California Resources Corporation has executed and closed a purchase and sale agreement with Chevron to acquire the remaining working, surface and mineral interests in the 47,000-acre Elk Hills field in the San Joaquin Basin of California. Consolidating sole ownership of the Elk Hills field, CRC paid cash consideration of $460 million and issued 2.85 million CRC common shares to Chevron, subject to customary post-closing adjustments. The effective date of the transaction was April 1, 2018.

Todd Stevens, President and Chief Executive Officer, stated, 
“This acquisition is a natural fit that immediately accretes value to CRC, improving our cash flow and credit metrics. With a surface area larger than Washington, D.C., the Elk Hills field is our flagship asset. We have operated this field for over 20 years and have developed a deep knowledge of the geology and strong operational expertise to deliver robust value from this asset. We intend to apply this know-how to our newly acquired position, as well as transfer learnings and efficiencies to enhance CRC’s assets across California. We would like to thank Chevron for their partnership over the past 20 years. Acquiring sole ownership of such a prolific field is an ideal use of proceeds from our recent midstream joint venture transaction, adding both immediate production and cash flow, while providing for quick synergies and tremendous long-term development opportunities.”

The acquisition includes Chevron’s non-operated working interests ranging between 20% to 22% in different producing horizons within the Elk Hills field. In 2017, the acquired interests produced approximately 13,300 barrels of equivalent (BOE) per day with 46% oil and 9% natural gas liquids. CRC estimates that if it had owned 100% of the field last year, these interests would have added approximately 64 million BOE of proved reserves at year-end 2017, of which approximately 75% are considered proved developed. CRC estimates that these interests would have generated approximately $100 million of annual operating cash flow in 2017 assuming current prices.

CRC now owns Elk Hills in fee simple, the most complete form of ownership, holding a 100% working interest and a 100% net revenue interest, as well as all surface lands in the Elk Hills field. The field has an estimated 8.5 billion BOE of original oil in place and 32 major producing zones currently identified. CRC expects to achieve approximately $5 million of annualized operational savings within six months of closing and approximately $15 million of additional synergies within the next 18 months as it streamlines processes and leverages its substantial infrastructure already in place. Elk Hills is CRC’s lowest cost operating area and with a 100% ownership interest would have accounted for approximately 43% of its 2017 pro-forma production. Because of the low operating costs at Elk Hills, this acquisition will immediately reduce CRC’s corporate per unit production costs by approximately $0.55 per BOE, in addition to lowering general and administrative costs by about $0.20 per BOE.