California Resources Sells Ventura Basin Wells

California Resources Corp. has sold its operations in the Ventura basin so the company can focus on core assets.

The Santa Clarita Valley oil and natural gas producer sold its Ventura County operations for a total of $102 million cash plus additional earn-out consideration that is linked to future oil and gas prices. 

According to Francisco Leon, chief financial officer at California Resources, the Ventura basin produces 3,600 barrels a day, 65 percent of which is oil. 

“The exit from the basin allows (California Resources) to consolidate operations into three basins and removes a high-cost operating area,” Leon said during a conference call in August with analysts to discuss second quarter earnings. 

Going forward, the three basins where it will operate are San Joaquin, Los Angeles and Sacramento.

California Resources acreage in the Ventura basin includes the fields South Mountain, San Miguelito and Bardsdale. 

San Miguelito is located in the hills northwest of the city of Ventura, while South Mountain, among the largest in Ventura County, is located in and adjacent to the city of Santa Paula. The company has seven plugged wells in unincorporated Bardsdale, south of Fillmore, according to ShaleXP, an online oil and gas industry research site. 

The site also said that on South Mountain, there were 51 wells, of which 48 belonged to California Resources. Eighteen of those wells were active with the rest either idle or plugged. Two other companies operated the remaining wells. 

Mark “Mac” McFarland, California Resources’ chief executive, explained during the conference call about the three pillars making up California Resource’s growth strategy. 

One of those was responsible portfolio management, McFarland said. 

“(California Resources) demonstrated our commitment to this cohort by purchasing the entire working interest position held by a joint venture partner in our core field as well as entering into an agreement to exit the noncore Ventura basin,” he said. 

Earlier in the year, he said that the company was in too many fields and believed focusing on its core assets would drive the most value.

“From a high-level perspective, these bolt-on and bolt-off transactions allow us to recycle capital back into our core fields, simplify our business model and continue to streamline our cost structure,” McFarland said. 

The acquisition McFarland mentioned was of wells in the San Joaquin basin that were held in a joint venture with Macquarie Infrastructure and Real Assets Inc. They were purchased for $53 million.

Carbon capture project

California Resources reported on Aug. 6 adjusted net income of $78 million (94 cents a share) for the second quarter ending June 30, compared with an adjusted net loss of $202 million (-$4.08) in the same period a year earlier. Revenue increased 10 percent to $304 million. 

In the 11 months since the company returned to the New York Stock Exchange after having filed for voluntary bankruptcy last year, its share price has gained 173 percent, to close at $41 on Sept. 30. The shares closed at $39.25 on Oct. 6.

Scott Hanold, an analyst who follows California Resources at RBC Capital Markets, said in a research note after the second quarter earnings that the company remained “a top idea” given its valuation but more importantly for its environmental, social and governance efforts, which are starting to emerge. 

During the conference call, McFarland mentioned how the company had filed for two permits to develop storage capability of up to 40 million metric tons of carbon dioxide. That project is called Carbon TerraVault I. In total, California Resources has identified within its assets up to 1 billion metric tons of permanent CO2 storage, which would allow it to store about 20 million metric tons per year for 50 years, McFarland said. “That’s the equivalent of removing more than 4 million cars from the road every year,” McFarland explained.

In his research note, Hanold said that California Resources can play a significant role in the state’s emission reduction efforts through carbon capture and sequestration (CCS). 

Management continues to evaluate its energy transition efforts, including the Carbon TerraVault I project and some front/back of the meter solar projects that could help the company and state work toward net emission reduction targets, improve operating costs and generate additional cash flow through selling more electricity to the grid, Hanold said in the note.