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Did California Resources Benefit from Higher Crude Oil Prices?

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California Resources’ 3Q16 realized prices

Excluding the effect of hedges, California Resources’ (CRC) average realized crude oil price in 3Q16 was $41.73 per barrel, a fall of ~9% from $46.10 per barrel in 3Q15. 

CRC’s year-over-year lower crude oil realized prices were compensated partially by its gains on crude oil derivatives. We’ll study CRC’s hedges in Part Eight of this series.

In 3Q16, CRC’s average realized price for natural gas liquids production rose ~33% to $22.45 per barrel, compared to $16.92 for the same period in 2015. In 3Q16, CRC’s average realized price for natural gas production fell ~7% to $2.64 per Mcf (thousand cubic feet), compared to $2.83 per Mcf for the same period in 2015.

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CRC’s crude oil realized prices compared to the benchmark

For the first nine months of 2016, CRC’s average realized price for crude oil was $40.91 per barrel, ~1% lower compared to the average WTI (West Texas Intermediate) crude oil price of $41.33 per barrel for the same period. In 2015, CRC’s average realized crude oil price beat the benchmark WTI crude oil price by ~1%.

CRC’s California advantage

According to California Resources’ 10Q form for 3Q16, refiners located in California offered better pricing for crude oil purchases from California Resources compared to other US refining markets. For this reason, CRC sells its entire crude oil production to refiners located in California.

The primary reason for better crude oil prices from California refiners is the insufficient crude oil transportation capacity from other oil-producing states to California’s refining markets. California Resources expects this trend of relatively higher realizations to continue in the future as well.

Other upstream players

Other upstream companies from the S&P 500 (SPY) such as Southwestern Energy (SWN), Pioneer Natural Resources (PXD), and Marathon Oil (MRO) had lower realized crude oil prices in 3Q16 compared to the average WTI crude oil price during the quarter.

Now, let’s take a look at an interesting chart that’s related to California Resources’ realized price effectiveness in terms of production costs.

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