Author Topic: CRC - California Resources  (Read 2138 times)

thepupil

  • Hero Member
  • *****
  • Posts: 2224
CRC - California Resources
« on: January 12, 2021, 12:17:55 PM »
~$530mm of debt
84mm shares, $2.1B market cap
$2.6B EV, some warrants in the mid $30's

https://www.bamsec.com/filing/160925320000226?cik=1609253
https://s23.q4cdn.com/941458137/files/doc_presentations/2020/CRC-Emergence-Strategy-2020-Final.pdf

This is not a pitch (if one can even call it that) on which I care to spend a lot of time.

I do not know anything about oil and gas. Those who know something feel free to offer better alternatives or say why all of the below is bagholder logic/make the case for chapter 22.

Post-reorg pres:
https://www.bamsec.com/filing/160925320000226?cik=1609253

CRC went bankrupt, got rid of pretty much all its debt. It is the largest producer of oil and gas in the world's 5th largest economy.

I just think it has option value and the post-reorg balance sheet probably gives you a fair bit of time on that. It is mostly held by distressed debt funds, who are likely to be pukers of the stock for some time.

I mostly own BSM and DMLP for my energy.

Those, in my view, are investments.

This is a speculation.







« Last Edit: January 12, 2021, 01:02:24 PM by Parsad »


5xEBITDA

  • Full Member
  • ***
  • Posts: 201
Re: CRC - California Resources
« Reply #1 on: January 12, 2021, 01:54:51 PM »
Who owns it post-BK? Is it all former lenders, and if so, are any of them operating focused / PE-types? A huge amount of post-reorg E&Ps are owned by banks right now, so if this is the case then its sort of a publicly traded bank-ran liquidation. I've seen a lot of this going on in the private markets over the last several months. Basically, they're running the Company for cash and selling off non-core assets / properties to pay down what might still be left of any debt. I'd be interested to hear what the post-BK plan is for CRC. I'm sure there is some detail on a development plan out there and how much that'll cost...how they're hedged and at what price are they cash flow break even (including for the development plan) will be important. I would expect it to probably trade in a range of 0.75x - 1.25x EV / PDP PV-10 depending on what the corporate plan is...probably towards the lower side if they're just planning on putting $ back into the ground with a questionable development plan.

thepupil

  • Hero Member
  • *****
  • Posts: 2224
Re: CRC - California Resources
« Reply #2 on: January 12, 2021, 02:08:39 PM »
It's owned by Goldentree, Fidelity & Ares (20% ish each) and a bunch of distressed debt types.

Page 12
http://d18rn0p25nwr6d.cloudfront.net/CIK-0001609253/2da45810-9d78-4f3c-9477-415ab2a5745d.pdf

also see attached 1 pager

samwise

  • Sr. Member
  • ****
  • Posts: 293
Re: CRC - California Resources
« Reply #3 on: January 12, 2021, 07:27:18 PM »
No position. I’m dithering over this.

Thesis is discount to reserves: Pv-10 value of 7B vs EV of ~2-3

But I’ve had those kind of thesis fail before. Somehow PV-10 doesn’t  translates to cash flow. Maybe now with interest cost gone, they will actually produce cash flow. Could see chapter 22 if oil tanks again and Brent goes below 35.

And you get California regulations risk.

For PV-10 as of dec 2019, see slide 26: https://s23.q4cdn.com/941458137/files/doc_presentations/2020/12/CRC-Investor-Presentation-December-2020.pdf


Edit: my back of the envelope FCF is 400 million, which would be attractive. But I don’t trust myself on this. Would be good to know if someone else has done this calculation too.
 
Edit 2: fixed the date for the pv-10, which is before the oil crash. New value isn’t clear but PDP +PDNP =3B. So adding some non-producing gets you above 3B.
« Last Edit: January 12, 2021, 09:27:13 PM by samwise »

thepupil

  • Hero Member
  • *****
  • Posts: 2224
Re: CRC - California Resources
« Reply #4 on: January 12, 2021, 07:50:25 PM »
Love the sentiment: To parrot back to you: I think this is at 40-50% of PV-10 and a 20% free cash flow yield but that just seems so nucking futs that it probably will go bankrupt, even though they just got rid of all their debt.

I feel the exact same way. I don't trust myself either, but have availed myself of the rank speculation....

« Last Edit: January 12, 2021, 07:53:20 PM by thepupil »

samwise

  • Sr. Member
  • ****
  • Posts: 293
Re: CRC - California Resources
« Reply #5 on: January 12, 2021, 09:19:33 PM »
Haha. Yes seems too good to be true. But all depends on your oil price assumptions. E.g. annualized FCF from last nine months is 140, about 7% only. Pv-10 is also lower than 2019, but above 3B. So the discount isn’t as big as the last SEC numbers suggest.

 they claim that their total cost is mid 30s. Hence the comment about ch22 under 35. And maintenance capex is extra. So no FCF below $40 perhaps. Your option is currently in the money.

I don’t think ch22 is probable, but it’s possible. And California regulations risk is probably unique with this oil stock.

Btw they hedge 75% oil for 2 years and 50% in the third year. Might not be the best option on oil if you want to speculate. They are aiming to survive, not provide the best delta to oil.

Best of luck.

thepupil

  • Hero Member
  • *****
  • Posts: 2224
Re: CRC - California Resources
« Reply #6 on: January 13, 2021, 05:57:45 AM »
I can't believe I'm providing a semi-serious update on this ShitCo, but they're refi-ing most of their debt.

Will pay off the 2nd lien term loan, which is pretty expensive money at L+9-10%


Interest Rate – We can elect to pay interest at either an adjusted LIBOR rate or ABR rate, subject to a 1% floor and 2% floor, respectively, plus an applicable margin. The ABR rate is equal to the highest of (i) the prime rate, (ii) the federal funds rate effective rate plus 0.5%, and (iii) the one-month adjusted LIBOR rate plus 1%. In the case of an adjusted LIBOR rate election, the applicable margin is 9% per annum if interest is paid in cash and 10.5% per annum if interest is paid-in-kind. Prior to the second anniversary of the closing date of the Second Lien Term Loan, the applicable margin in the case of an ABR rate election is 8% per annum if paid in cash and 9.5% per annum if paid-in-kind, and the applicable margin in the case of an adjusted LIBOR rate election is 9% if paid in cash and 10.5% if paid-in-kind. After the second anniversary of the closing date, the applicable margin is 8% with respect to any ABR loan and 9% with respect to an adjusted LIBOR loan. Interest on ABR loans is paid quarterly in arrears and interest based on the adjusted LIBOR rate is due at the end of each LIBOR period, which can be one, two, three or six months but not less than quarterly. We also pay customary fees and expenses.


And pay off the Elk Hills notes (which weren't actually that expensive)...perhaps because Elk Hills produces over 1/2 of Cali's natural gas production and is a strategic asset that's been producing for 110 years<--this is me being promotional, just watch the hype video https://youtu.be/jJ6L304MIa8 , otherwise known as the "hey california please don't shut down your clean reliable energy source that is the largest taxpayer/economic engine in kern county" video
E

EHP Notes

On the Effective Date, our wholly-owned subsidiary, EHP Midco Holding Company, LLC (Elk Hills Issuer) entered into a Note Purchase Agreement (Note Purchase Agreement) with certain subsidiaries of Ares and Wilmington Trust, N.A. as collateral agent. The $300 million Notes were issued as partial consideration for the Class B Preferred Units, Class A Common Units and Class C Common Units in the Ares JV previously held by ECR (EHP Notes).

The EHP Notes are senior notes due in 2027, and are secured by a first-priority security interest in all of the assets of Elk Hills Power, any third-party offtake contracts for power generated by Elk Hills Power, all of the equity interests of Elk Hills Power held by Elk Hills Issuer and all of the equity interests of Elk Hills Issuer held by its direct parent, EHP Topco Holding Company, LLC, our wholly-owned subsidiary. We and Elk Hills Power have guaranteed, on a joint and several basis, all of the obligations of Elk Hills Issuer under the EHP Notes. The EHP Notes bear an interest rate of 6.0% per annum through the fourth anniversary of issuance, increasing to 7.0% per annum after the fourth anniversary of issuance and to 8.0% per annum after the fifth anniversary of issuance. The EHP Notes may be redeemed at any time prior to their maturity date without payment of premium or penalty.


SANTA CLARITA, Calif.--(BUSINESS WIRE)-- California Resources Corporation (NYSE: CRC) (the “Company”) announced today that, subject to market and other conditions, it intends to offer and sell to eligible purchasers $600 million in aggregate principal amount of senior unsecured notes due 2026 (the “Notes”). The Notes will be guaranteed by all of the Company’s existing subsidiaries that guarantee its revolving credit facility and certain future subsidiaries. The Company intends to use the net proceeds from this offering to repay in full its second lien term loan and repay all outstanding senior secured notes due 2027 previously issued by its wholly-owned subsidiary that indirectly owns all of the assets associated with its Elk Hills power plant and gas processing facilities, with the remainder to be used to repay a portion of the outstanding borrowings under its revolving credit facility.

The Notes have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the rules promulgated thereunder and applicable state securities laws. The Notes will be offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act and non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act.

T
« Last Edit: January 13, 2021, 06:15:13 AM by thepupil »

5xEBITDA

  • Full Member
  • ***
  • Posts: 201
Re: CRC - California Resources
« Reply #7 on: January 13, 2021, 06:35:37 AM »
As a comp, Talos Energy just issued a similar amount of 2L bonds with a 12% coupon (all in cost of 15% with OID).

The problem with something like CRC is that a discount to PDP is nice, but what is the catalyst? There are not that many incremental buyers of discounted E&P stock already. Goldentree et al are not interested in being long term, thoughtful owners of this business. They're most interested in finding a way to exit, although in a smarter way than banks would.

5xEBITDA

  • Full Member
  • ***
  • Posts: 201
Re: CRC - California Resources
« Reply #8 on: January 13, 2021, 07:40:42 AM »
Proved Reserves as of 12/1/20: (Note: prepared by CRC internal engineers, not a third-party).

SEC Pricing:
PDP PV-10 - $1.5bn
PDNP PV-10 - $0.7bn
PUD PV-10 - $0.2bn
Total Proved PV-10 - $2.4bn

Strip Pricing (12/1):
PDP PV-10 - $2.1bn
PDNP PV-10 - $0.9bn
PUD PV-10 - $0.3bn
Total Proved PV-10 - $3.4bn


The Company estimates total daily production of 100 Mboe/d to 105 Mboe/d and adjusted EBITDAX range of $93 million to $103 million for the fourth quarter. As of 12/1, total reserves of 489 MMboe consist of 346 MMbbl oil, 43 MMbbl NGL, and 599 Bcf gas. Capital expenditure budget for 2021 will total $175 million to $225 million comprised of drilling (54%), capital workovers (20%), and infrastructure / corporate (26%). Expected free cash flow for the fourth quarter is between negative $45 million and negative $50 million (cash flow from operations between negative $35 million and negative $39 million). Adding back RX/transaction costs reduces the FCF loss to negative $30 million to negative $33 million.

Good guess that this thing is already trading ~1.28x PDP!
« Last Edit: January 13, 2021, 07:44:11 AM by 5xEBITDA »

thepupil

  • Hero Member
  • *****
  • Posts: 2224
Re: CRC - California Resources
« Reply #9 on: January 13, 2021, 08:12:57 AM »
thanks, can you point me to the source of $2.4B / $3.4B numbers.

I'm confused as to the progression from the 7/31/2020 numbers to the much lower 12/2020 numbers despite brent and natural gas prices going up.