California Resources Corp
For the period ended Dec 31, 2024. Filed Mar 3, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 3, 2025
CRC$46.92-0.1%Stored close · as of Nov 9, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0001609253-24-000043
Item 1A. RISK FACTORSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-03.
0001609253-25-000027
Item 1A. RISK FACTORSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 256 previous paragraphs and 255 current paragraphs.
147 unchanged; 91 reworded; 15 added; 16 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
•We may face increased local restrictions on oil and gas exploration and production operations or even be prohibited from operating in certain areas as a result of recently enacted California legislation.
Current report
•Our operations and financial performance may be negatively affected directly or indirectly by changes in trade policies and tariffs.
Current report
Increases in inflation may have an adverse effect on us. Operating and capital costs in the oil and natural gas industry are heavily influenced by commodity prices, including the prices we pay for electricity, natural gas and steel-based materials. For example, we use natural gas in our operations to generate steam for use in steamfloods and we purchase additional volumes of natural gas to support our operations. We also use electricity generated by our Elk Hills power plant to power our oil and gas operations in the Elk Hills field. If we are unable to generate sufficient electricity for use in our operations, we may need to purchase electricity from third parties. Increases in the volumes or prices of commodities used in our operations could cause increases in our operating expenses. We attempt to manage our exposure to price increases of certain commodities used in our operations, including natural gas, by entering into hedges or longer-term contracts with fixed price arrangements. However, these measures do not fully protect us from the effects of commodity price increases and we may not be able to enter into similar arrangements in the future on acceptable terms or at all. Inflation could also result in higher interest rates in the United States, which could increase the cost of future financing efforts.
Current report
The military conflicts in Ukraine, Israel and other countries in the Middle East have caused price volatility and geopolitical instability which impact our business.
Current report
Our ability to maintain or increase our reserves, other than through acquisitions, depends on our ability to drill new wells, which is currently limited due to the lack of availability of new well permits as described below. See Risks Related to Regulation and Government Action – We may face material delays related to our ability to timely obtain permits necessary for our operations or be unable to secure such permits on favorable terms or at all as a result of numerous California political, regulatory, and legal developments.
Current report
•Obtaining Class VI permits for carbon dioxide injection and storage from the EPA may take years, and the time to obtain permits may vary with the complexity and type of storage reservoir. The analysis of the suitability of a reservoir for carbon sequestration is complex and our permit applications are subject to extensive review by the EPA. There can be no assurances that the EPA will release Class VI permits to us when we expect, if at all. Even if we are successful in our efforts to obtain Class VI permits, the permits could be subject to legal challenges.
Current report
The current administration signed several Executive Orders reversing, revoking or rescinding many climate-related actions and has expressed a desire to make modifications to the Inflation Reduction Act. On January 20, 2025, the current administration issued an Executive Order which paused distribution of federal funds appropriated through the IRA or the Infrastructure Investment and Jobs Act. The pause was aimed at providing time to review the processes, policies and issuance of various grants, loans, contracts or financial disbursements of appropriated funds but did not modify the IRA statutory language with respect to federal income tax credits, such as 45Q or 45V credits (for more information, see Tax law changes could have an adverse effect on our business, financial condition and results of operations). However, on January 29, 2025, the White House Office of Management and Budget rescinded the freezing of federal grants and loans, although not its efforts to review the processes with respect to federal spending. At this time, the potential impact of these various actions remains uncertain. If the current administration or Congress repeals, modifies, or otherwise limits the grants, funding and tax incentives made available under the IRA, such actions could particularly harm our carbon management business and its prospects.
Current report
This opposition also extends to our carbon management segment as certain activists oppose carbon capture and sequestration efforts by the oil and gas industry for various reasons. For example, on November 22, 2024, a group of non-governmental organizations filed a Petition for Writ of Mandate and Complaint for Injunctive Relief against Kern County and its Board of Supervisors (CTV I Complaint) in Kern County for our CTV I project. See Regulation of Carbon Capture, Sequestration and Storage - CCS Project Permitting. Such lawsuits have the potential to delay timely construction of the project and commencement of operations and could otherwise have a material and adverse effect on our carbon management business and its prospects.
Current report
We face increased attention and expectations from various sources related to our business. This includes increased social expectations on energy companies to address climate change and other environmental and social impacts. In addition, investors and others have evolving expectations regarding voluntary or mandatory ESG disclosures. Finally, increased consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation. Any of the foregoing negative impacts on our stock price and access to capital. Increased attention to climate change and environmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations and private litigation against us. To the extent that societal pressures or political or other factors are involved, it is possible that liability could be imposed without regard to our causation of or contribution to the asserted damage, or to other mitigating factors. While we may participate in various voluntary frameworks and certification programs to improve or support the ESG profile of our operations and products, we cannot guarantee that such participation or certification will have the intended results on our or our products’ ESG profile.
Current report
Public statements with respect to ESG matters, such as emissions reduction goals, other environmental targets, or other commitments addressing certain employment practices or social initiatives, are becoming increasingly subject to heightened scrutiny from public and governmental authorities. For example, the SEC has recently taken enforcement action against companies for ESG-related misconduct, including alleged “greenwashing,”i.e., misleading information or false claims overstating potential ESG benefits. Certain non-governmental organizations and other private actors have filed lawsuits against entities under various securities and consumer protection laws alleging that certain ESG statements, goals, or standards were misleading, false or otherwise deceptive. Certain employment practices or social initiatives are the subject of scrutiny by both those calling for the continued advancement of such policies, as well as those who believe they should be curbed, including government actors, and the complex regulatory and legal frameworks applicable to such initiatives continue to evolve. More recent political developments could mean that the Company faces increasing criticism or litigation risks from certain “anti-ESG” parties, including various government agencies. Such sentiment may focus on the Company’s environmental commitments (such as reducing GHG emissions) or its pursuit of certain employment practices or social initiatives, which anti-ESG proponents may assert as unlawful, political or polarizing in nature or are alleged to violate laws based, in part, on changing priorities of, or interpretations by, federal agencies or state governments. Consideration of ESG-related factors in the Company’s decision-making could be subject to increasing scrutiny and objection from such anti-ESG parties. As a result, the Company may be subject to pressure from the media or through other means, such as governmental investigations, enforcement actions, or other proceedings, all of which could adversely affect our reputation and our business. Accordingly, there may be increased costs related to review, implementation, and management of such policies, as well as compliance and litigation risks based both on positions we do or do not take, or work we do or do not perform.
Current report
We may face increased local restrictions on oil and gas exploration and production operations or even be prohibited from operating in certain areas as a result of recently enacted California legislation.
Current report
On September 25, 2024, Assembly Bill 3233 (AB 3233) was enacted which authorizes local governments to prohibit, oil and gas operations or development, or impose regulations, limits or prohibitions that are more protective of public health, the climate or the environment than prescribed by state law, regulation or order on such oil and gas operations or development, within their jurisdiction, including with respect to existing operations. Prior to the passage of this law, certain local governments within California had previously taken steps to limit oil and gas operations that were struck down by California courts. Monterey County previously sought to ban only new production and prohibit the use of wastewater injection as a production method. The City and County of Los Angeles previously sought to both ban new wells and phaseout existing wells over a certain period of time. If these bans were enacted, for the year ended December 31, 2024, less than 1% of our net production and proved reserves were located in the City of Los Angeles; and our operations are otherwise in unincorporated areas of Los Angeles, which would not be affected by such bans. Approximately 2% of our net production and 1% of proved reserves were located in Monterey County as of and for the year ended December 31, 2024. Although both of those local measures were struck down in court, following the adoption of AB 3233, certain legal arguments used to challenge these local actions are no longer valid and it is possible that these or other local governments in places where we operate may pass similar regulations. It is difficult to predict how local governments in California may choose to exercise their new authority under AB 3233.
Current report
While there may be future legal challenges to AB 3233 and any local ordinances enacted thereunder, we cannot predict whether or not such challenges will be successful. Notwithstanding any potential claims for regulatory takings we may have in the event local jurisdictions seek to prohibit any of our existing operations, to the extent that the local governments in the areas where we operate in California enact new restrictions or prohibitions with respect to oil and gas exploration and production activities, we could face increased operating costs, loss of revenues, and other material and adverse impacts to our business and results of operations.
Current report
Our operations and financial performance may be negatively affected directly or indirectly by changes in trade policies and tariffs.
Current report
In recent years, the United States increased tariffs for certain goods, which triggered other nations to also increase tariffs on certain of their goods. In recent weeks, the current administration has made many announcements regarding tariffs and the extent and duration of such tariffs remain uncertain. If maintained, the newly announced tariffs and the potential escalation of trade disputes could pose a risk to our business and also directly impact our operating expenses. For example, recently announced 25% tariffs on imported steel are likely to lead to increased material costs.
Removed paragraphs (16)
Previous report
•The military conflicts in Ukraine, Israel and Yemen and the Red Sea have caused related price volatility and geopolitical instability could negatively impact our business.
Previous report
•We may not decide to separate our carbon management business from our E&P business, or be successful in the event we choose to pursue such separation.
Previous report
•While the Aera Merger is pending, we will be subject to certain contractual restrictions that could adversely affect our business and operations.
Previous report
•There is an increased potential for short sales of our common stock due to the sales of shares issued upon exercise of warrants, which could materially affect the market price of the stock.
Previous report
Increases in inflation may have an adverse effect on us. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability. We have taken measures to limit the effects of the inflationary market by entering into contracts for materials and services with terms of one to three years. Additionally, we continually look at productivity and performance improvements from our vendors in order to mitigate these price increases and also to reduce volumes consumed. However, there can be no assurances that such measures will be effective. Inflation could also result in higher interest rates in the United States, which could increase the cost of future financing efforts.
Previous report
•We may need to transport CO 2 in pipelines if a CCS project relies on storage space that is not co-located with the production facilities. Our ability to transport CO 2 is subject to regulatory uncertainty, see Risks Related to Regulation and Government Action – New and developing regulations related to the CO 2 unitization, permitting and pipeline safety could negatively impact our business, financial condition and results of operations described below.
Previous report
Public statements with respect to ESG matters, such as emissions reduction goals, other environmental targets, or other commitments addressing certain social issues, are becoming increasingly subject to heightened scrutiny from public and governmental authorities related to the risk of potential “greenwashing,”i.e., misleading information or false claims overstating potential ESG benefits. As a result, we may face increased litigation risks from private parties and governmental authorities related to our ESG efforts. In addition, any alleged claims of greenwashing against us or others in our industry may lead to further negative sentiment and diversion of investments. Additionally, we could face increasing costs as we attempt to comply with and navigate further ESG-related focus and scrutiny.
Previous report
We may not decide to separate our carbon management business from our E&P business, or be successful in the event we choose to pursue separation.
Previous report
We are considering the potential separation of our E&P and carbon management businesses at some point in the future. We are also pursuing financing options for our carbon management business that are separate from the rest of our business. Our carbon management business faces operational, technological and regulatory risks that could be considerable due to early stage nature of these projects and the sector generally, which may make it more difficult to independently finance and there are no assurances that it will be a viable standalone business in the near term or at all. Further, there can be no assurances that we will be able to successfully separate our E&P and carbon management businesses. We also may decide not to pursue such separation if we do not believe it would maximize shareholder value.
Previous report
While the Aera Merger is pending, we will be subject to certain contractual restrictions that could adversely affect our business and operations.
Previous report
Due to certain restrictions in the Merger Agreement on the conduct of business prior to completing the Aera Merger, we may be unable, during the pendency of the Aera Merger, to pursue strategic transactions, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial, and we may have to forgo certain opportunities we might otherwise pursue.
Previous report
In addition, the Merger Agreement prohibits us from initiating, soliciting or knowingly encouraging any competing acquisition proposals, subject to certain limited exceptions. The Merger Agreement also contains certain termination rights for us and Aera. Upon termination of the Merger Agreement in accordance with its terms, under certain circumstances, we will be required to pay Aera a termination fee of $50 million, or $100 million in certain circumstances, including if the Merger Agreement is terminated by Aera due to our Board changing its recommendation in favor of the Aera Merger to support a competing acquisition proposal.
Previous report
In addition, commencing in February 2023, CalGEM began returning our applications for permits in the Wilmington Oil Field, including permits for new production wells, workovers and plugging and abandonment operations. CalGEM cited concerns regarding the adequacy of the related environmental impact report for purposes of meeting CEQA requirements. We are working together with the City of Long Beach to address CalGEM’s concerns regarding conducting future re-drills, workover and plugging and abandonment activities.
Previous report
Our ability to timely obtain and maintain permits for our operations in 2023, including from CalGEM, has been subject to significant delays and uncertainties and is subject to factors that are not within our control. These factors include changes in agency practices, new regulations, or legal challenges to existing approvals for our operations from individual citizens and non-governmental organizations. For example, beginning in 2021, CalGEM ceased issuing new well stimulation permits. In 2023, CalGEM virtually ceased issuing permits for new wells, sidetracks, deepenings, and reworks throughout the state (though it recently resumed issuing permits for reworks, and has slowly been resuming the issuance of permits for sidetracks), even as it continues approving permits for plugging and abandonment. CalGEM communicated that permitting would resume (with the exception of permits for new wells in Kern County, the issuance of which has been stayed pending the final ruling of the Appellate Court) upon its development of standard operating procedures for reviewing permit applications and cited staffing shortages within its CEQA unit as an additional reason for the delays. See Part I, Item 1 and 2 – Business and Properties, Regulation of the Industries in which we Operate, Regulations of Exploration and Production Activities.
Previous report
There is an increased potential for short sales of our common stock due to the sales of shares issued upon exercise of warrants, which could materially affect the market price of the stock.
Previous report
Downward pressure on the market price of our common stock that likely will result from sales of our common stock issued in connection with the exercise of warrants could encourage short sales of our common stock by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Such sales of our common stock could have a tendency to depress the price of the stock, which could increase the potential for short sales.
Reworded paragraphs (91)
Previous wording
•Prices for our products are volatile and a substantial decline in prices over an extended period could materially and adversely affect our financial condition, results of operations, cash flow and ability to invest in our assets.
Current wording
•Prices for our products are volatile and a substantial decline in prices over an extended period could have a material adverse effect on our financial condition, results of operations, cash flow and ability to invest in our assets.
Previous wording
•Our producing properties are located exclusively in California, making us vulnerable to risks associated with having operations concentrated in this geographic area.
Current wording
•Our producing properties are located exclusively in California, making us vulnerable to risks associated with having operations concentrated in this geographic area, including drought, earthquake and wildfire risks.
Previous wording
•Drilling for and producing oil and natural gas carry significant operational risks and uncertainty. We may not drill wells at the times we scheduled, or at all. Wells we do drill may not yield production in economic quantities or generate the expected payback.
Current wording
•Drilling for and producing oil and natural gas carries significant operational risks and uncertainty. We may not drill wells at the times we schedule, or at all. Wells we do drill may not yield production in economic quantities or generate the expected payback.
Previous wording
•We have been negatively impacted by inflation.
Previous wording
The military conflicts in Ukraine, Israel and Yemen and the Red Sea have caused price volatility and geopolitical instability could negatively impact our business.
Current wording
•The military conflicts in Ukraine, Israel and other countries in the Middle East have caused price volatility and geopolitical instability which impact our business.
Previous wording
•Many of our competitors have greater resources than us and we may not be able to successfully compete in acquiring and developing new properties.
Current wording
•Some of our competitors have greater resources than us and we may not be able to successfully compete in acquiring and developing new properties.
Previous wording
Risks Related to Carbon TerraVault and Our Carbon Management Business
Current wording
Risks Related to Carbon TerraVault and Our Carbon Management Segment
Previous wording
•Our ability to achieve our 2045 Full-Scope Net Zero target and other goals related to carbon management activities, is subject to risks and uncertainties.
Current wording
•Our ability to achieve our emissions goals and other goals related to carbon management activities is subject to risks and uncertainties.
Previous wording
•Increasing activism against the oil and gas industry presents risks to our business.
Current wording
•Increasing activism against the industries in which we operate, including the oil and gas industry and our involvement in carbon capture, storage, utilization and sequestration, presents risks to our business.
Previous wording
•Increasing attention to ESG matters may adversely impact our business.
Current wording
•Increased attention to ESG matters may adversely impact our business.
Previous wording
•Acquisition and disposition activities, including the Aera Merger, involve substantial risks.
Current wording
•Acquisition and disposition activities, including continued integration of the Aera Merger, involve substantial risks.
Previous wording
•Our Carbon TerraVault business and our CCS projects are subject to extensive government regulation much of which is still being developed. Failure to comply with these requirements and obtain the necessary permits, or the development of government regulations that are unfavorable to our CCS projects, could have an adverse effect on our business, results of operations and financial condition.
Current wording
•Our Carbon TerraVault business and our CCS projects are subject to extensive government regulation much of which is still being developed. Failure to comply with these regulations and obtain the necessary permits, or the development of government regulations that are unfavorable to our CCS projects, could have an adverse effect on our business, results of operations and financial condition.
Previous wording
•Concerns about climate change and other air quality issues may prompt governmental action that could materially affect our operations or results.
Current wording
•Concerns about climate change and other environmental issues may prompt governmental action that could have a material adverse effect on our operations or results.
Previous wording
•Recent action by the State of California imposing additional financial assurance requirements related to plugging and abandonment costs, decommissioning, and site restoration on those who acquire the right to operate wells and production facilities could impact our ability to sell or acquire assets in the state of California or increase our costs in connection with the same.
Current wording
•Financial assurance requirements related to plugging and abandonment costs, decommissioning, and site restoration on those who acquire the right to operate wells and production facilities could impact our ability to sell or acquire assets in California or increase our costs in connection with the same.
Previous wording
•The lenders under our Revolving Credit Facility could limit our ability to borrow and restrict our ability to use or access to capital.
Current wording
•The lenders under our Revolving Credit Facility could limit our ability to borrow and restrict our ability to use or access capital.
Previous wording
•Restrictive covenants in our Revolving Credit Facility and the indenture governing our Senior Notes may limit our financial and operating flexibility.
Current wording
•Restrictive covenants in our Revolving Credit Facility and the indentures governing our Senior Notes may limit our financial and operating flexibility.
Previous wording
Prices for our products are volatile and a substantial decline in prices over an extended period could materially and adversely affect our financial condition, results of operations, cash flow and ability to invest in our assets.
Current wording
Prices for our products are volatile and a substantial decline in prices over an extended period could have a material adverse effect on our financial condition, results of operations, cash flow and ability to invest in our assets.
Previous wording
•political and economic conditions, including international disputes such as the conflicts in Ukraine, Israel and Yemen and the Red Sea;
Current wording
•political and economic conditions, including international disputes such as the conflicts in Ukraine, Israel and other countries in the Middle East;
Previous wording
Lower prices could have adverse effects on our business, financial condition, results of operations and cash flow, including:
Current wording
Lower prices could have adverse effects on our business, financial condition and results of operations, including:
Previous wording
Our producing properties are located exclusively in California, making us vulnerable to risks associated with having operations concentrated in this geographic area.
Current wording
Our producing properties are located exclusively in California, making us vulnerable to risks associated with having operations concentrated in this geographic area, including drought, earthquake and wildfire risks.
Previous wording
Our operations are concentrated in California. Because of this geographic concentration, the success and profitability of our operations may be disproportionately exposed to the effect of regional conditions. These changes in state or regional laws and regulations affecting our operations, local price fluctuations and other regional supply and demand factors, including gathering, pipeline, transportation and storage capacity constraints, limited potential customers, infrastructure capacity and availability of rigs, equipment, oil field services, supplies and labor. Our operations are also exposed to natural disasters and related events common to California, such as wildfires, mudslides, high winds, earthquakes and extreme weather events, and the potential increase to the frequency of drought and flooding. Further, our operations may be exposed to power outages, mechanical failures, industrial accidents or labor difficulties. Any one of these events has the potential to cause producing wells to be shut in, delay operations and growth plans, decrease cash flows, increase operating and capital costs, prevent development of lease inventory before expiration and limit access to markets for our products.
Current wording
Our operations are concentrated in California. Because of this geographic concentration, the success and profitability of our operations may be disproportionately exposed to the effect of regional conditions. Changes in state or regional laws and regulations affecting our operations, local price fluctuations and other regional supply and demand factors, including gathering, pipeline, transportation and storage capacity constraints, limited potential customers, infrastructure capacity and availability of rigs, equipment, oil field services, supplies and labor. Our operations are also exposed to natural disasters and related events common to California, such as wildfires, mudslides, high winds, earthquakes and extreme weather events, and the potential increase to the frequency of drought and flooding. Further, our operations may be exposed to power outages, mechanical failures, industrial accidents or labor difficulties. Any one of these events has the potential to cause producing wells to be shut in, delay operations and growth plans, decrease cash flows, increase operating and capital costs, prevent development of lease inventory before expiration and limit access to markets for our products.
Previous wording
Drilling for and producing oil and natural gas carry significant operational risks and uncertainty. We may not drill wells at the times we scheduled, or at all. Wells we do drill may not yield production in economic quantities or generate the expected payback.
Current wording
Drilling for and producing oil and natural gas carries significant operational risks and uncertainty. We may not drill wells at the times we schedule, or at all. Wells we do drill may not yield production in economic quantities or generate the expected payback.
Previous wording
We have specifically identified locations for drilling over the next several years, which are an integral part of our production strategy. Our actual drilling activities may materially differ from those presently identified. If future drilling results in these projects do not establish sufficient production and reserves to achieve an economic return, we may curtail drilling or development of these projects. We make assumptions about the consistency and accuracy of data when we identify these locations that may prove inaccurate. We cannot guarantee that our identified drilling locations will ever be drilled or if we will be able to produce crude oil or natural gas from these drilling locations. In addition, some of our leases could expire if we do not establish production in the leased acreage. The combined net acreage covered by leases expiring in the next three years represented 4% of our total net undeveloped acreage at December 31, 2023.
Current wording
We have specifically identified drilling activities for the next several years, which are an integral part of our production strategy. Our actual drilling activities may materially differ from those presently identified. If future drilling activities do not generate sufficient production and reserves, we may be forced to curtail drilling or development of these and other projects. We make assumptions about the consistency and accuracy of data when we identify locations for new wells or opportunities for workovers, sidetracks and deepenings, and these assumptions may prove inaccurate. We cannot guarantee that our identified new well drilling locations will ever be drilled or if we will be able to produce crude oil or natural gas from these drilling locations or from our other drilling activities. In addition, some of our leases could expire if we do not establish production in the leased acreage. The combined net acreage covered by leases expiring in the next three years represented 2% of our total net undeveloped acreage at December 31, 2024.
Previous wording
The marketing of our oil, natural gas and NGLs is dependent upon the existence of adequate markets for our products. Imbalances between the supply of and demand for these products, including as a result of economic downturns or the effects of public health events, could cause extreme market volatility and a substantial adverse effect on commodity prices. A world health event, the extent of actions that may be taken to contain or treat their impact, and the impacts on the economy generally and oil prices in particular, are uncertain, rapidly changing and hard to predict. This uncertainty could force us to reduce costs, including by decreasing operating expenses and lowering capital expenditures, and such actions could negatively affect future production and our reserves. We may experience labor shortages if our employees are unwilling or unable to come to work because of illness, quarantines, government actions or other restrictions in connection with a pandemic. If our suppliers cannot deliver the materials, supplies and services we need, we may need to suspend operations. In addition, we are exposed to changes in commodity prices which have been and will likely remain volatile. We cannot predict the duration and extent of a pandemic's adverse impact on our operating results.
Current wording
The marketing of our oil, natural gas and NGLs is dependent upon the existence of adequate markets for our products. Imbalances between the supply of and demand for these products, including as a result of economic downturns or the effects of public health events, could cause extreme market volatility and a substantial adverse effect on commodity prices. A world health event, the extent of actions that may be taken to contain or treat its impact, and the impacts on the economy generally and oil prices in particular, are uncertain, rapidly changing and hard to predict. This uncertainty could force us to reduce costs, including by decreasing operating expenses and lowering capital expenditures, and such actions could negatively affect future production and our reserves. We may experience labor shortages if our employees are unwilling or unable to come to work because of illness, quarantines, government actions or other restrictions in connection with a pandemic. If our suppliers cannot deliver the materials, supplies and services we need, we may need to suspend operations. In addition, we are exposed to changes in commodity prices which have been and will likely remain volatile. We cannot predict the duration and extent of a pandemic's adverse impact on our operating results.
Previous wording
The military conflicts in Ukraine, Israel and Yemen and the Red Sea have caused volatility in the prices of natural gas, oil and NGLs, and the extent and duration of the military action, sanctions and resulting market disruptions have been significant and could continue to have a substantial impact on the global economy and our business for an unknown period of time.
Current wording
The military conflicts in Ukraine, Israel and other countries in the Middle East have caused volatility in the prices of natural gas, oil and NGLs, and the extent and duration of the military action, sanctions and resulting market disruptions have been significant and could continue to have a substantial impact on the global economy and our business for an unknown period of time.
Previous wording
During the fourth quarter of 2023, OPEC+ announced a continuation of its combined 4 million barrels per day voluntary reduction in production quotas. While actual OPEC+ production capabilities are difficult to discern, any return to previous targeted production levels—coupled with expanding Iranian, Venezuelan, Brazilian and U.S. production—could cause commodity prices to decline which would reduce the revenues we receive for our oil and natural gas production.
Current wording
In the fourth quarter of 2024, OPEC+ extended its nearly 4 million barrels per day voluntary reduction in production quotas as well as 2.2 million barrels per day in voluntary production curtailments. While actual OPEC+ production capabilities are difficult to discern, any return to previous targeted production levels—coupled with expanding Iranian, Venezuelan, Brazilian and U.S. production—could cause commodity prices to decline which would reduce the revenues we receive for our oil production.
Previous wording
Many of our competitors have greater resources than us and we may not be able to successfully compete in acquiring and developing new properties.
Current wording
Some of our competitors have greater resources than us and we may not be able to successfully compete in acquiring and developing new properties.
Previous wording
We face competition in every aspect of our business, including, but not limited to, acquiring reserves and leases, obtaining goods and services and hiring and retaining employees needed to operate and manage our business and marketing natural gas, NGLs or oil. Competitors include a multinational oil company, independent production companies and individual producers and operators. In California, our competitors are few and large, which may limit available acquisition opportunities. Many of our competitors have greater financial and other resources than we do. As a result, these competitors may be able to address such competitive factors more effectively than we can or withstand industry downturns more easily than we can.
Current wording
We face competition in every aspect of our business, including, but not limited to, acquiring reserves and leases, obtaining goods and services and hiring and retaining employees needed to operate and manage our business and marketing natural gas, NGLs or oil. Competitors include a multinational oil company, independent production companies and individual producers and operators. In California, our competitors are few, which may limit available acquisition opportunities. Some of our competitors have greater financial and other resources than we do. As a result, these competitors may be able to address such competitive factors more effectively than we can or withstand industry downturns more easily than we can.
Previous wording
We enter into hedges to mitigate our economic exposure to commodity price volatility and ensure our financial strength and liquidity by protecting our cash flows. Our Revolving Credit Facility also includes a covenant that would require us to enter into hedges if the ratio of our indebtedness to Consolidated EBITDAX (as defined in the Revolving Credit Facility) exceeds certain levels. In addition, we have previously entered into incremental hedges above these requirements for certain time periods. These hedges expose us to the risk of financial losses depending on commodity price movements and may prevent us from realizing the full benefits of price increases. Our ability to realize the benefits of our hedges also depends in part upon the counterparties to these contracts honoring their financial obligations. If any of our counterparties are unable to perform their obligations in the future, we could be exposed to increased cash flow volatility that could affect our liquidity. In addition, our level of hedging activity may be impacted by financial regulations that could increase our costs of hedging and/or limit the number of hedging counterparties available to us.
Current wording
We enter into hedges to mitigate our economic exposure to commodity price volatility and ensure our financial strength and liquidity by protecting our cash flows. Our Revolving Credit Facility also includes a covenant that would require us to enter into hedges if the ratio of our indebtedness to Consolidated EBITDAX (as defined in the Revolving Credit Facility) exceeds certain levels. These hedges expose us to the risk of financial losses depending on commodity price movements and may prevent us from realizing the full benefits of price increases. Our ability to realize the benefits of our hedges also depends in part upon the counterparties to these contracts honoring their financial obligations. If any of our counterparties are unable to perform their obligations in the future, we could be exposed to increased cash flow volatility that could affect our liquidity. In addition, our level of hedging activity may be impacted by financial regulations that could increase our costs of hedging and/or limit the number of hedging counterparties available to us.
Previous wording
Our ability to add reserves, other than through acquisitions, depends on the success of improved recovery, extension and discovery projects, each of which depends on reservoir characteristics, technology improvements and oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside management’s control and will affect whether the historical sources of proved reserves additions continue to provide reserves at similar levels.
Current wording
To the extent we are able to drill new wells, our ability to maintain or increase reserves (other than through acquisitions) is contingent on the success of improved recovery, extension and discovery projects, each of which hinges on reservoir characteristics, technology improvements and oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside management’s control and will affect whether the historical sources of proved reserves additions continue to provide reserves at similar levels.
Previous wording
In addition, our reserves information represents estimates prepared by internal engineers. Although 88% of our estimated proved reserve volumes as of December 31, 2023, were audited by our independent petroleum engineer, NSAI, we cannot guarantee that the estimates are accurate.
Current wording
In addition, our reserves information represents estimates prepared by internal engineers. Although 85% of our estimated proved reserve volumes as of December 31, 2024, were audited by our independent petroleum engineer, NSAI, we cannot guarantee that the estimates are accurate.
Previous wording
Risks Related to Carbon TerraVault and Our Carbon Management Business
Current wording
Risks Related to Carbon TerraVault and Our Carbon Management Segment
Previous wording
•The development of CCS and related projects will require us, our joint venture partner, and third-party emitters to make significant capital investments in the relevant technology and infrastructure and we may not have sufficient capital resources to fund such investments. Such projects may also depend on third party financing and such financing may not be available on reasonable terms or at all. In some cases, these projects will involve the production and sale of hydrogen, ammonia or other products and markets for some of these products are still emerging.
Current wording
•The development of CCS and related projects will likely require us, our joint venture partner, and third-party emitters to make significant capital investments in the relevant technology and infrastructure and we may not have sufficient capital resources to fund such investments. Such projects may also depend on third party financing and such financing may not be available on reasonable terms or at all. In some cases, these projects will involve the production and sale of hydrogen, ammonia or other products and markets for some of these products are still emerging.
Previous wording
•The development of a CCS project will require us to enter into long term binding agreements with large carbon emitters and other third parties and we may not be able to do so on agreeable terms or at all. Such agreements are complex and may involve allocation of not only fees but also various credits, incentives and environmental attributes associated with the storage of CO 2. Not all emission sources produce sufficiently large quantities of pure or relatively pure streams of CO 2, or have installed equipment to capture such CO 2, so as to be useable in one or more of our CCS projects. As a result, we cannot assure whether we will be able to access CO 2 emissions in sufficient quantities or on terms that are acceptable to us.
Current wording
•The development of a CCS project will likely require us to enter into long term binding agreements with large carbon emitters and other third parties and we may not be able to do so on agreeable terms or at all. Such agreements are complex and may involve allocation of not only fees but also various credits, incentives and environmental attributes associated with the storage of CO 2. Not all emission sources produce sufficiently large quantities of pure or relatively pure streams of CO 2, or have installed equipment to capture such CO 2, so as to be useable in one or more of our CCS projects. As a result, we cannot assure whether we will be able to access CO 2 emissions in sufficient quantities or on terms that are acceptable to us.
Previous wording
•The development and operation of cost-effective, commercial-scale hydrogen and ammonia production facilities and associated sequestration facilities is highly complex. We may participate in the development of production facilities that provide the emissions for our CCS business. There can be no assurances that we or our partners will be able to successfully develop these production facilities, or that we will be able to develop the related sequestration facilities, in a timely manner or at all. In addition, there can be no assurances that these facilities can be maintained and operated over the longer term. The financing and development of these projects may depend on the availability of long term off-take agreements for these products and the market for hydrogen is still developing. It may not be possible for us or our partners to enter into these types of agreements on acceptable terms or at all.
Current wording
•The development and operation of cost-effective, commercial-scale hydrogen and ammonia production facilities and associated sequestration facilities are highly complex. We may participate in the development of production facilities that provide the emissions for our CCS business. There can be no assurances that we or our partners will be able to successfully develop these production facilities, or that we will be able to develop the related sequestration facilities, in a timely manner or at all. In addition, there can be no assurances that these facilities can be maintained and operated over the longer term. The financing and development of these projects may depend on the availability of long term off-take agreements for these products and the market for hydrogen is still developing. It may not be possible for us or our partners to enter into these types of agreements on acceptable terms or at all.
Previous wording
•Carbon capture may be viewed as a pathway to the continued use of fossil fuels and there may be organized opposition to CCS projects from environmental groups, local residents and legislators.
Current wording
•Carbon capture may be viewed as a pathway to the continued use of fossil fuels and there may be organized opposition (including lawsuits) to CCS projects from environmental groups, local residents and legislators.
Previous wording
There can be no assurances that we will successfully develop our CCS projects, including CalCapture, and such failure could have an adverse effect on our business. Our carbon management business is currently in an early stage of development, and we do not expect the failure of a single CCS project to create an impact on our overall financial condition or operations. However, as the scale of our CCS projects grows, so will their impact on our overall financial condition and operations. Moreover, our failure to successfully develop our CCS projects would adversely affect our ability to claim emissions reductions related to our sequestration activities and our ability to meet our carbon management goals, which in turn could have an adverse effect on our business and reputation.
Current wording
There can be no assurances that we will successfully develop our CCS projects, including our cryogenic gas plant CCS project or CalCapture, and a failure to do so would have an adverse effect on our carbon management business and its prospects. Our carbon management segment is currently in an early stage of development, and we do not expect the failure of a single CCS project to create an impact on our overall financial condition or operations. However, as the scale of our CCS projects grows, so will its impact on our overall financial condition and operations. Moreover, our failure to successfully develop our CCS projects would adversely affect our ability to claim emissions reductions related to our sequestration activities and our ability to meet our carbon management goals, which in turn could have an adverse effect on our business and reputation.
Previous wording
Our ability to achieve our 2045 Full-Scope Net Zero target and other goals related to our carbon management activities is subject to risks and uncertainties.
Current wording
Our ability to achieve our emissions and other goals related to our carbon management activities is subject to risks and uncertainties.
Previous wording
We have adopted a number of targets and objectives related to sustainability matters, including our 2045 Full-Scope Net Zero target and our energy transition strategy. Our efforts to research, establish, accomplish, and accurately report on these targets and objectives expose us to numerous operational, reputational, financial, legal, and other risks. Our ability to achieve any stated target or objective is not guaranteed and is subject to numerous factors and conditions, some of which are outside of our control. In particular, our 2045 Full-Scope Net Zero goal includes Scope 1, 2 and 3 emissions and estimation and management of Scope 3 emissions is subject to some degree of uncertainty. We cannot guarantee that we have been able to completely quantify the full scope of our emissions and account for mitigating all such emissions in our Full-Scope Net Zero goal.
Current wording
We have adopted a number of targets and objectives related to sustainability matters. Our efforts to research, establish, accomplish, and accurately report on these targets and objectives expose us to numerous operational, reputational, financial, legal, and other risks. Our ability to achieve any stated target or objective is not guaranteed and is subject to numerous factors and conditions, some of which are outside of our control. We are reviewing the impact of the Aera Merger and its assets on our ability to meet our previously announced 2045 Full-Scope Net Zero goal and may revise our goal to reflect our current business and other considerations. In any event, this goal includes Scope 1, 2 and 3 emissions and estimation and management of Scope 3 emissions are subject to some degree of uncertainty. We cannot guarantee that we have been able to completely quantify the full scope of our emissions and account for mitigating all such emissions in our Full-Scope Net Zero goal.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
If the existing legal requirements for incentives such as the 45Q credit, the 45V credit or LCFS credits are eliminated or subsequently amended in a manner that such incentives no longer apply or are restricted in application, directly or indirectly, to our projects, we may not be able to successfully achieve an economic return from our Carbon TerraVault business and our other CCS projects or, alternatively, the construction or operation of applicable projects may be substantially delayed such that one or more projects is unprofitable or otherwise infeasible.
Current report — wording carried from elsewhere
Due to heightened concerns around climate change and GHG emissions, there is often considerable pressure on lawmakers, regulators and others to take action with respect to these allegations regardless of their perceived merit. This pressure is particularly high in California. We may need to incur significant costs associated with responding to these initiatives and such actions may have a material adverse effect on our financial results. Complying with any resulting additional legal or regulatory requirements that are substantial or prevent our activity could have a material adverse effect on our business, financial condition and results of operations.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
We cannot guarantee that these issues or new ones that may arise in the future will not continue to delay or otherwise impair our ability to obtain drilling permits. In the past we have generally been able to mitigate permitting risks by building up a reserve of drilling permits for use throughout the year, but as a result of the issues described above, we have not been able to build our reserve of approved permits to the same level as we have in the past. Changes to elected or appointed officials or their priorities and policies could result in different approaches to the regulation of the oil and natural gas industry. If we cannot obtain new drilling or sidetrack permits in a timely manner, we have limited options to meet our drilling plans, such as the use of workovers to extend the life of existing production, that may not ultimately be sufficient to achieve our business goals. Any continuing failure to obtain certain permits or the adoption of more stringent permitting requirements could have a material adverse effect on our business, operations, properties, results of operations, and our financial condition.
Previous report — wording carried elsewhere
The unified permitting process contemplated by Senate Bill No. 905 will be optional for project applicants and is intended to simplify the permitting process for CCS projects. In the meantime, pursuant to this legislation we are permitted to proceed with our existing and future CCS Class VI permit applications with the EPA. This law also contemplates the implementation of a new regulatory program incorporating standards that are not yet defined and that could affect the timing of future CCS projects in California.