uploads///CRC Q Cash Flow

California Resources: Why No Positive Cash Flow in 2Q16?

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Dec. 4 2020, Updated 10:53 a.m. ET

California Resources’ revenues and operating cash flows

For 2Q16, California Resources’ (CRC) total operating revenue (excluding derivative losses) was ~$435 million or ~44% lower than 2Q15. The lower operating revenue in 2Q16 was the direct result of lower realized prices for crude oil and natural gas production.

In 2Q16, CRC reported an OCF (operating cash flow) of about -$71 million, which was ~$188 million lower than its OCF of ~$117 million in 2Q15. The decrease in 2Q16 OCF was mainly due to lower operating revenues, as we discussed above.

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California Resources’ free cash flow trend

As the chart above shows, CRC has reported negative FCFs (free cash flows) in 1Q15 and 4Q15. In 2Q16, CRC reported a FCF of about -$76 million. Due to the steep downward trend in energy prices, most S&P 500 (SPY) energy companies have reported negative FCFs. Pioneer Natural Resources (PXD), Range Resources (RRC), and Murphy Oil (MUR) reported -$137 million (or -$0.84 per share), -$53 million (or -$0.31 per share), and -$322 million (or -$1.87 per share), respectively, in free cash flows in 2Q16.

The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas–related equities from the S&P 500.

FCF helps a company enhance shareholder value. It can pay dividends, buy back stocks, or repay debt. FCF is calculated by subtracting capital expenditure or capex from OCF.

California Resources’ capital expenditure guidance

In 2Q16, CRC spent ~$5 million in capital expenditure, ~95% less than 2Q15.

For 2016, CRC has developed a dynamic capital program to align its investments with its projected cash flow. CRC currently has no drilling rigs running and expects capital expenditure of ~$50 million in 2016.

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