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CRC stock jumps on share-buyback plan despite $94 million first-quarter loss


California Resources Corp. is based in Santa Clarita but has a sprawling office complex in southwest Bakersfield. The company said in May 2020 it had about 730 employees and 1,700 contractors in Kern County.

One of Kern's leading oilfield operators, California Resources Corp., posted a $94 million first-quarter loss Thursday as part of an otherwise upbeat earnings report that helped raise its stock price to finish the day almost 6 percent higher.

There was suggestion the positive market reaction was fueled by CRC's morning announcement it plans to buy back up to $150 million worth of its shares, funded primarily by $120 million in free cash flow achieved during the first quarter. Share repurchase plans are generally viewed as a sign of confidence.

Other highlights of Thursday's earnings report include an intention to accelerate the Santa Clarita-based company's carbon-capture and renewable-energy efforts, along with successes in lowering operating and overhead expenses.

"This was a strong start to the year that displays CRC’s ability to successfully execute on our corporate strategy based on strong business financial fundamentals, disciplined capital allocation, and robust free cash flow generation," company spokesman Richard Venn said by email.

CRC, which last year emerged from bankruptcy under a very different ownership structure, said its average daily production during the first quarter ended up 18 percent below the level reported a year earlier.

The company reported shifting $15 million away from new drilling and well completions, putting that money instead toward so-called downhole maintenance, which increases efficiencies at existing wells. Seventeen new wells were drilled during the first quarter, it stated, as compared with 40 "workovers" of existing wells.

During a morning call with stock analysts, President and CEO Mark A. "Mac" McFarland said Gov. Gavin Newsom's recently announced plan to ban fracking by 2024 would have "no material impact" on the company because less than 1 percent of the company's proved reserves require such technology.

Moreover, he noted the company's operations do not involve the use of high-pressure cyclic steaming, a controversial technique on which the Newsom administration has placed a moratorium.

During the phone conference, KeyBanc analyst Leo Mariani said he thought the stock market's favorable reaction to Thursday's earnings report was mostly a reaction to the share-buyback announcement.

McFarland, responding to a question by Mariani on that point, said he felt the repurchase program was in shareholders' best interest.

"As we go through the remainder of the year, we'll continue to evaluate all different forms of ability to return cash to shareholders, as well as potentially looking at little, I'll say, potential add-ons or recycling the capital into the business," McFarland said, according to a transcript posted online by The Motley Fool.

When another analyst, Noel Parks of Tuohy Brothers, asked about the company's reference to decarbonization projects, McFarland responded that the company is looking at moving forward with a variety of initiatives in addition to an earlier-disclosed project to capture and bury carbon dioxide emissions from its Elk Hills power plant.

The CEO went on to say the company is considering using "a number" of its depleted oilfields for carbon capture and sequestration, in which carbon dioxide is stored indefinitely underground as a way of fighting climate change. McFarland mentioned the possibility of deploying solar energy development at some of its surface acreage, though he noted it's unclear how these different projects would be financed.

"But we would also look for alternative financing structures to bring in our potential partners because the renewable space, for example, has a different cost of capital than we do as an oil and gas company that we'd be looking for, bringing in the right type of capital structure, but leveraging our assets in order to be a part of that energy transition," he said, according to the Motley Fool transcript.

The company's shares, which trade on the New York Stock Exchange under the symbol "CRC," closed Thursday at $25.86, or 8 percent shy of its peak during the past year.

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