This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Good day and welcome to the California Resources Corporation third quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Joanna Parks, VP of Investor Relations and Treasurer. Please go ahead.
spk00: Thanks. Welcome to California Resources Corporation third quarter 2022 conference call. Participating on today's call are Mac McFarland, President and Chief Executive Officer, Francisco Leon, Executive Vice President and Chief Financial Officer, as well as the entire Executive Committee. 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 our third quarter results. We have 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, we are making some forward-looking statements based on current expectations. Actual results could differ due to factors described on our earnings release and in our periodic SEC filing. As a reminder, we have allotted additional time for Q&A at the end of our prepared remarks, and we ask that participants limit their questions to a primary and one follow-up. With that, I will now turn the call over to Max.
spk09: Great, and thank you, Joanna. At CRC, we are a different kind of energy company. We are focused on delivering consistent and predictable free cash flow, We are focused on disciplined capital allocation and shareholder returns from the free cash we generate. And we are focused on advancing and accelerating our carbon management business. A simple but focused strategy. So let's discuss each of these in greater detail. First, consistent and predictable cash flow. During the third quarter, we continued to deliver strong results by producing 92,000 barrels of oil equivalent per day and $128 million of after-tax free cash flow. We did this despite externalities, including the continued litigation over the Kern County ERR, which has been recently resolved in the courts, as well as ongoing inflationary pressures. We were able to accomplish these results because we have a robust portfolio of assets that allows us to adapt to the ever-changing landscape. Our portfolio allowed us to ramp up to five DNC rigs during the year and increase our downhole maintenance activity to deliver on our production goals. For the full year 2022, we are projecting approximately $235 million of DNC capital expenditures while maintaining oil production, essentially flat, entry to exit. And that's after adding back the impact from the Kern County EIR litigation delay and taking into account A&D transactions from earlier this year. And while inflation has impacted our non-energy OpEx and CapEx costs, and as a result, slightly squeezed our margins, we are still delivering on full year 2022 expectations on the current price day. Francisco will describe this in greater detail, but as we have said, we anticipate long-term average DNC capital of approximately $300 million per year to keep oil production flat after adjusting for the inflationary pressures that we are seeing. We have a resilient portfolio that delivers consistent and predictable cash flow. Second, disciplined capital allocation. Until recently, we had a stated long-term capital allocation framework of recycling approximately 50% or less of our operating free cash flow to maintain our oil production. And then we would split the remaining free cash flow 50-50 between shareholder returns and investment in our carbon management business. Now, that has significantly changed with our carbon tariff all JV with Brookfield. Because the JV, excuse me, is expected to fund the carbon management business by our farm down of carbon terra vaults into the JV and the 10 ton buy in to these vaults by Brookfield, our carbon management business is essentially self funding through the end of the decade if the JV is successful in its objectives. That means we can now focus our free cash flow after CapEx for shareholder returns after making limited investments in early stage ctv storage vaults as we've said previously and that is our new discipline capital allocation framework in fact through the third quarter we have returned 105 percent of free cash flow through our share repurchase program and our dividend and because we are further committing to shareholder returns we are increasing our dividend by 66 percent to 28 and a quarter cents per share and increasing our share repurchase program by an additional 200 million for a total program of 850 million. And we are also extending the program through the end of 2023. In fact, if we complete our entire share repurchase program by year end 2023 and include our fixed quarterly dividend, CRC is on pace for nearly $1 billion of total shareholder returns on a cumulative basis. Finally, We continue to advance and accelerate our carbon management business. Last quarter, we closed the CTV Brookfield JV, and we are now focused on execution and continue to see a tremendous opportunity. With the passing of the Inflation Reduction Act and the increase in 45Q incentives, we see a growing and expanding target market opportunity. For permanent sequestration, we see a growing set of new opportunities for Carbon TerraVault in the new energy economy, new counterparties in hydrogen and ammonia, renewable diesel. These are greenfield opportunities that we believe can fit within our economic type curve for CMB, our carbon management business, because they have lower cost of capture and can be constructed in close proximity to our storage vaults, which limits transportation requirements. While this target market opportunity is not yet defined as our existing sources in the state, Many of the counterparties we have recently engaged with are part of this newly emerging economy and something we find very exciting. We continue to make progress in our advancing multiple CDMAs, or carbon dioxide management agreements, with our counterparties. These CDMAs are detailed frameworks which address the key project terms, including pore space, volume commitments, economics, development milestones, facilities, and the like. The CDMAs are also subject to conditions and provide a useful roadmap to reach agreement on final investment decisions on an expedited basis. We remain confident in our goal of signing a CDMA by the year end, putting us on track for first injection by the end of 2025. On the permitting front, we expect to end the year with approximately 140 million tons of filed permits. And while our previous stated goal was 200 million tons of permit on file by the year end, we remain confident in our backlog of permits. The fact is, as we advance permits for permanent storage in a constructive dialogue with the EPA, we are continuing to refine and define best-in-class permit applications and the standards for best-in-class continue to increase in the level of detail and rigor, something we are keenly positioned to meet. That being said, we have a significant backlog of permit applications, but we are assuring that we file permits of the highest quality while maintaining our credibility as a leader in carbon management. Our carbon management business was also bolstered by Senate Bill 905, which was focused on advancing and streamlining the process for permitting CCS in California. While the law itself can be improved with further details and clarifications, the author of the bill has acknowledged the willingness to work to improve the law further, and we look forward to engaging on these fronts. Given CO2 EOR was banned from Senate Bill 905 and the increase in 45Q tax credits, we are shifting our CalCapture project to permanent storage and continuing to advance the feed study. We remain excited about the prospects of this project. So in summary, consistent cash flows, disciplined capital allocation with focus on shareholder returns, and growing a carbon management business. That is how we are building a different kind of energy company. I'll now turn it over to Francisco for further details on our results, including how we continue to refine our portfolio. Francisco?
spk07: Thank you, Mac. Our assets continue to perform well, delivering consistent and predictable results. Third quarter production averaged 92,000 barrels of oil equivalent per day, up 1% from the second quarter. Changes in our development plan and well mix in response to the Kern County EIR litigation and the heat-related electricity outages throughout the state impacted our quarterly production volumes. Yesterday afternoon, the court issued a favorable ruling lifting the stay in the current county EIR litigation. We expect the county to promptly begin processing permits in accordance with that ruling. From a commodity realization standpoint, CRC continued to benefit from strong realized prices across all three hydrocarbons. Our average realized price for oil in the third quarter after settlement payments on our derivative contracts registered at $62.45 per barrel. Third quarter NGL realizations declined from the second quarter, which were in line with seasonal pricing and expectations at $57.68 per barrel. California natural gas prices remain strong, registering five consecutive quarters of increases. CRC realized 109% of NIMEX after hedges at $8.58 per MCF. As we turn to the cost side of the business, we saw total quarterly non-energy operating costs rise by 77 cents per DOE, quarter over quarter, mainly as a result of increased downhole maintenance activity. In addition, increases to natural gas prices drove energy-related operating costs up $1.63 per DOE, or 17% from the previous quarter. As California's largest natural gas producer, we are net long the commodity, which means that what we produce and sell is greater than the natural gas purchased for use in our operations. During the third quarter, CRC generated $234 million of adjusted EBITDAX and quarterly operating cash flow of $235 million, demonstrating CRC's significant cash generation capability. We remained disciplined and invested $107 million in CAPEX, which is $9 million above the second quarter, mainly due to the addition of a fifth rig in the LA Basin. In the fourth quarter, We are temporarily shifting a rig from the San Joaquin Basin to our Huntington Beach field to conduct a six to eight well program and to prioritize available permits on hand. CRC entered the fourth quarter with four drilling rigs and we expect to exit the year with 94,000 DOEs per day in total production and 55,000 barrels per day of oil production. For the year, we are maintaining net oil production relatively flat entry to exit after adjusting for A&D activity with approximately $235 million in BNC capital below our stated maintenance CapEx levels. After funding our capital program, we generated $128 million of free cash flow for the quarter. Through the third quarter, we have generated $272 million of free cash flow. This provides another example of the financial results our business model delivers, and as Mac mentioned earlier, provides ample opportunity to accelerate CRC shareholder return strategy. This quarter, we are increasing both the fixed dividend and the share repurchase program. We believe this allows us to provide competitive returns, which put us in the top quartile of small and mid-cap peers from a fixed dividend standpoint. Further, we continue to execute on our stock repurchase program and have used $424 million of cash today to repurchase nearly 13% of our shares outstanding. With the expanded and extended SRP program, we have a lot of dry powder left. We also continue to build our cash balance to nearly $360 million at the end of the third quarter, up from $305 million at the end of 2021 and we have a net leverage ratio of approximately 0.3 times. Active portfolio management is a key pillar of CRC strategy. Just as we have focused on our core operations to optimize cash flow and leverage our asset position to develop carbon tera vaults, CRC continuously optimizes and evaluates its assets as part of the value proposition. Many of our assets hold appreciable value beyond the use of oil and gas producing assets. either through CCS or real estate developments. As such, we're evaluating a potential sale of a small parcel of land near Huntington Beachfield to test the real estate market and to optimize future plans for the larger strip. Looking forward to next year, we see a handful of items to keep in mind. First, consistent with our strategy, CRC will continue to advance operations for carbon terravolts. This may require some additional facility spend to prepare certain reservoirs to receive CO2 injection. As a reminder, we expect that the majority of this cost will be recouped through the $10 per metric ton buy-in through our partnership. Second, we will begin to see more commodity exposure in our results as our legacy hedges begin to roll off. This should exceed an offset inflation that we're seeing across several categories in our business. Third, as we have demonstrated this year, we believe that on average, over the next five years, drilling and completion capital requirements to hold oil flat requires approximately $300 million per year. Our portfolio of assets allows us to deliver predictable results which support our consistent free cash flow. Given our continued strong financial results and our limited NOL position, we expect to be a cash income taxpayer in the range of 15 to 20% of taxable income in 2023. CRC's outstanding total return profile, combined with a leading carbon management business, further reinforces the exceptional investment opportunity CRC offers as we create a different kind of energy company. Now I'll turn the call over back to Mac. Mac?
spk09: Thanks, Francisco. Before we conclude, I'd like to I'd like to thank the employees of CRC for their tireless dedication as well as their safety and environmental stewardship. Nothing is possible in the results that we achieve without their hard work. Thank you for your interest in CRC and thank you for joining us on today's call. We'll now open the line for questions and I'll turn it back to the operator.
spk04: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And our first question will come from Dave Davis, Patriots with RBC Capital Markets. Please go ahead.
spk10: Yeah. Hey, it's Scott Handel here with RBC. Just kind of curious now that the Kern County oil and gas permitting is kind of green lit. Can you talk about how many, I guess, permits you have in there and we'll call it backlog and You know, how long do you think it's going to take you to get some of those? So, you know, ultimately, you know, when do you think you can get kind of back on pace to what you view as the most optimized drilling program in 2023?
spk09: Hey, good morning, Scott. It's Mac. I want to flip this over to Sean Kearns, our chief operating officer. But look, it's late-breaking news, okay? And it's good news, and we're optimistic about what this brings to us. But I'll let Sean tell you about some of the process that we're looking at from here.
spk11: Yeah, good morning, Scott. Yeah, you know, late breaking news. We're very encouraged by what we heard, you know, through the court's decision. You know, as you're aware, we're having conversations with the permitting agencies about how they're going to restart in an orderly manner. So we've, you know, been engaging in conversations throughout the year anticipating that this may happen. And so I think it'll take a little bit of time to unpack the permitting backlog, but we're very, very excited about what this could mean for 2023.
spk10: Yeah, I mean, do you have a sense, I was kind of curious on your backlog?
spk09: Go ahead, Scott, sorry.
spk11: Yeah, you know, we have a number of permits that are kind of in place and under hold. And so, you know, there's some conversations going of how do we get those restarted, and then we have a number that are just waiting on the permit system to reopen.
spk09: Yes, Scott, the way I'd say it is that there's a number of permits. It's not just us. It's created a backlog, and that has to be worked through both through certifying under this EIR as well as going through the CalGEM process. But we remain cautiously optimistic that it will return to normalized activity in 2023.
spk10: It's good to hear. Thanks. And as my follow-up, it was good to hear you kind of reaffirm your view that you hope to have an emitter signed up by the end of the year. And a couple things with that. First of all, is there certain things that we should look for as sort of steps that need to occur? I know there's an EIR in Kern County for 26R that I think we should be getting some kind of flow on soon. And then also, you know, to the point of, you know, the slide that you all have on your presentation on page 19, you know, where you defined those existing sources that, you know, can be greenfield projects. You know, currently I think a lot of those may not be in the LCFS compliant molecules, but, you know, are you seeing any progress to kind of, you know, get that, you know, put into an LCF compliance, you know, bucket to even make them more enhanced opportunities?
spk09: Yeah, there's a lot to unpack there. I mean, so look, as far as the overall process is concerned, you know, you mentioned 26R. We're passing, we're just passing a year in the permitting process. As we've always said, we expect to get that permit by the end of next year on sort of that two-year timeframe. So we're excited about that and that permit as well as the A1A2 permit continue to progress through as well as our other permits. And going on that timeline, we said we were targeting a emitter contract, which we're calling a CDMA at this point. And those CDMAs, if we attain our objective by the end of this year, sort of puts us on track for going to final investment decision, hopefully right around the time that we have the permit. We remain confident that we'll be able to do that. I think what's exciting about the page that you brought up on page 19 and the prior page on page 18, which just shows an expanded market opportunity, is that when you think about some of the new energy economy, whether it be hydrogen, ammonia, ethanol, et cetera, there is a lot that is coming to the forefront. And why has that happened is because with the changes in the Inflation Reduction Act and the $85 for permanent storage, That has moved things that don't have a lot of capture capital into the economic discussions, things that we think would fit within the economic type curve that we laid out. The other advantage is that they can be co-located next to our sites. And so therefore, that has an advantage for elimination of transportation and things of the like. Anything you want to add, Francisco?
spk07: Just to kind of build on that point, Mac, we have 47,000 surface acres in Elk Hills. We were one of the largest surface owners in the state, so it's a really good way to think about how to leverage our land position.
spk09: And, Scott, I think you also asked about LCFS. Is there a pathway? So, you know, for example, on ammonia and hydrogen, there's not an established pathway that I'm aware, but if there is for hydrogen for the fueling stations. But if they're used for transportation fuels, there is an ability to apply for a pathway. And so that would allow you to do the stacking as well. But this is, you know, I think these are pretty exciting as well as, you know, there are ongoing conversations associated with the direct air capture in California in addition to that.
spk10: Appreciate all that color. Thank you.
spk04: Our next question will come from Doug Legate with Bank of America. Please go ahead.
spk06: Hey, good morning, guys. This is Kalei on for Doug, so thanks for taking the questions. My first one is a follow-up on the current EIR. So my understanding was that when the ruling occurred in May, some of the permits that you had were frozen. Can you talk about whether or not those permits are now viable again, and what would happen to the permits if the opposition should file an appeal?
spk11: Yeah, Kalei, this is Sean. Yeah, those permits... Oh, look at this. Yeah, that's correct. Yeah. Yeah, those permits that were frozen in May are still viable. So they were just really pending the outcome of an EIR kind of CEQA notification. So you have some in the queue, some that are yet to be filed. But, you know, as a team, we've been thinking through different scenarios and planning for this event. So, you know, there will be more conversations in the near future about how to get this restarted in an orderly fashion.
spk06: Got it. What happens in an appeal, Sean?
spk11: Yeah, I'll let Mike take this.
spk08: You know, so the stay was lifted and the permitting process can begin immediately. However, obviously the litigation is not completely resolved and the petitioner, the original petitioners will have the opportunity to seek an appeal and to stay new process if they so choose, that's certainly not a foregone conclusion that they would be able to achieve a further stay. And we think, you know, as an observer of the litigation that both the county and the judge have been very careful in addressing all of the issues that were raised in the first appeal. So, you know, no guarantees about kind of future results in the litigation, but we're optimistic.
spk06: Got it. So maybe if I could summarize, it sounds like you're not totally out of the woods yet, but it feels like the worst of the possible outcomes is now behind us or past that point. Is that fair?
spk11: Yeah, Kalei, I would say, you know, the indications we get right now is it's resuming. So the teams are meeting on how to restart permitting, and that's what we're going to be focused on.
spk06: Okay. I appreciate it. My next question is on the step-back rule. as it relates to LA Basin. As you assess that impact, can you talk about how you're thinking about the production cadence and the inventory depth of those assets? Maybe to add on, we came across a comment in an old slide deck presentation that stated that workovers in LA Basin provided about 3,500 BOE per year in terms of production. So it seems like the impact, if it does affect the workovers, could be quite meaningful. How do you guys view the cadence?
spk11: Yeah, on the 1137, again, it still has to go through a rulemaking process there to fully kind of understand the impact. We've put out what we think preliminary impact could be on certain portions of our asset. There's other areas of the field. You know, it's a very large field where you can continue developing or drilling from different locations. So it's kind of yet to be seen what the impact is there.
spk07: And as you saw at the latest, Francisco, we've changed our drilling rigs to come into this year to drill some wells in the LA Basin that we had dislocations identified as prime candidates for the beginning of next year. We're moving them into this year as a result that they might be potentially impacted by setbacks in the future. So we're accelerating activity in that basin because of that reason.
spk06: Francisco, maybe just to put a finer point on it, what do you see the inventory depth in the LA basin? How long can you hold current production flat?
spk07: Yeah, I mean, we're still evaluating the impact, but as Sean indicated, these are large fields that will still have running room to go, and the setback doesn't impact entirety of the field. So we're still evaluating the numbers. We still obviously have to see what the final rules are going to be, but we do have inventory left, and we'll talk about it at the future date once we have more clarity as to what the inventory looks like.
spk06: I appreciate it. Thank you.
spk04: Our next question will come from Leo Mariani with MKM Partners. Please go ahead.
spk05: Hey, guys. I wanted to follow up a little bit on the Brookfield deal here. So I think I saw in the release that you made some comments that you'd put a handful of maybe new projects in front of Brookfield. Can you provide any more color around that, and is there some kind of timeframe they have to kind of look at these projects and decide to move forward on them? How does the mechanics sort of work there?
spk08: Yeah.
spk09: Hey Leo, it's Mack. Good morning or afternoon. Uh, so we, we did submit a couple other, uh, you know, the A1, A2, CTD2 and CTD3 to the JV as farm downs into the structure. And there is, you know, the commercial terms, I don't know that we've necessarily disclosed, but there's a defined timeframe by which they have an opportunity to respond if they decide not to pull, pull those into the JV or drop them in from our perspective. that there's a deferral mechanism with some carry on it. And then it's basically part of the right of first offer, et cetera, as we described, for them to take a look at it until we go through FID. And then it's an ultimate decision that has to be made. So right now, we're in the waiting time frame and should hear relatively shortly as to whether or not those will be dropped in immediately or deferred.
spk05: OK. And then also in your prepared comments, I think you said that it sounds like you're going to get, you know, Class 6 permits for around 120 tons this year, and I think your goal was 200. It sounds like you're coming up a little bit short there, if I heard that right. Just any color around that? Are we just looking at maybe some minor delays? What are you seeing happening there on those permits?
spk09: I'm going to let... Chris Gould jumped in and explained because he's been handling that process. But I would say in a simple fashion is that the stakes are being taken up at the EPA. And we've been building credibility all along the way with the quality of our permits. And so we want to make sure that we have the highest quality of permits. And so we're just not going to rush anything. But Chris, you want to provide additional comment?
spk02: Yeah. Good morning. I think that's right. We've always been committed to setting the highest standards. And given the previously limited amount of Class VI applications before CCS has really come onto the scene here, it's not unexpected that EPA is going to learn and adjust. And frankly, we appreciate the need to have the highest standards on projects of this importance. So we're well positioned to keep our standards high, meet their standards. And we're talking about things related to data requests and additional requirements around the edges. But nonetheless, things that we want to be very deliberate, very thoughtful, and very careful about how we deliver these permits at the highest standard. So we remain on track for our eyes set for 200 million tons of permits and to hit our 5 million ton per annum goal in 2027.
spk05: All right, I just wanted to follow up on the oil production here. So I think if I heard right, a pair of comments, you guys are talking about a 50,000, a 55,000 barrel a day exit rate, and that's what you're kind of expecting. I guess that's kind of flat where you were, you know, in the third quarter. Just wanted to inquire, just some text in the press release where I think you referenced that maybe a loss to another kind of thousand barrels a day, just kind of reshuffling of the permits and moving the rigs around. Did I kind of hear those numbers right, that In terms of the ops, you're a little behind on the oil just because of having to reshuffle the program. Is that continuing to kind of be an issue? And I would assume that if this ERR is not appealed and is fully resolved, then this issue would pretty much go away in 2023.
spk07: Yeah, that's right, Leo. This is Francisco. The 1,000 barrel impact shown on slide 10, it's a full year impact. As we look at, okay, look back at the current county EIR delays and we'd want to measure, okay, how much we could have done if it wasn't for that litigation. It's about 1,000 barrels for the full year. Our exit rate numbers already take this into account. There's no true up changes. We just wanted to say, okay, this is the impact based on the litigation and expect to be back before on a normalized basis in 2023. Okay, thanks.
spk04: Our next question will come from Nate Pendleton with Stifel. Please go ahead.
spk01: Good morning. Thanks for taking my questions. For my first question, regarding your carbon terravolta business, can you speak to the potential logistics your team is working through to move the captured CO2 to the planned sequestration sites? and how transportation impacts your assessment of potential sources of CO2?
spk08: Yes.
spk09: Nate, good morning. It's Mack. Yeah, obviously, you know, one of the things that we're talking about with this new energy economy is the ability to not have to move it very far. With respect to existing sources and being able to move, we've looked at things that are within close proximity being, you know, call it 30-mile radius. And those are longer term because you'd have to basically create a point-to-point pipe, if you will, because there's no trunk line here of CO2 movement. So it goes into our calculation as to what are the best opportunities, okay, from an economic standpoint, because obviously there's an economic cost of having a pipeline to connect source to sink. However, As we mentioned in these greenfield opportunities, if you can cite it right, at Elk Hills, as Francisco mentioned earlier, you don't have a lot of piping to do. It's all infield for all practical purposes.
spk01: I appreciate that. And then as my follow-up, given your subsurface understanding and progress in the class six process, can you help us understand how your position is differentiated for sequestration from a geologic perspective in the state? especially the reservoirs presented to the JV, and how widespread that opportunity is for high-quality sequestration across your acreage?
spk02: Yeah, good morning. So we're positioned well. We've talked about many times here our subsurface expertise in the reservoirs that we've brought forth thus far. You know, it comes down to we're one of the largest holders, if not the largest of seismic data, 3D seismic in the state of California. So obviously when you're characterizing these reservoirs, you have to know how they will act with CO2 and you need the data, subsurface data to be able to do that, which we have. We're the largest holder. That then translates into us being the largest, one of the largest, depending on mineral and surface owners in the state, you put that together, and you combine that with the skills and expertise of a company that's been focused on California for decades, and that is where our competitive advantage comes into play.
spk04: Great. Thanks for your time. Again, if you have a question, please press star then 1. Our next question will come from Eric Sieve with GoldenTree. Please go ahead.
spk03: Hey guys, congratulations on the favorable ruling in the Kern County EIR litigation. I understand that you guys are still working through the permitting process with the regulators there and are still working through your 2023 budget. But my question is sort of a qualitative one, given that I know you're still working through those things. If you can achieve flat oil production with $300 million of DNC CapEx, On my numbers, it seems to imply a really spectacular return on capital for the drilling program. So my question is, what is your intent and what is your ability with respect to the drilling program in 23? If you can achieve such terrific return on capital, is there any intent to grow, and Do you have clarity yet on the permitting constraints? Would that be a constraint to growth? Thanks.
spk07: Hey, Eric. It's Francisco. Yeah, we're still working through it. We had multiple different variations of the business plan for next year, anticipating a favorable resolution, but also thinking about, okay, what happens if it doesn't come through, right? We're looking at all the options. We're going to deliver an optimized plan next year. We haven't come to a decision as to how many rigs and what the pacing of that's going to be. We're focused on finishing the year strong, focusing on accelerating some of these wells that we felt could be impacted down the road. I think it's just a matter of we saw the ruling yesterday after the market closed, and we're working hard to provide more clarity.
spk03: Okay, great. Thank you. My other question is on the Huntington Beach asset. You guys mentioned you're going to do sort of an exploratory process with a small part of the real estate there, just trying to get a rough sense of how big is that piece, and is it contiguous with the rest of it? I'm just curious how you sized it and how big it is and how you're thinking about that. Thanks.
spk07: Yeah, Eric. So we have a number of properties that are attractive future real estate developments. And this one in particular is not continuous to our bigger Huntington Beach strip, but it's close. It's within a few blocks. Also beachfront property. And that's where we think this is a very marketable property. It's an oil field today, but it will We'll do the work to get it in a position so that it tries to maximize real estate value. So we're going to work through that. It's, like I said, beachfront property, and I'll send you some pictures so you can look at it. It's right next to the oil field.
spk03: How many acres is it?
spk07: It's one acre approximately.
spk03: Great. Hey, thanks a lot, guys.
spk04: This concludes our question and answer session. I would like to turn the conference back over to Mack McFarland for any closing remarks.
spk09: Mack McFarland Great. Thanks everyone for joining us and we look forward to your continued support at CRC. Have a good day.
spk04: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer