. At merger close, we used the available cash on hand to repay 990 million of ERA's outstanding debt, transaction costs, and financing fees, leaving CRC with roughly 1 billion of liquidity.

Nelly Molina: As part of the merger, we also improved our liquidity position by increasing our borrowing base to $1.5 billion and electric commitments to $1.1 billion.

Nelly Molina: At merger close, we use the available cash on hand to repay $990 million of ERA's outstanding debt, transaction costs, and financing fees, leaving CRC with roughly $1 billion of liquidity.

Noel Molina: Tony, now to our guidance for the second half of 2024, and building on a 60 million of interest extend savings mentioned earlier, we now expect 235 million in total synergies. We anticipate approximately 30 million will be reflected in the second half of 2024 results, and the rest in 2025 and beyond. As Francisco mentioned, errors and CRCs assets are interconnected, and we believe there will be additional synergies that can be actions in the near future. Looking to the second half of 2024, we expect our cash flow and free cash flow to more than that will do to the increased scale, strength of a business and our ability to enhance margins through synergies and operational efficiencies.

Nelly Molina: We anticipate approximately $30 million will be reflected in the second half of 2024 results, and the rest in 2025 and beyond. As Francisco mentioned, ERAS and CRC's assets are interconnected, and we believe there will be additional synergies that can be achieved in the near future. Looking to the second half of 2024, we expect our cash flow and free cash flow to more than double due to the increased scale and strength of our business and our ability to enhance margins through synergies and operational efficiency.

Nelly Molina: Turning now to our guidance for the second half of 2024, and building on the $60 million of interest expense savings mentioned earlier, we now expect $235 million in total synergies.

Nelly Molina: We anticipate approximately $30 million will be reflected in the second half of 2024 results, and the rest in 2025 and beyond.

Nelly Molina: As Francisco mentioned, ERAS and CRC's assets are interconnected, and we believe there will be additional synergies that can be actioned in the near future.

Speaker Change: Looking to the second half of 2024, we expect our cash flow and free cash flow to more than double due to the increased scale, strength of our business, and our ability to enhance margins through synergies and operational efficiencies.

Noel Molina: We also expect our 2024 adjusted to be around 1 billion as the business builds momentum into 2025.

Nelly Molina: We also expect our 2024 adjusted EBACs to be around $1 billion as the business builds momentum into 2025. We will continue to have merger-related costs, which include transaction, integration, and cost-to-achieve synergies that will be reflected in other operating expenses and which are non-recurrent in nature.

Speaker Change: We also expect our 2024 adjusted EBITDA acts to be around $1 billion as the business builds momentum into 2025.

Noel Molina: We will continue to have murdered related calls, which include transaction, integration, and cost to achieve synergies that will be reflected in all the operating expenses and which are non-recurrent in nature.

Speaker Change: We will continue to have merger-related costs, which include transaction, integration, and cost-to-achieve synergies that will be reflected in other operating expenses and which are non-recurrent in nature.

Noel Molina: I would like to remind you about our hedge book. No matter what prices may move for the balance of the year and through 2025, we have managed our hedge book to provide the revenues necessary to, one, invest in both the core and CTV businesses; two, service our debts; and three, prioritize shareholder returns, including dividends and share buybacks. In terms of 2026, we have significant hedges in place for that year which, depending upon the size of our drilling program, leave us in the same spot. The capital needs for our drilling program will ultimately be heavily influenced by, among other factors, prevailing market price.

Nelly Molina: I would like to remind you about our hedge books. No matter what prices may move for the balance of the year and through 2025, we have managed our hedge books to provide the revenues necessary to, one, invest in both the core and CTV businesses, two, service our debt, and three, prioritize shareholder returns, including dividends and share buybacks. In terms of 2026, we have significant hedges in place for that year, which, depending upon the size of our drilling program, leave us in the same position. The capital needs for our drilling program will ultimately be heavily influenced by, among other factors, prevailing markets. We are committed to preserving a solid balance sheet and believe we have the financial flexibility to deliver on our strategic objectives. With that, I'll turn it back to Francisco.

Speaker Change: I would like to remind you about our Hedge Book.

Speaker Change: No matter what prices may move for the balance of the year and through 2025, we have managed our hedge book to provide the revenues necessary to, one, invest in both the core and CTV businesses, two, service our debt,

Speaker Change: And three, prioritize shareholder returns, including dividends and share buybacks.

Speaker Change: In terms of 2026, we have significant hedges in place for that year, which, depending upon the size of our drilling program, leave us in the same spot.

Speaker Change: The capital needs for our drilling program will ultimately be heavily influenced by, among other factors, prevailing market price.

Noel Molina: We are committed to preserving a solid balance sheet and believe we have the financial flexibility to deliver on our strategic objectives.

Speaker Change: We are committed to preserving a solid balance sheet and believe we have the financial flexibility to deliver on our strategic objectives.

Francisco Leon: With that, I'll turn it back to Francisco. We're excited to execute on our strategy across a platform that is now bigger and better. Our hedge book, Durable Castles, and balance sheet flexibility provide business stability through market volatility.

Speaker Change: With that, I'll turn it back to Francisco.

Francisco Leon: We're excited to execute on our strategy across a platform that is now bigger and better. Our hedge book, durable cash flows, and balance sheet flexibility provides business stability through market volatility.

Francisco Leon: Our hedge book, durable cash flows, and balance sheet flexibility provide business stability through MarketBot. Moving forward, we will have three primary areas of focus. First, we will drive our business decisions to deliver cash flow per share growth and strong returns to shareholders while preserving a strong balance. Second, we will continue to drive operational efficiencies and execute on $235 million of operational and financial synergies that will improve the business cost structure. And finally, we will continue to expand our California-leading carbon management platform through new CDMAs and permit applications to offer sustainable energy solutions to existing and developing industries to support California's Net Zero Goals.

Francisco Leon: Moving forward, we will have three primary areas of focus. First, we will drive our business decisions to deliver cash loop or share growth and strong returns to shareholders while preserving a strong balance sheet. Second, we will continue to drive operational efficiencies and execute on 235 million of operational and financial synergies that will improve the business cost structure. And finally, we will continue to expand our California leading carbon management platform through new CDMAs and permit applications to offer sustainable energy solutions to existing and developing industries to support California's net zero goals. We truly are a different kind of energy company and look forward to unlocking the value of our expanded enterprise for the benefit of our shareholders and our fellow California.

Francisco Leon: Moving forward, we will have three primary areas of focus.

Francisco Leon: First.

Speaker Change: We will drive our business decisions to deliver cash flow per share growth and strong returns to shareholders while preserving a strong balance sheet.

Speaker Change: Second, we will continue to drive operational efficiencies and execute on 235 million of operational and financial synergies that will improve the business cost structure.

Speaker Change: And finally, we will continue to expand our California leading carbon management platform through new CDMAs and permit applications to offer sustainable energy solutions.

Speaker Change: to existing and developing industries to support California's Net Zero Goals.

Francisco Leon: We truly are a different kind of energy and look forward to unlocking the value of our expanded enterprise for the benefit of our shareholders and our fellow Californians. Operator, thank you.

Speaker Change: We truly are a different kind of energy company.

Speaker Change: and look forward to unlocking the value of our expanded enterprise for the benefit of our shareholders and our fellow Californians.

Operator: James.

Operator: And with that, we can now open the line for questions.

Operator: Operator? Thank you. And ladies and gentlemen, at this time, we will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Please limit yourself, or please limit your questions to one person. One primary and one follow-up.

Speaker Change: And with that, we can now open the line for questions. Operator?

Operator: Thank you. And ladies and gentlemen, at this time, we will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit your questions to one primary and one follow-up. And at this time, we'll pause momentarily for the first question. And our first question today will come from Scott Hanold with RBC. Please go ahead. Yeah, thanks.

Speaker Change: Thank you. And ladies and gentlemen, at this time we will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself or please limit your questions to one primary and one follow-up. And at this time, we'll pause momentarily for the first question.

Operator: And at this time, we'll pause momentarily for the first question.

Scott Hanold: And our first question today will come from Scott Hanold with RBC. Please go ahead. Yeah, thanks. Good morning. You know, it looks like the CTV assets are squirrely positioned for, you know, this carbon-free data center AI demand opportunity. I know it's early, but, you know, when you look at the economic dynamics of, you know, this, you know, how does that compare with some of the other, you know, prior, you know, CTV projects you're evaluating. And also, if you think about the different power solutions to utilize for these data centers? I know you talked about the combined cycle, you know, kind of facilities, but are there other options?

Speaker Change: And our first question today will come from Scott Hanold with RBC. Please go ahead.

Scott Hanold: You know, it looks like the CTV assets are squarely positioned for, you know, this carbon-free data center and AI demand opportunity. I know it's early, but, you know, when you look at the economics of this, how does that compare with some of the other, you know, prior CTV projects you're evaluating? And also, as you think about the different power solutions to utilize for these data centers, I know you talked about the combined cycle, you know, kind of facilities, but are there other options, and does that impact the economics?

Scott Hanold: Yeah, thanks. Good morning.

Scott Hanold: Yeah, thanks. Good morning. You know, it looks like the CTV assets are squarely positioned for, you know, this carbon-free data center, AI demand opportunity. I know it's early, but...

Scott Hanold: You know, when you look at the economics of, you know, this, you know, how does that compare with some of the other, you know, prior, you know, you know, CTV projects you're evaluating?

Speaker Change: And also, as you think about the different power solutions to utilize for these data centers, I know you talked about the combined cycle, you know, kind of facilities, but are there other options and does that impact the economics?

Scott Hanold: And does that impact the economics? Thanks.

Francisco Leon: Hey Scott, yeah, thanks. Thanks for the question. So, yeah, this is, if you go to our slide today, we highlight the location of our reservoirs that we've been permitting now for over two years in the northern part of California. So, this has been a long time build and execution from our team to get us to the right area. Yes, around the state where we can service all these potential emitters. So, we're excited about the location of these northern reservoirs. You can see it on the map. There's been a lot of questions as we have built our CTV strategy around where the emissions are going to come from.

Francisco Leon: Hey Scott. Yeah, thanks. Thanks for the question. Yeah, this is, if you go to our slide deck today, we highlight the location of our reservoirs that we've been permitting now for over two years in the northern part of California. So, this has been a long-term build and execution from our team to get us to the right areas around the state where we can service all these potential emitters. So, we're excited about the location of these northern reservoirs. You can see it on the map.

Speaker Change: Hey, Scott. Yeah, thanks. Thanks for the question.

Scott Hanold: Yeah, this is, if you go to our slide deck today, we highlight the location of our

Scott Hanold: Reservoirs that we've been permitting now for over two years in the northern part of California. So this has been a

Scott Hanold: We have a long time build and execution from our team to get us to the right areas around the state where we can service all these potential emitters. So we're excited about the location of these northern reservoirs.

Francisco Leon: There's been a lot of questions as we have built our CTV strategy around where the emissions are going to come from. And I think that should be clear that we're targeting the Bay Area, San Francisco, Sacramento, where a lot of the existing hard to evade sectors of emissions are there. So we like the positioning there.

Scott Hanold: You can see it on the map. There's been a lot of questions as we have built our CTV strategy.

Francisco Leon: And I think that should clear that we're targeting the Bay Area, San Francisco, Sacramento, where a lot of the existing hard-to-obey sectors of emissions are there. So, we like, we like the positioning there.

Scott Hanold: around where the emissions are going to come from. And I think that should clear.

Scott Hanold: that were targeting the Bay Area, San Francisco, Sacramento were a lot of the existing hard-to-evade sectors of...

Scott Hanold: emissions are there so we like we like the positioning there. We also are looking at these data center growth with a lot of interest as

Francisco Leon: We also are looking at these data center growth with a lot of interest, as these older power plants that have been in service for a long time are going to be critical to attracting and retaining data centers in California. Data centers need 24/7 base load power. It's a race to get to market. First time to market is critical. So, having existing infrastructure is actually going to be key. The nice thing is with CTV, we offer a not only the time to market opportunity, but we have an ability to bring a decarbonized power generation into the fold that also meets the other criteria.

Francisco Leon: We also are looking at data center growth with a lot of interest as these older power plants that have been in service for a long time are going to be critical to attracting and retaining data centers in California. The data centers need 24-7 base load power. It's a race to get to market first; time to market is critical.

Speaker Change: These older power plants that have been in service for a long time are going to be critical to attracting and retaining data centers in California. Data centers need 24-7 base load power.

Speaker Change: It's a race to get to market first time to market is critical

Francisco Leon: So having existing infrastructure is absolutely going to be key. And the nice thing is that, with CTV, we offer not only the time to market opportunity, but we have an ability to bring decarbonized power generation into the fold that also meets the other criteria. As we move up north, and really, the strength of our business there is in the poor space availability to sequester emissions. We will look for partnerships around these existing power plants.

Speaker Change: So having existing infrastructure is actually going to be key.

Speaker Change: The nice thing is with CTV, we offer not only the time-to-market opportunity, but we have an ability to bring a decarbonized power generation into the fold that also meets the other criteria.

Francisco Leon: As we move up north, and really the strength of our business there is in the poor space availability to sequester emissions. We will look for partnerships around the existing power. Plans. There will be an opportunity to develop other technologies like fuel cells; geothermal will also come into play. And those could be important, depending on what data centers ultimately want to power to power their AI.

Speaker Change: As we move up north and really the strength of our business there is in the pore space availability to sequester emissions, we will look for partnerships around these existing power plants.

Francisco Leon: There will be an opportunity to develop other technologies, like fuel cells, geothermal energy will also come into play, and those would be important depending on what data centers ultimately want to power their AI. I don't foresee any changes to the type curve. I would say I am very confident that we have the right pricing for storage-only projects. And what you're seeing here is more market development on both the emission side and also on who's going to consume that power for future growth. So no changes that I would say are coming in our type curve. I feel very good about our positioning and how we're aligned to accommodate this incremental power that will come from data.

Speaker Change: There will be an opportunity to develop other technologies like fuel cells, geothermal will also come into play. And those would be important depending on what data centers ultimately want to power their AI.

Francisco Leon: I don't foresee any changes to the type curve. I would say very confident that we have the right pricing for storage-only projects. And what you're seeing here is more the market development on both the emission side and also on who's going to consume that power for future growth. So no changes that I would say coming in our type curve feel very good about our positioning and how we're aligned to accommodate this incremental power that will come from data centers. I appreciate that color.

Speaker Change: I don't foresee any changes to the type curve. I would say I'm very confident that...

Speaker Change: We have the right pricing for storage-only projects.

Speaker Change: And what you're seeing here is more of the market development.

Speaker Change: on both the emission side and also on the who's going to consume that power for future growth. So no changes that I would say coming in our type curve feel very good about our positioning and how we're aligned to accommodate this incremental power that will come from data centers.

Francisco Leon: I appreciate that color. And then my next question is going to be about the oil and gas business. And as you kind of think forward, you know, into 2025, you now have a combined asset base with ERA. Can you talk a little bit about, you know, how do you see activity on a combined, combined basis? Like, where's it going to be, you know, focused on? And, you know, where are we at with getting whaling gas permits? I know you all are running a dual path, but can you remind us and refresh us on where we're at that gives you confidence in getting to more of a maintenance mode in 2H25?

Scott Hanold: And then my next question is going to be on the oil and gas business. And as you kind of think forward, you know, into 2025, is the, you now have a combined asset base with there. Can you talk about a little bit about, you know, how do you see activity on the combined basis like where is it going to be, you know, focused on and where are we at with, you know, getting oil and gas permits.

Speaker Change: Appreciate that color. And then my next question is going to be on the oil and gas business.

Speaker Change: As you kind of think forward, you know, into 2025 is the, you know, you now have a combined asset base with ERA. Can you talk...

Speaker Change: A little bit about, you know, how do you see activity on the combined basis? Like, where is it going to be, you know, focused on? And, you know, where are we at with, you know, getting...

Francisco Leon: I know you all running a dual path, but can you remind us and refresh us on where we are that gives you confidence in getting to more of a maintenance mode and to age 25. Yeah, for sure. So we're confident in our one degree inventory that we talked about before in terms of new wells, but these assets really, it's about work overs on sidetracks. That's the bread and butter of our assets and air assets as well. And so we're able to, with one rig program running between the two assets, work overs on sidetracks, we should be able to deliver that mid, mid single digit decline, even with no incremental permits.

Speaker Change: Whale and gas permits, I know you all are running a dual path, but can you remind us and refresh us on where we're at that gives you confidence in getting to more of a maintenance mode in 2H25?

Francisco Leon: Yeah, for sure. So we're confident in our one rig inventory that we've talked about before, in terms of new wells, but these assets are really about workovers and sidetracks. That's the bread and butter of our assets and ARAS assets as well. And so we're able to, with one rig program running between the two assets, workovers, and sidetracks, we should be able to deliver that mid-single-digit decline, even with no incremental permits. So we feel good about the quality of the assets, the low decline, and the ability to work over older wellbores and go to different zones for incremental production.

Speaker Change: Yeah, for sure. So we're confident in our one rig inventory that we talked about before.

Speaker Change: in terms of new wells. But these assets, really, it's about workovers and sidetracks. That's the bread and butter of our assets and ARAS assets as well. And so we're able to, with one rig program running between the two assets.

Speaker Change: Workovers on sidetracks.

Speaker Change: we should be able to deliver that MID.

Francisco Leon: So we feel good about the quality of the assets, the low decline, and the ability to work over all their well boards and go to different different zones for incremental production. So that's the way ultimately this business runs, and now to get to a steady state of stay flat, which is ultimately our objective, is to keep production flat and keep that stability in the caseloads.

Speaker Change: Mid-single-digit decline even with no incremental permits. So we feel good about the quality of the assets, the low decline.

Speaker Change: and the ability to

Speaker Change: work over all their wellbores and go to different zones for incremental production.

Francisco Leon: So that's the way, ultimately, this business runs. And now to get to a steady state of staying flat, which is ultimately our objective, is to keep production flat and keep that stability in the cash flows. We haven't really changed the timeline. We still see the second half of 2025 as the point in time where we have that line of sight to a path to getting permits back again in California. So that hasn't changed.

Speaker Change: So that's the way ultimately this business runs and now to get to a steady state of a stay flat which is ultimately our objective is to keep production flat and keep that stability in the cash flows.

Francisco Leon: We are we haven't really changed the timeline. We still see the second half of 2025 as the point in time where we have that line of sight to a path to getting permits back again in California. So that hasn't changed. We still are working towards the timeline, working multiple alternatives as we talked about before. But again, this this company runs very well, as you saw with our results year to date, with only a 2% decline during the period. These assets run really well with just the blocking and tackling and doing surveillance and doing and just focusing on the base production, right?

Speaker Change: We haven't really changed the timeline. We still see the second half of 2025.

Speaker Change: as the point in time where we have that line of sight to IE.

Speaker Change: a path to getting permits back again in California. So that hasn't changed. We still are working towards that timeline, working multiple alternatives as we talked about before.

Francisco Leon: We still are working towards that timeline, working multiple alternatives as we talked about before, but again, this company runs very well, as you saw with our results year to date with only a 2% decline during the period. These assets run really well with just the blocking and tackling and doing surveillance and doing and just focusing on the base production, right? That's the great thing about the assets that we own.

Speaker Change: But again, this company runs very well, as you saw with our results year-to-date, with only a 2%.

Speaker Change: Decline during the period, these assets run really well with just the blocking and tackling and doing surveillance and doing and just focusing on the base production, right? That's the great thing about the assets that we own.

Francisco Leon: That's the great thing about the assets that we own.

Operator: Thank you.

Kaleinoheaokealaula Akamine: Hello, next question. We'll come from Kalei with Akamine with Bank of America. We'll go ahead.

Kaleinoheaokealaula Akamine: And our next question will come from Kale with Akamine on Bank of America. Please go ahead. Hey!

Speaker Change: Thank you.

Speaker Change: And our next question will come from Kale Akamine with Bank of America. Please go ahead.

Kaleinoheaokealaula Akamine: Hey, good morning guys. Francisco, CRC team. I've got a follow-up there on the big theme of data centers. I think there's no question that there's a bigger data center trend out there, and guys on my side are obviously trying to figure out what that means for businesses like yours. Maybe at a basic level, we can agree that it's positive for the gas price. I guess where I'm a little bit less clear is what it means for volumes. So as you think about the potential outcomes of what data centers mean for your business, is there some scenario that clearly drives volume growth in your business as a response to price?

Kaleinoheaokealaula Akamine: Hey, good morning, guys, Francisco CRC team. I've got to follow up there on the big thematic on data centers. I think there's no question that there's a bigger data center, data center thematic out there. And guys in my side are obviously trying to figure out what that means for businesses like yours. Maybe at a base level, we can agree that it's positive. The gas price, I guess where I'm a little bit less clear is what it needs for volumes. So, as you think about the potential outcomes of what data centers mean for your business, is there sort of a scenario that clearly drives the volume growth in your business as a response to price?

Speaker Change: Hey, good morning guys, Francisco, CRC team.

Kalle Ackermann: I've got to follow up there on the big thematic on data centers.

Kalle Ackermann: No question that there's a bigger data center thematic out there, and guys on my side are obviously trying to figure out what that means for businesses like yours.

Speaker Change: maybe at a base level we can agree that it's positive for the gas price. I guess where I'm a little bit less clear is what it means for volumes.

Speaker Change: So, as you think about the potential outcomes of what data centers mean for your business, is there sort of a scenario that clearly drives volume growth in your business as a response to price?

Francisco Leon: So, yes, a reminder: CRC has about 80% of the natural gas production in state; the rest of it we import from other states.

Francisco Leon: So yes, as a reminder, we CRC have about 80% of the natural gas production in the state; the rest of it, we import from other states. So are there scenarios of growth? Absolutely, you have to think if you look at the growth profile of data centers and then you go, okay, well, these data centers are not going to rely on renewables and intermittent power; you need to come back to baseload. California doesn't really have a lot of options. We're down to one nuclear plant, and hydro tends to be variable, depending on the rain.

Speaker Change: So yes, as a reminder, we

Speaker Change: CRC has about 80% of the natural gas production in-state. The rest of it we import from other states.

Francisco Leon: So are there scenarios of growth? Absolutely. You have to think if you look at the growth profile of data centers, and then you go to, okay, well, these data centers are not going to rely on renewables and intermittent power. Or you need to come back to base load. California doesn't really have a lot of options. We're down to one nuclear plant; hydro tends to be variable depending on the rain. So you look at this infrastructure that's already in place with all these independent power producers, which are natural gas, power generation, which are, in some cases, not fully utilized today.

Speaker Change: So are there scenarios of growth? Absolutely, you have to think if you look at the growth profile of

Speaker Change: of Data Centers. And then you go to, okay, well, these data centers are not going to rely on renewables and intermittent power. You need to come back to baseload. California doesn't really have a lot of options. We're down to one nuclear plant.

Francisco Leon: So you look at this infrastructure that's already in place, with all these independent power producers, which are natural gas power generation, which are in some cases not fully utilized today. If the plan should be in California to maximize that utilization, and if you can put the decarbonization plans that we have in place, then you can really solve for multiple variables. And that's what has us really excited, right?

Speaker Change: Hydro tends to be variable depending on the rain.

Speaker Change: So, you look at this infrastructure that's already in place, with all these independent power producers, which are...

Speaker Change: Natural Gas Power Generation, which are, in some cases, not fully utilized today.

Francisco Leon: The plan should be in California to maximize that utilization. And if you can put the decarbonization plan that we have in place, then you can really solve for multiple variables. And that's what has was really excited, right, the decarbonization, which were very committed to do, but you also bring the reliability with this infrastructure and affordability by having local production. You know, as we've highlighted before, we don't feel like all barrels or all MCF are created equal. Local production where you can certify the third parties that your low methane emissions, like we did with MIT, or that it's responsibly sourced across the board should matter to the consumer where their energy comes from.

Speaker Change: The plan should be in California to maximize that utilization.

Speaker Change: And if you can put the decarbonization plans that we have in place.

Speaker Change: then you can really solve for multiple variables. And that's what has us really excited, right? The decarbonization, which we're very committed to do, but you also bring the reliability with this infrastructure and affordability by having local production.

Francisco Leon: It's decarbonization, which we're very committed to doing, but you also bring reliability with this infrastructure and affordability by having local production. You know, as we've highlighted before, we don't feel like all barrels or all MCF are created equal. Local production, where you can certify to third parties that you have low methane emissions, like we did with MIQ, or that it's responsibly sourced across the board, should matter to the consumer where their energy comes from.

Speaker Change: You know what, as we've highlighted before,

Speaker Change: We don't feel like all barrels or all MCFs are created equal.

Speaker Change: Local production where you can certify the third parties.

Speaker Change: that your low methane emissions like we did with MIQ or that it's responsibly sourced across the board should matter to the consumer where their energy comes from. So if you start thinking about data center consumption needs, if you start looking at a path towards

Francisco Leon: So if you start thinking about data center consumption needs, if you start looking at a path towards having preference for local production, then you start really getting excited about our natural gas position and the ability to service a lot of these power plants. So yes, I mean, there's definitely scenarios out there, things have to come, and we're a little bit in front of the market, but I like our assets and how we're positioned from just a production standpoint and an infrastructure point of view as well. All right.

Francisco Leon: So if you start thinking about data center consumption needs, if you start looking at a path towards having preference to local production, then you start really getting excited about our natural gas position and the ability to serve. There is a lot of these power plans. So, so yes, I mean, there's definitely scenarios out there. Things you have to come and we're a little bit in front of the market. But I like our assets and what how our position we are from just a production standpoint and an infrastructure point as well.

Speaker Change: having preference to local production.

Speaker Change: Then you start really getting excited about our natural gas position and the ability to service a lot of these power plants.

Speaker Change: So yes, I mean, there's definitely scenarios out there, things have to come, and we're a little bit in front of the market, but I like our assets and how we're positioned, we are from just a production standpoint and an infrastructure point as well.

Francisco Leon: I guess when you think about it, do you see a lot of behind-the-meter opportunities for your natural gas and your power?

Francisco Leon: I guess when you think about it, you see a lot of behind-the-meter sort of opportunities for your natural gas and your power. Yeah, absolutely. I mean, I think that's something that we're really focused on. There's we have this power plant that all kills 550 megawatt. And we added more power with the era transactions who were we're above 800 megawatts combined. And, you know, the right now, if you look at the trading multiple of CRC, we traded a discount to PDP and we have a critical asset that has a lot of value. We participate in a very attractive capacity program right now, but there's no value recognition for this asset.

Speaker Change: I guess when you think about it you see a lot of behind-the-meter sort of opportunities for your natural gas and your power.

Speaker Change: Yeah, absolutely. I mean, I think that's something that we're really focused on. There's, we have this power plant that outkills 550 megawatt.

Speaker Change: And we added more power with the ARAT transactions, so we're above 800 megawatts combined.

Speaker Change: Right now, if you look at the trading multiple of CRC, we trade at a discount to PDP.

Speaker Change: And we have a critical asset that has a lot of value. We participate in a very attractive capacity program right now, but there's no value recognition for this asset.

Francisco Leon: So we're going to work towards whether it's data centers or other potential partners. We're going to look to unlock that value of the power plant. And you can do that through contract price and duration. And we're focused on that, and that's where the data center opportunity kind of brings a growing and exciting into industry into kind of the forefront of what we're thinking. So there could be ways to unlock that value on their power plant. As you know, we use about one third of the power for self-consumption; the rest of it gets sold into the grid.

Francisco Leon: We're going to work towards, whether it's data centers or other potential partners. We're going to look to unlock that value of the power plant. And you can do that through contract price and duration. And we're focused on that.

Speaker Change: We're going to work towards, whether it's data centers or

Speaker Change: and other potential partners.

Speaker Change: We're going to look to unlock that value of the power plant and you can do that through contract price and duration and we're focused on that and that's where the data center opportunity kind of brings.

Speaker Change: a growing and exciting industry into kind of the forefront of what we're thinking. So

Francisco Leon: And that's where the data center opportunity kind of brings a growing and exciting industry into kind of the forefront of what we're thinking. So there could be ways to unlock that value in their power plant. As you know, we use about one third of the power for self-consumption that goes to the rest of it gets sold into the grid. So those behind the meter opportunities will be important to unlock over time.

Speaker Change: there could be ways to unlock that value on their power plant. As you know, we use about one-third of the power for self-consumption that goes to the rest of it, gets sold into the grid. So those behind-the-meter opportunities will be important to unlock over time.

Kaleinoheaokealaula Akamine: So those behind the mirror opportunities will be important to unlock. Over time. Got it.

Kaleinoheaokealaula Akamine: Got it. There's a lot changing in the long term, for sure. It's a very interesting setup. I guess my follow-up question is on the nearer term outlook for California gas. I think some of us were surprised to see SoCal under HUB in the second quarter, but that premium seems to have returned. As we sort of head into 2025, that premium looks a little bit more durable as you have Mexican LNG perhaps siphoning some of that California imports away. But there are a lot of things happening. California renewables are growing. As you sort of run your scenarios for 2025, how do you see the balance playing out?

Kaleinoheaokealaula Akamine: There's a lot changing in the long term, for sure. It's a very interesting setup.

Kaleinoheaokealaula Akamine: I guess my follow-up is on the new return outlook for California gas. I think some of us were surprised to see SoCal underhub in the second quarter, but that premium seems to have returned. As we sort of head into 25, that premium looks a little bit more durable as you have Mexican LNG perhaps sighted in some way, some of that California imports away, but there is a lot of things happening. California Renewables. Those are growing. So, as you sort of run your scenarios for 25, how do you see the balances playing out? Sounds great. That's a great question on gas.

Speaker Change: Got it. There's a lot changing in the long term for sure. It's a very interesting setup. I guess my follow-up is on the newer term outlook for California gas.

Speaker Change: I think some of us were surprised to see SoCal under HUB in the second quarter, but that premium seems to have returned. As we sort of head into 2025, that premium looks a little bit more durable, as you have Mexican LNG perhaps siphoning some of that California imports away.

Speaker Change: There is a lot of things happening in California. Renewables are growing. So as you sort of run your scenarios for 25 How do you see the balances playing out?

Francisco Leon: Sounds great, Kalei. That's a great question.

Francisco Leon: So I'll turn it over to Jay here in a minute to cover the near-term impact, but yes, a reminder, just more macro and longer term first. California short gas. We import a lot of the gas that we consume in state as LNG projects get sex and advanced. The gas will flow to pray places where you can find better pricing. So that's why it's important to develop that local industry so that we can really provide that gas when the market eats it. But the dynamics in terms of the short term, I'll let Jay speak to that.

Speaker Change: Sounds great, Kalei. That's a great question on gas. So I'll turn it over to Jay here in a minute to cover the near-term impact. But yes, a reminder, just more macro and longer-term first.

Francisco Leon: So I'll turn it over to Jay here in a minute to cover the near-term impact. But yes, a reminder, just more macro and longer term first. California Short Gas, we import a lot of the gas that we consume in the state. As LNG projects get sanctioned in advance, the gas will flow to great places where it can find better pricing. So that's why it's important to develop that local industry so that we can really provide that gas when the market needs it. But the dynamics in terms of the short term, I'll let Jay speak to that.

Jay: California Short Gas, we import a lot of the gas that we consume in state.

Jay: As LNG projects get sanctioned in advance, the gas...

Jay: will float to great places where it can find better pricing. So that's why it's important to develop that local industry so that we can really provide that gas when the market needs it. But the dynamics in terms of the short term, I'll let Jay speak to that.

Jay Bys: Sorry about that. We had a little IT mishap here. Yeah, your notation is correct. In Q2, both the border and the city gate traded below or near the screen, which is pretty unusual for the last couple of three years. The fact is, gas is going to go where it's most valuable, and gas is making its way to California, particularly from the Permian, where its alternative market price would have been something close to zero or negative. So like water, it's going to flow to the most attractive point.

Jay Bys: Hi, sorry about that little I do miss out here. Yeah, your notations correct Q2. Both the border and the city gate traded below or near the screen, which is pretty unusual last couple three years. The fact is gas is going to go to where it's most valuable, and gas is making its way to California, particularly from the Permian, where its alternative market price would have been something close to zero or negative. So, like water, it's going to flow to the most attractive point going forward. I think you already seen what's going to happen. You're seeing a lot of this Permian gas gets stuck in the Rockies, for example, and unable to make it over to California today.

Jay: that

Jay: i

Jay: Hi, Kalei. Sorry about that. We had a little IT mishap here. Yeah, your notation is correct. Q2.

Jay: Both the border and the city gate traded below or near the screen, which is pretty unusual for the last couple, three years.

Jay: The fact is, gas is going to go to where it's most valuable, and gas is making its way to California, particularly from the Permian, where its alternative market price would have been something close to zero or negative, so like water, it's going to flow to the most attractive point.

Jay Bys: Going forward, I think you're already seeing what's going to happen. You're seeing a lot of this Permian gas getting stuck in the Rockies, for example, and unable to make it over to California today. So you're seeing differentials in differentials in price between California and, for example, the Rockies. I think you're going to see more and more of that next year. Again, we produce roughly roughly 15 percent of the natural gas we consume in the state over time. That's not a good position to be in right now. It's great to have low-cost gas coming from somewhere else.

Jay: Going forward, I think you're already seeing what's going to happen. You're seeing a lot of this Permian gas get stuck in the Rockies, for example, and unable to make it over to California today. So you're seeing differentials in price between California and, for example, the Rockies. I think you're going to see more and more of that next year.

Jay Bys: So you're seeing differentials and differentials in price between California and, for example, the Rockies. I think you're going to see more and more of that next year. We again, we produce roughly 15% of the natural gas we consume in the state over time. That's not a good position to be in right now. It's great to have low-cost gas coming from somewhere else, but over time, we need to dictate our own fate. It's helpful. Thanks, guys.

Speaker Change: Again, we produce roughly 15% of the natural gas we consume in the state over time. That's not a good position to be in right now. It's great to have low-cost gas coming from somewhere else, but over time, we need to dictate our own fate.

Jay Bys: But over time, we need to dictate our own fate.

Betty Jane: And our next question will come from Betty Jane with Berkeley. Go ahead. Good morning. Thanks for taking my question. This is probably a data center question, but also related to CTV. So I want to ask about Cal Capture project. It is a very meaningful project, and it's in house. These post-combustion projects are more capital intensive, so we'll love to understand the decision drivers around whether or not you will plan to move forward with that project. And how much of that is tied to signing a power purchase agreement with a buyer that are willing to pay up for low carbon power?

Betty Jang: And our next question will come from Betty Jang with Barclays. Please go ahead.

Speaker Change: Hopeful. Thanks, guys.

Speaker Change: And our next question will come from Betty Jang with Barclays. Please go ahead.

Betty Jang: Good morning. Thanks for taking my question. This is probably a data center question, but it's also related to CTV, so I want to ask about the CalCAPTCHA project. It is a very meaningful project, and it's in-house. These post-combustion projects are more capital intensive. So we'd love to understand the decision drivers around whether or not you plan to move forward with that project and how much of that is tied to signing a power purchase agreement with a buyer who is willing to pay more for low-carbon power.

Betty Jang: Good morning. Thanks for taking my question.

Speaker Change: This is probably a data center.

Betty Jang: question but also related to CPV. So I want to ask about CalCAPTCHA project.

Speaker Change: It is a very meaningful project and it's in-house.

Speaker Change: These post-combustion projects are more capital-intensive.

Speaker Change: So we'd love to understand the decision drivers around whether or not you will plan to move forward with that project and how much of that is tied to signing a power purchase agreement with a buyer that are willing to pay up for low carbon power.

Francisco Leon: Hey, Betty. Yeah, so Cal capture, which is a putting a capture system on our LKILs power plant. So we really like the ability to control our own destiny and emissions behind the meter.

Francisco Leon: Hey, Betty. Yeah, so CalCapture, which is putting a capture system on our Elk Hills power plant. So we really like the ability to control our own destiny and emissions behind the meter. We were looking for a solution for the state that's going to require pipelines, and that's going to ultimately bring scalability to CTV. But in the meantime, and until we get a better framework to retrofit pipelines, having those emissions behind the meter and with our power plant or steam generation is the way to bring forward the industry. So we feel good about the control points that we have. As you mentioned, this is a natural gas combined cycle plant with a low concentration of CO2.

Betty Jang: Hey Betty. Yes, so CalCapture, which is putting a capture system on our Elk Hills power plant. So we really like the ability to control our own destiny and emissions behind the meter. We were looking for

Francisco Leon: We were looking for. to provide a solution for the state that's going to require pipelines, and that's going to ultimately bring the scalability to CTV. But in the meantime, and until we get more better framework to retrofit pipelines, having those emissions behind the meter, and where there are power plant or steam generations is the way to bring forward the industry. So we feel good about the control points that we have. As you mentioned, this is an actual gas combined cycle plant low concentration CO2. So if you look at the cost curve, it's going to be on the higher end of the sources that you can capture.

Speaker Change: to provide a solution for the state that's going to require pipelines and that's going to ultimately bring the scalability to CTV.

Speaker Change: But in the meantime, and until we get a better framework to retrofit pipelines, having those emissions behind the meter, and with our power plant or steam generations, is the way to bring forward the industry, so we feel good about the control points that we have.

Speaker Change: As you mentioned, this is a natural gas combined cycle plant, low concentration of CO2. So, if you look at the cost curve, it's going to be on the higher end of the sources that you can capture. So, the value drivers that you need is ultimately good definition around the cost of the capture. And we've done multiple feed studies now, so we have a good handle of how much that's going to cost.

Francisco Leon: So, if you look at the cost curve, it's going to be on the higher end on the sources that you can capture. So, the value drivers that you need are ultimately good definition around the cost of the capture. And we've done multiple feed studies now, so we have a good handle on how much that's going to cost. So, you need to bring in the revenue drivers around incentives, and that's a combination of federal and state incentives and also PPA from data centers, or, ultimately, it doesn't have to be data centers, right?

Francisco Leon: So the value drivers that you need is ultimately good definition around the cost to the capture. And we've done multiple feed studies now. So we have a good handle of how that's how much they're going to cost. So you need to be bringing the revenue drivers around incentives. And that's a combination of federal and state incentives. And also PPA from data centers or ultimately, it doesn't have to be data centers. Right at the end of the day, what we're looking for is the right price point where the consumer of that power not only recognizes the advantage of the power already being there, but also the ability to unlock a carbon free power before the end of the decade.

Speaker Change: So, you need to bring in the revenue drivers around incentives, and that's a combination of federal and state incentives, and also PPA from data centers, or ultimately, it doesn't have to be data centers, right? At the end of the day, what we're looking for is the right...

Francisco Leon: At the end of the day, what we're looking for is the right price point where the consumer of that power not only recognizes the advantage of the power already being there but also the ability to unlock carbon-free power before the end of the decade. So, I would say we're kind of in that price discovery mode. We're trying to understand the value that that can bring in terms of all the different elements in our strategy.

Speaker Change: Price point where the consumer of that power not only recognizes the advantage of the power already being there, but also the ability to unlock.

Francisco Leon: So I would say we're kind of in that price discovery mode; we're trying to understand the value that that can bring in in terms of all the different elements to our strategy. And if we get that, we solve for all the right variables, I think this project will be a great one to bring forward.

Speaker Change: a carbon-free power before the end of the decade.

Speaker Change: So, I would say we're kind of in that price discovery mode, we're trying to understand

Speaker Change: The value that that can bring in terms of all the different elements to our strategy.

Francisco Leon: And if we solve for all the right variables, I think this project will be a great one to bring forward. So, we're not ready yet, but it's something that we're actively looking at, and we're kind of growing in excitement around being able to do something at the Elk Hills Power Plant.

Speaker Change: And if we solve for all the right variables, I think this project will be a great one to bring forward. So, we're not ready yet, but it's something that we're actively looking at, and we're kind of growing in excitement around being able to do something at the Elk Hills Power Plant.

Betty Jane: So we're not ready yet, but it's something that we're actively looking at, and we could kind of grow an excitement around being able to do something at the alcoast power plant. Got it. I'm very interesting. Look forward to that.

Betty Jang: Got it. It's very interesting. I look forward to that and then my follow-up on the more uses of free cash flow. We are seeing quite a bit of free cash flow generation this year and next year, and I'm wondering, what will be the calls on your cash maybe for the next several years? The only thing we see is there's that potential, the 2026 maturity, is that something that you want to preserve cash to pay off? Or as you start generating that meaningful free cash flow, is that more likely to come down to cash return and be a buyback?

Betty Jane: And then my follow up more on the free uses of free cash flow. We are seeing quite a bit of free cash flow generation in 2025 that this year and next year. And wondering what are the call on your cash, maybe for the next several years. The only thing we see is there's that potential at the 2026 maturity. Is that something that you want to preserve cash to pay off? Or, as you start generating that meaningful free cash flow, that's more likely to come down to cash return and be a buyback. So yeah, Betty, so we I guess we have to look backwards to our track record as a company since 2021, and we've returned 894 million dollars of cash to shareholders through a combination of dividends and buybacks.

Speaker Change: Got it. Very interesting. Look forward to that. And then my follow-up, more on the free uses of free cash flow. We are seeing quite a bit of free cash flow generation in 2020, this year and next year. And.

Speaker Change: I'm wondering, what are the calls on your cash, maybe for the next several years?

Speaker Change: The only thing we see is there's that potential, the 2026 maturity, is that something that you want to preserve cash to pay off, or as you start generating that meaningful free cash flow, that's more likely to come down to cash return?

Speaker Change: and Via Biobank.

Speaker Change: So yeah, Betty, so we, I guess we have to look backwards to our track record as a company since 2021. And we've returned

Francisco Leon: $894 million of cash to shareholders through a combination of dividends and buybacks. And we also were able to accumulate a significant amount of cash. So that's the business model. That's what CRC offers is the ability to generate a lot of cash and then aggressively return it back to shareholders. We are very comfortable with a fixed dividend model.

Speaker Change: $894 million of cash to shareholders through a combination of dividends and buybacks.

Francisco Leon: And we also were able to accumulate the significant amount of cash. So that's the that's the business model. That's what CRC offers: the ability to generate a lot of cash and then aggressively return it back to shareholders. We are very comfortable with a fixed dividend model. We want to continue to offer that to our shareholders, and we like to have that as a growing fixed dividend model. This is, you know, the fourth consecutive year where we've grown that dividend. So that's a key key part of our strategy. The share of buybacks are important as well, in particular at levels where we're trading today.

Speaker Change: and we also were able to accumulate a significant amount of cash. So that's the business model, that's what CRC offers, is the ability to generate a lot of cash and then aggressively return it back to shareholders.

Speaker Change: We are very comfortable with a fixed dividend model. We want to continue to offer that to our shareholders.

Francisco Leon: We want to continue to offer that to our shareholders, and we like to have that as a growing fixed dividend model. This is the fourth consecutive year that we've grown that dividend. So that's a key part of our strategy. The share buybacks are important as well, in particular at the levels where we're trading today. And as we wait for all these catalysts to unfold, it makes a lot of sense for us to buy back our shares at what we think is a meaningful discount.

Speaker Change: And we like to have that as a growing fixed dividend model. This is, you know, the fourth consecutive year where we've grown that dividend. So that's a key part of our strategy. The share buybacks are important as well, in particular at levels where we're trading today.

Francisco Leon: And as we wait for all these catalysts to unfold, it makes a lot of sense to us to buy back our shares at what we think is a meaningful discount. And that's where the discretionary piece ultimately comes from. So I guess the other point to raise on the buybacks. We no longer have effectively any restricted payment capacity on the buyback. So your question is super valid. It's about the what do we do with the cash? And you know, do you talked about the debt. The 2026 is what we said is we want to be at a half a turn net leverage, and we're slightly above that.

Speaker Change: And as we wait for all these catalysts to unfold, it makes a lot of sense to us to buy back our shares at what we think is a meaningful discount. And that's where the discretionary piece ultimately comes from.

Francisco Leon: And that's where the discretionary piece ultimately comes from. So I guess the other point to raise on the buybacks is that we no longer have effectively any restricted payment capacity on the buyback. So your question is super valid.

Speaker Change: I guess the other point to raise on the buybacks, we no longer have...

Speaker Change: effectively any restricted payment capacity on the buyback. So your question is super valid, it's about what do we do with the cash.

Francisco Leon: It's about what do we do with the cash? And you talked about the debt, the 2026s. What we said is we want to be at a half-turn net leverage, and we're slightly above that, but we want to get to that target point quickly. And so we'll look to preserve some cash to get there, or always look to be in the market if there's an opportunity to buy those bonds. As a reminder, the 2026s are callable, are a little bit over 101, and then they step down to part next year.

Speaker Change: and you know you talked about the debt the 2026 is what we said is we want to be at a half a turn net leverage

Francisco Leon: But we want to get to that target point quickly. And so we'll look to preserve some cash to get there or always look to be in the market if there's an opportunity to buy those bonds. As a reminder, the 2026s are callable a little bit over 101, and then they step down to partners here. So it gives us some prepayability option. So we have the option to refinance, prepay. But ultimately, we talk with our board every quarter, and we decide what's the best use of that cash. And that's been buybacks by a long shot in the last year quarter.

Speaker Change: And we're slightly above that, but we want to get to that target point quickly.

Speaker Change: And so we'll look to preserve some cash to get there, or always look to be in the market if there's an opportunity to buy those bonds.

Speaker Change: As a reminder, the 2026s are callable at a little bit over 101.

Francisco Leon: So it gives us some prepayability options. So we have the option to refinance, or prepay, but ultimately, we talk with our board every quarter, and we decide what's the best use of that cash. And that's been buybacks by a long shot in the last few quarters. So we'll continue to preserve that optionality. It's a good place to be when you have cash. I would lock in the fixed dividend and then look for ways to buy more shares.

Speaker Change: and then they step down to part next year, so it gives us some pre-payability option. So we have the option to refinance, pre-pay.

Speaker Change: But ultimately, we talk with our board every quarter and we decide what's the best use of that cash.

Speaker Change: And that's been buybacks by a long shot in the last few quarters. So we'll continue to preserve that optionality. It's a good place to be when you have cash. I would lock in the fixed dividend.

Francisco Leon: So we'll continue to preserve that optionality. It's a good place to feed when you have cash. I would lock in the fixed dividend and then look for ways to buy more shares. And, as we said, we're going to continue with our balancing strength. So we're watching the materials and looking at that as well. So the nice thing is, as we wait for permits next year, we have that excess cash flow that we have multiple ways to put it to work in a very attractive. Dewey.

Francisco Leon: And as we said, we're going to continue with our balancing strength. So we're watching the maturities and looking at that as well. So the nice thing is, as we wait for permits next year, we have that excess cash flow that we have multiple ways to put it to work in a very attractive way.

Speaker Change: and then look for ways to buy more shares. And as we said, we're going to continue with a balancing strength. So we're watching the maturities and looking at that as well. So the nice thing is, as we wait for permits next year, we have that excess cash flow that we have multiple ways to put it to work in a very attractive way.

Scott Gruber: And our next question will come from Scott Gruber with Citigroup. Please go ahead. Yes, good morning on your side. Morning.

Scott Gruber: And our next question will come from Scott Gruber with Citigroup. Please go ahead.

Speaker Change: And our next question will come from Scott Gruber with Citigroup. Please go ahead.

Scott Gruber: Yes, good morning on your side.

Scott Gruber: Yes, good morning on your side.

Scott Gruber: I'm just going to turn it back to the CalCaptural Project. What is the latest cost estimate for that project? And I was thinking about funding it. And yeah, how long would it take to add capture the plant in both the terms of permitting and construction? Yeah, all great questions. We haven't provided the mission publicly yet because what I like to do is to present the full picture. And the full picture comes certainly on the cost and permitting side, but also on the revenue line. And once you have all those components, we can address your question, and then we can also look at different financing opportunities.

Francisco Leon: Francisco, turning back to the CalCAPTCHA project, what is the latest cost estimate for that project, and how do you think about funding it? And, yeah, how long would it take to add CAPTCHA to the plant, both in terms of permitting and construction?

Scott Gruber: Morning.

Scott Gruber: Francisco, turning back to the cow capture project, what is the latest cost estimate for that project and how do you think about funding it and yeah how long would it take to add capture to the plant both in terms of permitting and construction?

Francisco Leon: Yeah, all great questions. We haven't provided information publicly yet because what I like to do is present the full picture. And the full picture comes, certainly, on the cost and permitting side, but also on the revenue line. Once you have all those components, we can address your question.

Speaker Change: Yeah, all great questions. We haven't provided information publicly yet because what I like to do is to present the full picture, and the full picture comes certainly on the cost and permitting side, but also on the revenue line. Once you have all those components, we can address your question, and then we can also look at different financing opportunities.

Francisco Leon: And then we can also look at different financing opportunities. We see a lot of appetite from private equity and growing support from traditional lending to deploy capital in projects like CalCapture that are decarbonizing existing infrastructure. So we feel good about where the direction of that business model is going. But we need, as I said earlier, to understand both the incentive packages and the long-term PPA around carbon-free power in order to make that decision.

Francisco Leon: We see a lot of appetite from private equity in growing support from traditional lending to the public capital in projects like CalCaptural that are the carbonizing existing infrastructure. So we feel good about where the direction of that business model is going, but we knew it that I said earlier, we need to understand both the incentive packages in the long term PPA around carbon free power in order to make that decision. And we're still not there yet. We're still looking at that, doing the price discovery on that part of it. So what I would look for is an update that has a more comprehensive view of what we're going to do.

Speaker Change: We see a lot of appetite from private equity in growing support from traditional lending to deploy capital in projects like CalCapture that are decarbonizing existing infrastructure.

Speaker Change: So we feel good about where the direction of that business model is going. But we know, as I said earlier, we need to understand both the incentive packages and the long-term PPA around carbon-free power in order to make that decision. And we're still not there yet. We're still looking at doing the price discovery on that part of it. So what I would look for is an update that has a more comprehensive view of what we're going to do with timeline, and ultimately, how do we generate an attractive return on the project.

Francisco Leon: And we're still not there yet. We're still looking at doing the price discovery on that part of it. So what I would look for is an update that has a more comprehensive view of what we're going to do with the timeline, with estimates, and ultimately, how do we generate an attractive return on the project.

Francisco Leon: With timeline with the midst and ultimately, how do we get generate an effective return on the projects?

Francisco Leon: That's very well. We'll wait for the details.

Francisco Leon: Now, as curious as you have some more color on CTV6, it's going to be a larger site, you know, once approved. Is that tied to a specific project that has been announced, or maybe one that hasn't been announced? And I was looking at the anticipated time of PPA approval in 2027. Is that a bit longer given the size? Are you just building in some contributors in there? So just some more color on CTV6. Thank you. Hey, Scotch, yeah, absolutely. So let me start by saying I'm very pleased with the pipeline inventory that the CTV team has been building.

Scott Gruber: That's fair; we'll wait for the details. And now, I was curious if you had some more color on CPV6.

Speaker Change: That's fair, we'll wait for the details. And now I was curious if you had some more color on CPV6.

Francisco Leon: It's going to be your largest site, you know, once approved. Is that tied to a specific project that has been announced or maybe one that hasn't been announced? And I was looking at the anticipated time of EPA approval in 2027. Is that a bit longer given the size? Or are you just building in some conservatism there? So just some more color on CPV6, thank you.

Speaker Change: It's going to be your largest site, you know, once approved. Is that tied to a specific project?

Speaker Change: that has been announced or maybe one that hasn't been announced.

Speaker Change: and I was looking at the anticipated time of EPA approval in 2027. Is that a bit longer given the size? Are you just building in some conservatism there? So just some more color on CPV6. Thank you.

Chris Gould: Hey Scott, so yeah, absolutely. So let me start by saying I'm very pleased with the pipeline inventory that the CTV team has been building. As we talked, when we started the strategy in 2021, we talked about having a billion metric tons of potential. So to have 300 million tons already in the queue for permitting in different areas, different types of reservoirs, and some assets that we own, some assets that we picked up over time, it's really, truly a testament to how good this team really is in achieving our strategy.

Speaker Change: Hey Scott, so yeah absolutely, so let me start by saying I'm very pleased with the

Francisco Leon: As we talked, we started the strategy in 2021. We talked about having a billion metric tons of potential. So to having 300 million tons already in the queue for permitting in different areas, different type of reservoirs and some assets that we own, some assets that we picked up over time, it's really truly a testament on how good this team really is in achieving our strategy. It's, you can see it, it's all there in the EPA information, but very few companies are able to show us most progress as we have. So, and we have more to go, right, and we continue to refine the permitting, get better at it and add land that has that poor space prospectivity as we go after the premium poor space in California.

Speaker Change: pipeline inventory that the CTV team has been building. As we talked, when we started the strategy in 2021, we talked about having a billion metric tons of potential.

Speaker Change: So to having 300 million tons already in the queue for permitting.

Speaker Change: in different areas, different type of rest of wars.

Speaker Change: Some assets that we own, some assets that we picked up over time. It's really, truly a testament on how good this team really is in achieving our strategy. You can see it, it's all there in the EPA information, but very few companies are able to show as much progress as we have.

Chris Gould: You can see it, it's all there in the EPA information, but very few companies are able to show us as much progress as we have. So, and we have more to go, right, and we continue to refine the permitting process, get better at it, and add land that has that pore space prospectivity as we go after the premium pore space in California. As it relates to class, to the CTV6 reservoir, I'll turn it over to Chris to provide any additional details. Yeah, so.

Speaker Change: So, and we have more to go, right, and we continue to...

Speaker Change: refine the permitting, get better at it.

Chris: and add land that has that pore space prospectivity as we go after the premium pore space in California. As it relates to the CTV-6 reservoir, I'll turn it to Chris to provide any additional details.

Chris Gould: As it relates to class to the CTV6 reservoir, I'll turn it to Chris to provide any addition. Yeah, so CTV 6, if you look at the map, you can see that we essentially have some bookends, if you will, with our storage projects in the San Joaquin Basin and the South, and then the Sacramento Basin and North, and we use the description of Central California to describe CTV 6, so it's just that it's in the middle, more in the middle of the state, and essentially filling in across the Central Valley where we can find the best intersection of high quality, meaning high injection rates, combined with attractive acquisition costs, and ease of execution going forward. This is the next step in that process; we like the area. It is, I would anticipate that it will follow the same sort of timelines as you're seeing in the EPA tracker for CTV 1 through 5. I don't think there's anything different about it that would cause it to go faster or slower, other than the fact that now that we've been through this and have this many permits through, we hope that overall the timelines continue to compress at EPA, but there's nothing the size of the asset itself should not require longer timeframes to evaluate by EPA.

Chris Gould: Yeah, so CTV-6, if you look at the map, you can see that we essentially have some bookends, if you will, with our storage projects in the San Joaquin Basin in the south and then the Sacramento Basin in the north, and we use the description of Central California to describe CTV-6. So it's just that. It's in the middle, more in the middle of the state and essentially filling in across the Central Valley, where we can find the best intersection of high quality, meaning high injection rates, combined with attractive acquisition costs and ease of execution going forward.

Chris: Yeah, so CTV 6, if you look at the map, you can see that we essentially have some bookends, if you will.

Chris: with our storage projects in the San Joaquin Basin in the south, and then the Sacramento Basin in the north. And we use the description of Central California to describe CTV6.

Chris: So it's just that, it's in the middle, more in the middle of the state and essentially filling in across the Central Valley where we can find the best intersection of high quality, meaning high injection rates.

Chris: combined with attractive acquisition costs.

Chris Gould: This is the next step in that process. We like the area. It is, I would anticipate that it will follow the same sort of timelines as you're seeing in the EPA tracker for CTV one through five. I don't think there's anything different about it that would cause it to go faster or slower, other than the fact that now that we've been through this and have this many permits through, we hope that overall the timelines continue to compress at EPA, but there's nothing, the size of the asset itself should not require a longer timeframe to evaluate by EPA.

Chris: and ease of execution going forward. This is the next step in that process. We like the area.

Speaker Change: It is, I would anticipate that it will follow the same sort of timelines as you're seeing in the EPA tracker for CTV one through five. I don't think there's anything different about it that would cause it to go.

Speaker Change: faster or slower other than the fact that now that we've been through this and have this many permits through we hope that overall

Speaker Change: The timelines continue to compress at EPA, but there's nothing, the size of the asset itself should not require a longer time frame to evaluate by EPA.

Chris Gould: In terms of if it's associated with a particular project, part of the consideration for where we acquire poor space is just that: what are the addressable emissions in the local vicinity? And I would just say that without specifics, this asset has ample opportunities for both brown fields and green field emission sources.

Chris Gould: In terms of if it's associated with a particular project, part of the consideration for where we acquire pore space is just that, what are the addressable emissions in the local vicinity, and I would just say that, without specificity, this asset has ample opportunities for both brownfields and greenfield emission sources.

Speaker Change: In terms of if it's associated with a particular project, part of the consideration for where we acquire pore space is just that, what are the addressable emissions in the local vicinity, and I would just say that without specifics

Speaker Change: This asset has ample opportunities for both brownfields and greenfield emission sources.

Kevin MacCurdy: And our next question will come from Kevin McCurdy with Pickering Energy Policies. Please go ahead. Hey, good morning. We appreciate all the details in the shareholder return. You mentioned that over the last couple of quarters, the board found the buy back to be the most attractive use of pre cash flow. My question is, what indicators are you looking at to make that decision? Is it an internal NAV or recent share price dislocation? And do you have any flexibility to temporarily go about pre cash flow if you saw a large dislocation? Yeah, so the way we look at it, it's really a view on the intrinsic value of the business.

Kevin McCurdy: And our next question will come from Kevin McCurdy with Pickering Energy Partners. Please go ahead.

Speaker Change: And our next question will come from Kevin McCurdy with Pickering Energy Partners. Please go ahead.

Kevin McCurdy: Hey, good morning. We appreciate all the details on the shareholder return. You mentioned that over the last several quarters, the board found the buyback to be the most attractive use of pre-cash flow. My question is, what indicators are you looking at to make that decision? Is it an internal NAV or recent share price dislocation? And do you have any flexibility to temporarily go above pre-cash flow if you see a large dislocation?

Kevin McCurdy: Hey, good morning. We appreciate all the details on the shareholder return. You mentioned that over the last several quarters, the board found the buyback to be the most attractive use of pre-cash flow.

Kevin McCurdy: My question is, what indicators are you looking at to make that decision? Is it an internal NAV or recent share price dislocation? And do you have any flexibility to temporarily go above pre-cash flow if you saw a large dislocation?

Francisco Leon: Yeah, so the way we look at it, it's really a view on the intrinsic value of the business. And if you do, and you can look at it from multiple angles, but we like to look at some of the parts, and you have an integrated business, that as you look at all the value drivers from a very stable, very valuable PDP, oil and gas wedge. And then you add on top of that the power generation cash flow that we're bringing in today, and the prospects of power generation in the future, and you have very high NRIs in our reservoirs.

Kevin McCurdy: not

Speaker Change: Yeah, so the way we look at it, it's really a view on the intrinsic value of the business. And if you do, and you can look at it from a multiple view of the tab, but we'll also like to look.

Francisco Leon: And if you do, and you can look at it from a multiple EBITDA, but we would also like to look at some of the parts, and you have an integrated business that, as you look at all the value drivers from a very stable, very valuable PDP oil and gas wedge. And then you add on top of that the power generation cash flow that we're bringing in today, the prospects of the power generation in the future. You have the very high NRIs on our reservoirs, and then you start looking at the CTV optionality or bringing in this model forward and add on that prospective around data centers and the ability to monetize the Huntington Beach asset over time.

Speaker Change: at the sum of the parts and you have an integrated business that as you look at all the value drivers from from a very stable very valuable PDP oil and gas wedge

Speaker Change: And then you add on top of that the power generation cash flow that we're bringing in today, the prospects of the power generation in the future. You have the very high NRIs on our reservoirs.

Francisco Leon: And then you start looking at the CTV optionality of bringing this model forward, and add on that prospectivity around data centers and the ability to monetize the Huntington Beach asset over time, you get to a value of the business that's meaningfully higher than where we are today. And that's what gives us confidence as we're trading today below four times this company's value, just given its solid foundation today, cash generation ability, but ultimately the catalysts that are coming within the next five years, this is the right place to put our capital to work in terms of returns.

Speaker Change: And then you start looking at the CTV optionality or bringing in this model forward.

Adam: And now, on that...

Adam: ProspectiVIA around data centers and the ability to monetize the Huntington Beach asset over time, you get to a value of the business that's meaningfully higher than where we are today. And that's what gives us confidence as we're trading today below four times EBITDA.

Francisco Leon: And you get to a value of the business that's meaningfully higher than where we are today. And that's what gives us confidence as we, as we're trading today below four times, even that this company just given its solid foundation today, cash generation ability, but ultimately the catalysts are coming within the next five years. This is the right place to pour a capital to work in terms of returns as it relates to would would go over cash flow. We have done it in prior quarters where we have actually distributed more than 100% of cash flow if we had some asset sales or some timing opportunities to be more aggressive.

Adam: that this company, just given its solid foundation today, cash generation ability, but ultimately the catalysts that are coming within the next five years, this is the right place to pour our capital to work in terms of returns.

Francisco Leon: As it relates to what would go over cash flow, we have. We've done it in prior quarters where we've actually distributed more than 100% of cash flow if we had some asset sales or some timing opportunities to be more aggressive. So we've done it before. And the plan is to return as much cash as we can to shareholders. So if the opportunity is there, we are not afraid to lean in.

Adam: As it relates to what would go over cash flow, we have. We've done it in prior quarters where we've actually distributed more than 100% of cash flow. If we had some asset sales or some timing opportunities to be more aggressive, so we've done it before. And the plan is to return as much cash as we can to shareholders. So if the opportunity is there, we are not afraid to lean in.

Francisco Leon: So we've done it before, and the plan is to return as much cash as we can to shareholders. So if the opportunity is there, we are not afraid to lean in.

Francisco Leon: Great, thanks for all that detail. And as a follow-up, we noticed that you increased your oil mix for the second half of the year, basically 79%, which is effectively increasing your oil guide. What's driving that? Is that something you're seeing in the new era assets, or is that something in your legacy assets? Yeah, absolutely, that's the answer. If you contrast the acid bases, air is almost entirely oil. And the gas and NGLs will come from the CRC portfolio; the oil is areas. So, yeah, you should expect the higher oil weighing, and you should expect higher, not net revenue interest, as I already mentioned.

Kevin McCurdy: Great, thanks for all that detail. And as a follow-up, we noticed that you increased your oil mix for the second half of the year, basically 79%, which is effectively increasing your oil guide. What's driving that? Is that something you're seeing in your new era assets? Or is that something in your legacy assets? Yeah.

Speaker Change: Great, thanks for all that detail. And as a follow-up, we noticed that you increased your oil mix for the second half of the year, basically 79%, which is effectively increasing your oil guide. What's driving that? Is that something you're seeing in the new era assets, or is that something in your legacy assets?

Francisco Leon: Yeah, absolutely, that's the answer. If you can contrast the acid base... AERA is almost entirely oil, and the gas and NGLs will come from the CRC portfolio. The oil is AERA's. So, yeah, you should expect higher oil weighing, and you should expect higher net revenue interest, as I already mentioned, and a nice portfolio of assets throughout the state that allows you to blend the crude, and get creative around how we move things around. But, yeah, ultimately, you have the higher oil weighting, given the AERA portfolio is almost exclusively oil.

Speaker Change: Yeah, absolutely, that's the answer.

Speaker Change: Eris

Speaker Change: Almost entirely oil.

Speaker Change: And the GAS and NGLs will come from the CRC portfolio.

Eris: The oil is heiress, so yeah, you should expect a higher oil weighing and you should expect higher not net revenue interest, as I already mentioned.

Francisco Leon: And a nice portfolio of assets throughout the state that allows you to blend the crude to get creative around how do we move things around. So, but yeah, ultimately, that's you have the higher oil weighing given the airport for you is almost exclusively oil.

Eris: and a nice portfolio of assets throughout the state that allows you to...

Eris: to blend the crude to get creative around how do we move things around so but yeah ultimately that's you have the higher oil weighing given the air portfolio is almost exclusively oil.

David Deckelbaum: And our next question will come from David Deckelbaum with TD Cowan. Please go ahead. Thanks for taking my questions, guys. I'm curious just to follow up on some of the other questions around the returner capital. How did you arrive at the specific fixed dividend? And should we think of it as it grows over time as a ratio relative to free cash, are they given long term oil price? So, we look at the fixed dividend in terms of how it compares to other EMP companies to indices. Obviously, we're fighting for capital from investors and want to make sure we have a competitive yield on our dividend.

David Dekelbaum: And our next question will come from David Dekelbaum with TD Cowan. Please go ahead.

Speaker Change: And our next question will come from David Dekelbaum with TD Cowen. Please go ahead.

David Dekelbaum: Thanks for taking my questions, guys. I'm curious, just, you know, to follow up on some of the other questions around the return of capital. How did you arrive at the specific fixed dividend? Should we think of it, as it grows over time, as a ratio relative to free cash at a given long-term oil price?

David Dekelbaum: Thanks for taking my questions guys.

David Dekelbaum: I'm curious just you know the follow-up on some of the other questions around the return of capital how did you arrive at the specific fixed dividend and

David Dekelbaum: Should we think of it as it grows over time, as...

Speaker Change: A ratio relative to free cash at a given long-term oil price.

Francisco Leon: So we look at the fixed dividend in terms of how it compares to other EMP companies and to indices. Obviously, we're fighting for capital from investors and want to make sure we have a competitive yield on our dividend. These assets, given how low capital intensive they are, are really great for that fixed dividend growth over time. So we wanted to provide a cadence that's attractive, and the growth is significant. And as we are leaning in and looking at synergies, we feel like the step up requires a higher incremental change than we had in prior sessions, where we were closer to 10%.

Speaker Change: So we look at the fixed dividend in terms of how it compares to other EMP companies to indices. Obviously we're

Speaker Change: Fighting for for capital from investors and one of

Francisco Leon: And these assets, given how low capital intensity they are, really are really great for that fixed dividend growth over time. So, we wanted to provide a cadence that's attractive, and the growth are significant. And as we are leaning in and looking at synergies, we feel like the step up is required a higher incremental change than we had in prior. Prior sessions where we were closer to at 10%, but we want to provide a consistent fixed dividend, and we have the runway to be able to do that over time, again, given the quality of the assets and our focus on synergies to continue to find more cash to return to shareholders.

Speaker Change: make sure we have a competitive yield.

Speaker Change: on our dividend. These assets, given how low capital intensity they are, really are really great for that fixed dividend growth over time. So we wanted to provide a cadence that attractive and the growths are significant.

Speaker Change: And as we are leaning in and looking at synergies, we feel like the step up is require a higher incremental change than we had in prior sessions, where we were closer to a 10%. But we want to provide a consistent.

Francisco Leon: We want to provide a consistent fixed dividend, and we have the runway to be able to do that over time, again, given the quality of the assets and our focus on synergies to continue to find more cash to return to shareholders.

Speaker Change: fixed dividend and we have the runway to be able to do that over time again given the quality of the assets and our focus on synergies to continue to find more cash to return to shareholders.

Francisco Leon: I appreciate the color. It certainly looks like there's plenty of runway left there.

David Dekelbaum: I appreciate the color. It certainly looks like there's plenty of runway left there. Now, I wanted to ask more on the AI data center theme, but I think Now, for the sake of that topic being covered, I'm curious just what you're observing around the current permitting environment, you know, pro forma now with ERA having closed. Where are most of your efforts? That are sort of focused around those initiatives. Maybe you could update us on the balance of looking at state-level permits versus what you're seeing happening at the local Kern County level.

Francisco Leon: Now, I wanted to ask more on the AI data center, but I think for the sake of that topic being covered, I'm curious just what you're observing around the current, excuse me, permitting environment, pro forma now with Era having closed. We're most of your efforts, sort of focused around those initiatives. Maybe you could update us on the balance of looking at date level permits versus what you're seeing happening at the local current county. High-level. Yeah, so, as I mentioned before, we see multiple alternatives to get permits back on track. Working with different agencies in Kern County, you have the county themselves, an issue permits.

Speaker Change: And I appreciate the color. It certainly looks like there's plenty of runway left there. Now, I wanted to ask more on the AI data center thematic, but I think

Speaker Change: Now, for the sake of that topic being covered, I'm curious just what you're observing around the current, excuse me, permitting environment, you know, pro forma now with ERA having closed.

Speaker Change: Where are most of your efforts sort of focused around those initiatives? Maybe you could update us on the balance of looking at state-level permits versus what you're seeing happening at the local Kern County level.

Francisco Leon: Yeah, so as I mentioned before, we see multiple alternatives to get permits back on track. Working with different agencies in Kern County, you have the county itself issuing permits.

Speaker Change: Yeah, so as I mentioned before, we see...

Speaker Change: We see multiple alternatives to get permits back on track. Working with different agencies in Kern County, you have...

Francisco Leon: The rest of the state, it's pretty much CalGEM, which used to be called DOGGR, that ultimately issues the permits. And CalGEM has been going through a significant realignment of their organization. And that's the primary reason we see for some delays there. But we're having really good discussions around our permitting process. And ultimately, how we see this playing forward is much more field-specific permitting. So not what we have today or had a few years ago, which was countywide permitting. I think going to more field-specific, which is much easier to define from a permitting standpoint in fields that are 100% owned by the company, will be where I see the path to getting those permits reinstated.

Francisco Leon: The rest of the state is pretty much Kaljim. Used to be called Dogger that ultimately issues the permits. In Kaljim has been going through a significant re-alignment of their organization, and that's the primary reason we see for, or some delays there. But we're having really good discussions around our permitting process. And ultimately, how we see this playing forward is much more field-specific permitting, so not what we have today, or a few years ago, which is county-wide permitting; a thing going to more field-specific, which is much easier to define from a permitting standpoint, in fields where 100% owned by the company will be where I see the path to getting the permits reinstated.

Speaker Change: The county themselves can issue permits.

Speaker Change: used to be called DOGGR, that ultimately issues a permit.

Speaker Change: And CalGEM has been going through a significant realignment

Speaker Change: the primary reason we see four.

Speaker Change: for some delays there. But we're having really good discussions around our permitting process. And ultimately, how we see this playing forward is...

Speaker Change: much more field-specific permitting, so not what we have today or had a few years ago, which is county-wide permitting. I think going to more field-specific.

Speaker Change: which is much easier to define from a permitting standpoint in fields where are 100% owned by the company will be where I see the path to getting the permits reinstated. So as an example, we have

Francisco Leon: So, as an example, we have a massive inventory in Elk Hills and Bell Ridge. These are our two core fields. As I mentioned before, a lot of the work that we can do is to do workovers. And that's not just repair workovers; we can recomplete uphole, downhole, we can sidetrack wells. And we see a lot of opportunity to do that. And that's basically what we do today.

Francisco Leon: So, as an example, we have a massive inventory in L. Kills and Dorridge. These are two core fields, as I mentioned before. A lot of the work that we can do is to do workovers, and that's not just repair workovers; we can re-complete uphole, downhole, we can sidetrack wells, and we see a lot of opportunity to do that, and that's basically what we do today. But we also have a lot of new production that can come online with new wells. And those are fields that are entirely owned by CRC. L. Kills is fee simple; well-reached is pretty much fee simple, minus a couple percent point.

Speaker Change: A massive inventory in Elk Hills and Bell Ridge. These are our two core fields.

Speaker Change: As I mentioned before, a lot of the work that we can do is to do workovers and that's not just repair workovers. We can re-complete up-hole, down-hole, we can sidetrack wells.

Francisco Leon: But we also have a lot of new production that can come online with new wells. And those are fields that are entirely owned by CRC. Elk Hills is fee simple, Bell Ridge is pretty much fee simple, minus a couple percent points. So we have the ability to permit on lands that we own. There's no overlap with farmers and certainly no communities nearby.

Speaker Change: And we see a lot of opportunity to do that, and that's basically what we do today. But we also have a lot of new production that can come online with new wells.

Speaker Change: And those are fields that are entirely owned by CRC.

Speaker Change: Elk Hills is Fee Simple.

Francisco Leon: So, we have the ability to permit on lands that we own; there's no overlap with farmers, and certainly no communities nearby, and we see those as the core of the activity on a go-forward basis. So, we're working through the changes of the agencies, and we're working to provide much more of a stable regulatory pathway. And, you know, we feel we have a lot of good data in really good practices to be able to get back on track.

Speaker Change: The outreach is pretty much fee simple, minus a couple percent points. So we have the ability to permit on lands that we own. There's no overlap with farmers and certainly no communities nearby.

Francisco Leon: And we see those as the core of the activity on a going forward basis. So we're working through the changes in the agencies, and we're working to provide much more of a stable regulatory pathway. And we feel we have a lot of good data and really good practices to be able to get back on track.

Speaker Change: And we see those as the core of the activity on a go-forward basis. So we're working through the changes of the agencies, and we're working to provide much more of a stable regulatory pathway. And we feel we have a lot of good data and really good practices to be able to get back on track.

Leo Mariani: And our next question will come from Leo Mariani with Ross. Please go ahead. Hi guys, I was hoping to dive a little bit more into some of the regulatory progress slash initiatives in the state. Can you kind of talk about what the current state is of some of the new potential 3,200-foot setbacks that have been proposed? And then additionally, has there been any real movement or update on the state's push to come up with some rules and regulations for new CO2 pipeline infrastructure?

Leo Mariani: And our next question will come from Leo Mariani with Ross. Please go ahead.

Speaker Change: And our next question will come from Leo Mariani with Ross. Please go ahead.

Leo Mariani: Hi guys, I was hoping to dive a little bit more into some of the regulatory, you know, progress slash initiatives, you know, in the state. Can you kind of talk about what the current state is of some of the new potential 3,200 foot setbacks that have been, you know, proposed? And then additionally, is there any real movement or update on the state's, you know, push to come up with some rules and regulations for new CO2, you know, pipeline infrastructure?

Leo Mariani: Hi guys, I was hoping to dive a little bit more into some of the regulatory, you know, progress slash initiatives, you know, in the state.

Leo Mariani: Can you kind of talk about what the current state is of some of the new...

Speaker Change: Potential 3200 foot setbacks.

Speaker Change: that have been, you know, proposed.

Speaker Change: And then additionally, is there been any real movement or update on the state's, you know, push to come up with some rules and regulations for new CO2, you know, pipeline infrastructure?

Francisco Leon: So, yeah, regarding the setbacks, it's now a law to have 3,200-foot setbacks in the state. We've been working towards. and documenting the impact for two years. And there's really, we were already at a place where we felt comfortable with the law going into effect. So no impact or very insignificant impact that we see on the CRC portfolio. There's also no impact to the air assets. Everything is really in in Kern County, in rural areas away from communities. Any impact on setbacks on a go forward basis. So we'll comply with the laws and have a lot of incremental inventory to drill within those limits.

Francisco Leon: Hey Leo, so regarding the setbacks, it's now a law to have 30 to 400 feet of setbacks in the state. We've been working towards documenting the impact for two years, and we were really already at a place where we felt comfortable with the law going into effect.

Leo Mariani: Hey Leo, so yeah, regarding the setbacks, it's now a law to have 30 to 400 feet setbacks in the state. We've been working towards

Speaker Change: documenting the impact for two years and

Leo Mariani: There's really, we were already at a place where we felt comfortable with.

Francisco Leon: So no, no, no impact or a very insignificant impact that we see on the CRC portfolio. There's also no impact to the area assets. Everything is really in Kern County, in rural areas, away from communities.

Leo Mariani: The law going into effect.

Speaker Change: So, no impact or very insignificant impact that we see on the CRC portfolio.

Speaker Change: There's also no impact to the area assets. Everything is really in...

Francisco Leon: So we just don't see any impact on setbacks on a go-forward basis. So we'll comply with the laws and have a lot of incremental inventory to drill within within those limits. So, no, no impact there in terms of the pipeline regulation that Senate Bill nine or five that had a temporary moratorium on pipeline regulation for CO2. We see a lot of support.

Speaker Change: in Kern County in rural areas away from communities.

Speaker Change: So, we just don't see any impact on setbacks on a go-forward basis, so we'll comply.

Speaker Change: with the loss and have a lot of incremental inventory.

Francisco Leon: So no impact there in terms of the pipeline regulation that Senate Bill 905 that had a temporary moratorium on pipeline regulation for CO2. So we see a lot of support. If you can't have the state of California reached targets, decarbonization targets without a pipeline solution. It's just not going to not going to get there. So as we build our CTV business and we put the permits in place for poor space, that pipeline will ultimately drive a lot of the growth in the business for us. And so where we feel very good about launch CTV and getting to first injection of CO2 by next year, it all kills with a hygienic gas project. Ultimately, the scalability of the business will depend on pipeline regulations coming to fruition.

Speaker Change: to drill within those limits. So no impact there. In terms of the pipeline regulation, that Senate Bill 905 that had a temporary moratorium on pipeline regulation for CO2.

Leo Mariani: If you can't have the state of California reach its targets, its decarbonization targets without a pipeline solution, it's just not going to get there. So as we build our CTV business and we put the permits in place for pore space, that pipeline will ultimately drive a lot of the growth in the business for us. And so, where we feel very good about launching CTV and getting the first injection of CO2 by next year, I don't kill it with a biogenic gas project.

Speaker Change: We see a lot of support. If you can't have...

Speaker Change: The State of California reached its targets.

Speaker Change #100: decarbonization targets without a pipeline solution. It's just not gonna not gonna get there. So as we build our CTV business and we put the permits in place for pore space, that pipeline will ultimately drive a lot of the growth in the business for us. And so where we feel very good about launch CTV and getting to first injection of CO2 by next year,

Leo Mariani: Ultimately, the scalability of the business will depend on pipeline regulations coming to Croatia. So what we see, like I said, I think all the decision makers at the state level are aware that we need more support as an industry to launch these projects. And we're standing by to be able to put more capital to work and make these projects a reality. So the session in California just got started after the summer break.

Speaker Change #100: at Elk Hills with our cryogenic gas project.

Speaker Change #100: Ultimately, the scalability of the business will depend on pipeline regulations coming to fruition. So, what we see, like I said, I think all the decision makers at the state level are aware that we need more support as an industry to launch these projects.

Francisco Leon: So what we see, like I said, you know, I think the all the decision makers at the state level are aware that they need more support as industry to launch these projects. And we're standing by to be able to put more capital to work and make these projects a reality.

Speaker Change #100: And we're standing by to be able to put more capital to work and make these projects a reality. So, the session in California just got started after the summer break. We still have a few weeks left.

Francisco Leon: So the session in California just got started after the summer break. We still have a few weeks left, optimistic that we can get some resolution there, but again, we're trying to highlight the art of the possible here to the state in terms of getting to their objectives if we can unlock the value there on the pipe regulation.

Leo Mariani: We still have a few weeks left, and we're optimistic that we can get some resolution there. But again, we're trying to highlight the art of the possible to the state in terms of getting to their objectives if we can unlock the value there on the pipe regulation.

Speaker Change #100: I'm optimistic that we can get some resolution there, but again, we're trying to highlight the art of the possible here to the state in terms of getting to their objectives if we can unlock the value there on the pipe regulation.

Operator: Okay, appreciate that.

Leo Mariani: Okay, I appreciate that. And I just wanted to jump over to the electric generation business. So my understanding was that you guys were getting roughly $150 million payment from the state to kind of serve as a backup electric gen provider in case you guys are needed. When I look at your guidance for full year 24, you guys are estimating around 100 million in EBIT. So just trying to reconcile those numbers there. Are you expecting kind of a loss from the business in the regular way, and then you get this $150 million kind of on top, which gets you to the 100 million in the EBIT guide? Can you just kind of help me out with the concepts here and some of the numbers?

Jay Bys: And just wanted to jump over to the electric, you know, generation business. So my understanding was you guys were getting roughly 150 million dollar payment from the state to kind of serve as a backup, you know, electric gen, you know, provider in case, you folks are needed. When I look at your guidance for full year 24, you guys are estimating around 100 million in EBIT. So just trying to reconcile those numbers there. Are you expecting kind of a loss from the business kind of regular way and then you get this $150 million kind of on top, which gets you to the 100 million EBIT guides.

Speaker Change #101: Okay, appreciate that. I just wanted to jump over to the electric generation business.

Speaker Change #102: So, my understanding was that you guys were getting roughly a $150 million payment from the state to kind of serve as a...

Speaker Change #103: A backup, you know, electric gen, you know, provider in case, you know, you folks are needed. When I look at your guidance for full year 24, you guys are estimating...

Speaker Change #104: around $100 million in EBIT, so just trying to reconcile those numbers there. Are you expecting kind of a loss from the business kind of regular way, and then you get this $150 million kind of on top, which gets you to the $100 million EBIT guide? Can you just kind of help me out with the concepts here and some of the numbers?

Jay Bys: You just kind of help me out with the concepts here and some of the numbers. Yeah, so I think the short answer is don't forget we had a major turnaround the plan major turnaround the early in the year. So the plan was offline for a period of time. And when you look at power generation cost, if the plan is not running, that means you're purchasing power from the grid. So there's an offset, but I'll turn it to Jay to see if you want to work.

Jay Bys: Yeah, so I think the short answer is don't forget we had a major turnaround, a planned major turnaround early in the year, so the plant was offline for a period of time, and when you look at power generation cost, if the plant's not running, that means you're purchasing power from the grid, so there's an offset, but I'll turn it to Jay to see if he wants to add more color.

Speaker Change #104: Yeah, so I think the short answer is, don't forget, we had a major turnaround, the plant made a turnaround early in the year, so the plant was offline for a period of time. And when you look at power generation cost, if the plant's not running, that means you're purchasing power from the grid, so there's an offset. But I'll turn it to Jay to see if he wants to add more color.

Jay Bys: Two pieces of the revenue stream, Leo. There's the energy sales stream and the RA capacity stream, which you kind of touched upon. For 2024, that RA resource adequacy revenue stream is approximately $104 million across the year. It will be closer than 150 figure a little over that for calendar 25, so just to make sure we're comparing apples to apples. The energy contribution this year, given the prevailing pressure provided by intermittent resources, the energy piece is not as robust as it was last year. If we get a warm summer, if we get a cold winter, expect that to change, but for the time being right now, the capacity piece is the larger piece of the revenue stream on the power business.

Jay Bys: Two pieces of the revenue stream, Leo, there's the energy energy sales stream and the RA capacity stream, which you kind of touched upon. For 2024, that RA, as we call it, the Resource Adequacy Revenue Stream, is approximately $104 million across the year. It will be closer to that 150 figure, a little over that, for calendar 25. So just to make sure we're comparing apples to apples. The energy contribution this year, given the prevailing... pressure provided by intermittent resources, the energy piece is not as robust as it was last year.

Jay: Two pieces of the revenue stream, Leo. There's the energy energy sales stream and the RA capacity stream which you kind of touched upon.

Jay: For 2024, that RA, as we call it, Resource Adequacy Revenue Stream, is approximately $104 million across the year.

Jay: It will be closer to that 150 figure, a little over that for calendar 25. So just to make sure we're comparing apples to apples. The energy contribution this year, given the prevailing...

Jay Bys: If we get a warm summer, if we get a cold winter, expect that to change. But for the time being, right now, the capacity piece is the larger piece of the revenue stream on the power grid.

Jay: Pressure provided by intermittent resources. The energy piece is not as robust as it was last year. If we get a warm summer, if we get a cold winter, expect that to change, but for the time being right now, the capacity piece is the larger piece of the revenue stream on the power business.

Noel Parks: In our next question, we'll come from Noel Parks with two e-brothery invested research. Please go ahead. Hi, I just got a couple of questions. One of them just to clarify and apologize if you've talked on the test run already, so on the era properties. Are there any sort of lingering land or lease issues on the era side where sequestration target areas are? Is there anything you need to clean up that's no longer solved by production anymore, for instance, or more may not be, but that is valuable for sequestration.

Noel Parks: And our next question will come from Noel Parks with Tui Brother Investment Research. Please go ahead.

Jay: And our next question will come from Noel Parks with Tui Brother Investment Research. Please go ahead.

Noel Parks: Hi, I just have a couple of questions. One of them, just to clarify, I apologize if you touched on this already. So on the ARA properties, just wondering, are there any sort of lingering land or lease issues on the ARA side where sequestration target areas are? I'm just wondering, is there anything you need to clean up that's no longer held by production anymore, for instance, or may not be, but that is valuable for sequestration?

Noel Parks: Hi, I just had a couple questions.

Noel Parks: One of them, just to clarify, I apologize if you touched on this already, so on the

Noel Parks: Just wondering, are there any...

Noel Parks: sort of lingering land or lease issues on the the area side where sequestration target areas are. I just wonder is there anything you need to clean up that's

Noel Parks: no longer held by production anymore, for instance, or may not be, but that is valuable for sequestration.

Francisco Leon: Yeah, one of the exciting things about the era transaction is that it allows us to expand our premium portion base near Bakersfield with two additions to the portfolio. One is the project that they call Carbon Frontier. That's in the EPA tracker that now we have inherited. And then there's another property called Post Levy, which is adjacent to all pills that we look to permit in the future. These are again, one of the big advantages to California is in California operators in general, but CRC is the best example is our land position is really strong. We own, you know, a lot of the assets in fee simple; that means we own surface in all depths, all rights on those rest awards.

Francisco Leon: Yeah, one of the exciting things about the AERA transaction is that it allows us to expand our premium pore space near Bakersfield with two additions to the portfolio. One is the project that we call Carbon Frontier, that's in the EPA tracker that we now have inherited. And then there's another property called Post Levy, which is adjacent to Elk Hills that we look to permit in the future. Again, one of the big advantages to California operators in general, but CRC is the best example, is that our land position is really strong.

Speaker Change #106: Yeah, one of the exciting things about the ERA transaction is that it allows us to expand

Speaker Change #106: Our premium pore space near Bakersfield.

Speaker Change #106: with two additions to the portfolio. One is the project that we call Carbon Frontier.

Speaker Change #106: that's in the EPA tracker that now we have inherited. And then there's another property called Post Levee, which is adjacent to Elk Hills that we look to permit in the future.

Speaker Change #106: These are again one of the big advantages to California is in California operators in general but CRC is the best example is

Francisco Leon: We own a lot of the assets in fee simple, that means we own surface in all depths, all rights on those reservoirs. So the nice thing is AERA has the same feature in their assets. So there's always going to be small cleanup items here and there, but nothing of significance. We feel those projects are in really good shape with a strong permit submitted, and we look forward to taking them over and accelerating some of the emission capture in the Central Valley.

Speaker Change #106: Our land position is really strong. We own, you know, a lot of the assets in Fee Simple. That means we own surface, in all depths, all rights on those reservoirs.

Francisco Leon: So the nice thing is there has the same, the same feature in their assets. So there's always going to be small, clean-up items here and there, but nothing of significance.

Speaker Change #106: So, the nice thing is that AERA has the same feature in their assets. So, there's always going to be small cleanup items here and there, but nothing of significance. We feel those projects...

Noel Parks: And we feel those projects are in really good shape with a strong permit submitted, and we look forward to taking it over and in accelerating some of the emission capture in the Central Valley. Great. Thanks.

Speaker Change #106: are in really good shape with a strong permit submitted, and we look forward to taking it over and accelerating some of the emission capture in the Central Valley.

Francisco Leon: Great, thanks. And another one on ERA. Did ERA have any partnerships in place similar to, for example, CTV and Brookfield that will persist now that the combination is closed? And I was wondering if there were any contractual issues, right of first refusal, or anything out there hanging with other parties that might not be immediately incurring.

Francisco Leon: And another one on the era, did the era have any partnerships in place similar to, for example, CTV and Brookfield, that will persist now that the combination is closed and I was wondering if there are any contractual issues right of first refusal or anything out there hanging with other parties that you might not be immediately impaired. No, nothing, no partnerships, no CDMAs on their acreage or capital commitments of any kind. So this would be assets that we would anticipate contributing to the partnership and working alongside Woodbrook Field to bring them forward. So we caught it at the right time.

Speaker Change #107: Great, thanks. And another one on AERA. Did AERA have any partnerships in place similar to, for example, CTV and Brookfield?

Speaker Change #108: that will persist now that the combination is closed.

Speaker Change #109: And I was wondering if there were any contractual issues, right, of first refusal or anything out there hanging with other parties that, you know, might not be immediately apparent.

Francisco Leon: No, nothing, no partnerships, no CDMAs on their acreage or capital commitments of any kind. So these would be assets that we would anticipate contributing to the partnership and working alongside with Brookfield to bring them forward. So we caught it at the right time, in my view, right? The era was fast following CRC in terms of permitting, and we were faster on commercial and financing. So this is a kind of really good opportunity to bring projects forward by letting the CRC team and the CTV team shape how those reservoirs are used.

Speaker Change #110: No, nothing, no partnerships, no CDMAs on their acreage.

Speaker Change #111: or capital commitments of any kind. So this would be assets that we would anticipate contributing to the partnership and working alongside with Brookfield.

Francisco Leon: In my view, right, they were, era was fast following CRC in terms of permitting, and we were faster on commercial and financing. So this is a kind of a really good opportunity to bring projects forward by letting the CRC team, the CTV team shape how those restaurants get filled.

Speaker Change #111: to bring them forward. So we caught it at the right time, in my view, right? They were, ERA was fast following CRC in terms of permitting, and we were faster on commercial and financing. So this is a kind of a really good opportunity to bring projects forward by letting the CRC team, the CTV team shape.

Operator: And this will conclude our question-and-answer session.

Speaker Change #112: how those restaurants get filled.

Operator: And that will conclude our question and answer session. I'd like to turn the conference back over to Francisco Leon for any closing remarks.

Francisco Leon: I'd like to share in the comments back over to Francis, go to Leo for any closing remarks. Thank you for joining us today. We will be presenting at investor conferences in September. Lots to talk about, but we're looking forward to seeing you. Thanks.

Speaker Change #112: And this will conclude our question and answer session. I'd like to turn the conference back over to Francisco Leon for any closing remarks.

Francisco Leon: Thank you for joining us today. We will be presenting at investor conferences in September. We have lots to talk about, but we're looking forward to seeing you.

Francisco Leon: Thank you for joining us today. We will be presenting at investor conferences in September . Lots to talk about, but we're looking forward to seeing you. Thanks.

Operator: Thanks. Thanks for watching. Bye.

Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time. Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time.

Speaker Change #113: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time.