California Resources Corporation

Good day, everyone, and welcome to the California Resources Corporation second quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Joanna Park, Vice President for Investor Relations and Treasurer. Ma'am, please go ahead.

Welcome to California Resources Corporation's second quarter 2021 conference call. Participating on today's call is Max McFarland, President and Chief Executive Officer, Francisco Leon, Executive Vice President and Chief Financial Officer, as well as several members of the CRC executive team. I'd like to highlight that we have provided slides on our investor relations section of our website, www.crc.com. These slides provide additional information into our operations and second quarter results, and we've also provided information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures on our website as well as in our earnings release. Today's conference call contains certain projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to risk and uncertainties and therefore may cause actual results to differ from those expressed or implied in these statements. Additional information on factors that could cause results to differ are available under Companies 10Q, which will be filed later today. We ask that you review it and the cautionary statement in our earnings release. A replay will be made available for at least 30 days following the call on our website. As a reminder, we've allotted additional time for question and answer at the end of our prepared remarks and would ask participants to limit their question to a primary and a follow-up. And with that, I will now turn the call over to Mac.

Thank you, Joanna, and thanks to everyone for attending today's earnings call. Second quarter results demonstrate the advantages of our asset position at DRC, the strong execution of our strategy, and the diligence of the hardworking employees of CRC. I'd like to thank each of them for their continued dedication in delivering the energy California needs despite COVID, unrelenting heat, and fires. As highlighted in our slides, we delivered on several key priorities. We continued our strong financial and operating performance. We announced several A&D transactions that allow us to focus on our core assets. We increased our free cash flow guidance for the full year. And accordingly, we are increasing our share repurchase program by an additional $100 million for a total of $250 million. And lastly, we are expanding our ESG leadership through decarbonization with new low-carbon initiatives. Turning to slide five, CRC strategy is based upon three main pillars. One, cost and operational excellence. Two, disciplined investing. And three, responsible portfolio management. I'm going to briefly explain how we delivered on all three pillars in the quarter and year-to-date. The first pillar of our strategy focuses on lowering our operating cost model while maintaining top-notch safety performance. The team continued to deliver on both aspects, maintaining corporate G&A cost savings, which are down 16% from 2020 levels, and our controllable non-energy costs, which are in line with the first quarter of 2021, both on a per barrel basis. I think it's important to stop and highlight why we are focused on our non-energy costs, because our energy costs rise with rising natural gas prices. The rising natural gas prices are a net positive to CRC, as we are a net long natural gas producer. Said differently, our revenues expand faster than our costs, which is a good position to be in. Francisco will go into more details on this topic later on the call. I might add one final thought on cost. While we work hard to maintain our cost structure and aim to be a low-cost producer, we're starting to see signs of inflation and inflationary pressures creeping into our business. We're working hard to contract differently or contracting differently to offset these pressures, but with rising commodity prices comes inflation. During the quarter, we maintained our high safety standard and extended our low incident rate with a 0.49 IRR year to date. I'd like to commend our employees and our contractors for focus on safety, as the industry and other industries, as we return to work, have seen an uptick in OSHA recordables. The second pillar of our disciplined investing is based on prudent investment and project prioritization. During the quarter, we continue to shift drilling capital to downhole maintenance due to the robust rate of returns of those projects. Our operations team continue to focus on our high return maintenance backlog and successfully maintain flat production levels while operating only two rigs in the first half of the year. Our thoughtful investment of each dollar toward our best available opportunity exhibits our ability to stabilize oil production while also generating meaningful free cash flow. And it shouldn't be lost to those on the phone, but as we shift dollars from capex to opex, we're actually taking a hit to EBITDAX, and yet we are still forecasting EBITDAX of just over $800 million. The third pillar of our strategy centers on responsible portfolio management. CRC demonstrated our commitment to this pillar by purchasing the entire working interest position held by a joint venture partner in our core field, as well as entering into an agreement to exit the non-core Ventura Basin. Earlier this year, we said we were in too many fields and we believe focusing on our core asset drives the most value. These transactions enabled us to do just that. Francisco is going to provide additional details from a high level perspective. These bolt on and bolt off transactions allow us to recycle capital back into our core fields, simplify our business model and continue to streamline our cost structure. Looking forward to strong free cash flow generation in the first half results combined with our updated forecast for free cash flow for the balance of the year give us confidence to increase the four-year guidance to the range of $400 to $500 million and to increase our share repurchase program, as I mentioned earlier, by $100 million to $250 million in total. We continue to believe there is significant stock appreciation potential given our low leverage and that we traded a relative discount to peers. I'll now turn the call over to Francisco, who will provide additional details on second quarter financial performance before I return to discuss our ESG efforts. Francisco?