California Resources' New Projects Under Carbon Management Business To Be The Key Focus Of 2Q: Analyst

Mizuho analyst Nitin Kumar reiterated a Buy rating on California Resources Corporation CRC, raising the price target to $60 from $52. 

The company is scheduled to report its second-quarter 2023 financial results on July 31, 2023, after the market close.

Given the recent acquisition of Denbury by Exxon Mobil Corporation XOM, the analyst expects the focus of CRC's 2Q call to be on developing its first Carbon capture and storage project.

The analyst expects investors to be focused on the progress of the build-out of Carbon TerraVault (CTV) projects that are part of CRC's Carbon Management Business (CMB).

The analyst adds that many investors expect a lengthy permitting process, but progress on reviewing these applications would be a positive sign for the sector and CRC.

Given the slowdown in permitting new oil wells in California, CRC is thoroughly focusing on permits already in hand for 2023/1H24. 

The analyst notes that the company expects permitting to resume in 2H24 and a return to regular activity (~3-5 rigs) in Kern County.

The analyst adds that CRC is also expected to gain from gas realizations at the SoCal Border hub. The natural gas at the SoCal Border hub had a 2Q23 average price of $2.69/MMBtu, which was the most robust quarter-average pricing in the US.

For the quarter to be reported, the analyst forecasts 2Q23 EBITDAX of $151 million, Free cash flow of $35 million, and Capital expenditure of $54 million. 

Price Action: CRC shares are trading lower by 2.99% to $45.68 on the last check Friday.