California Resources : 2020 Annual Report to Stockholders

ANNUAL REPORT

2020

23.59

9.03

17.04

$

$

$

FINANCIAL & OPERATIONAL

HIGHLIGHTS

FINANCIAL HIGHLIGHTS	2020 Combined*		2019*		2018*
Dollar amounts in millions, except share and per-share amounts, as of and for the years ended December 31,
Total Revenue	$	1,559	$	2,634	$	3,064
Net Income (Loss)	$	1,871	$	99	$	429
Net Income Attributable to Noncontrolling Interests	$	105	$	127	$	101
Net (Loss) Income Attributable to Common Stock	$	1,766	$	(28)	$	328
Adjusted Net Income (Loss)(a)	$	(257)	$	70	$	61
Net (Loss) Income Attributable to Common		-	$	(0.57)	$	6.77
Stock per Share - Diluted
Adjusted Net Income (Loss)(a)		-	$	1.40	$	1.27
per Share - Diluted
Net Cash Provided by Operating Activities	$	106	$	676	$	461
Capital Investments	$	47	$	455	$	690
Free Cash Flow(a)	$	172	$	269	$	(180)
Net Cash (Used) Provided by Financing Activities	$	(58)	$	(282)	$	692
Total Assets	$	3,074	$	6,958	$	7,158
Long-Term Debt, Net	$	597	$	5,023	$	5,467
Equity	$	1,182	$	(296)	$	(247)
Weighted-Average Shares Outstanding - Diluted		-		49.0		47.4
Year-End Shares		83.3		49.2		48.7

	OPERATIONAL HIGHLIGHTS	2020 Combined*		2019*		2018*
	Production:		69		80		82
	Oil (MBbl/d)
	NGLs (MBbl/d)		13		15		16
	Natural Gas (MMcf/d)		172		197		202
	Total (MBoe/d)(b)		111		128		132
	Average Realized Prices:	$	43.53	$	68.65	$	62.60
	Oil with hedge ($/Bbl)
	Oil without hedge ($/Bbl)	$	41.89	$	64.83	$	70.11
	NGLs ($/Bbl)	$	27.63	$	31.71	$	43.67
	Natural Gas ($/Mcf)	$	2.28	$	2.87	$	3.00
	Reserves:		313		483		530
	Oil (MMBbl)
	NGLs (MMBbl)		41		52		60
	Natural Gas (Bcf)		527		654		734
	Total (MMBoe)(b)		442		644		712
	PV-10 of Cash Flows (in billions)(a)	$	2.4	$	6.8	$	9.4
	Net Mineral Acreage (in thousands):		717		673		701
	Developed
	Undeveloped		1,388		1,491		1,539
	Total		2,105		2,164		2,240
2020

Closing Share Price

*Note: 2020 represents the combined successor and predecessor periods as defined in Part I - Item 7 - Basis of Presentation. 2019 and 2018 represent predecessor periods.

(a) See www.crc.com, Investor Relations for a discussion of these performance and non-GAAP measures, including a reconcililation to the most closely related GAAP measure or information on the related calculations.

(b) Natural gas volumes have been converted to Boe based on the equivalence of energy content between six Mcf of natural gas and one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence.

This report contains forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. For a discussion of these risks and uncertainties, please refer to the "Risk Factors" and "Forward-Looking Statements" described in our Annual Report on Form 10-K. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "target, "will" or "would" and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation to correct or update any forward-looking statement, except as required by applicable law.

A MESSAGE TO OUR SHAREHOLDERS

Dear Shareholders,

The past year was one of the most disruptive in memory. The COVID-19 global pandemic, previously unimaginable by most, upturned nearly every aspect of our lives. The steep economic downturn associated with pandemic-related lockdowns, combined with OPEC+ actions, significantly impacted California Resources Corporation (CRC).

These events of early 2020 contributed to CRC's entrance into a Chapter 11 restructuring in July to eliminate the burden of an over leveraged balance sheet. CRC emerged in October with an improved balance sheet, which we simplified further in January with our high yield offering, and we are committed to building on CRC's strong assets and repositioning the company to optimize returns to our investors.

Looking forward, CRC is shareholder-return focused and building on our strengths

1. Asset portfolio providing resilient and predictable production. Our assets keep on producing. The majority of our interests are in producing properties located in stacked-payreservoirs that we believe have long-livedproduction profiles and repeatable development opportunities. CRC's conventional assets are also characterized by shallow base decline rates which limits the investment required to offset production declines and is a competitive advantage over many shale- based peers.
2. Dynamic and disciplined capital investment strategy which facilitated free cash flow1 generation in 2020. CRC's flexible approach responds to changes in commodity pricing. As Brent oil prices fell from over $68 at the start of the year to below $20 in April, CRC cut non-discretionarycapital spend and shut-inselected wells. Our decisive response to economic conditions enabled $172MM in free cash flow1 generation for the year despite the drastic change in price environment in the first half of the year and hefty restructuring costs in the second half. CRC continuously analyzes the operating and economic performance of our assets so we can manage our portfolio for the highs and lows of the commodity price cycle.
3. Steadfast commitment to safety and environmental, social and governance (ESG) practices. At CRC, health and safety leads everything we do. Safeguarding people and the environment as we provide reliable energy is our number one principle. In 2020, CRC received 24 National Safety Achievement awards and set a new company safety record for our combined workforce of employees and contractors, better than the insurance and finance sectors. We earned an A- from CDP for our climate disclosure, tied for first among U.S. oil and natural gas companies, and marked two years in a row at CDP's Leadership Level.

Repositioning CRC for the future

In concert with the Board of Directors, CRC's re-aligned senior management team conducted a full-scale business review. The 2021 repositioning efforts will focus on the following:

1. CRC will be laser-focused on core assets with the highest operating cash flow potential. Non-coreassets with insufficient cash generation will be transformed or rationalized.
2. CRC will maintain operating and overhead cost reductions in line with our scale and rationalized asset portfolio.
3. CRC will practice disciplined capital investment with a target of less than 60% of discretionary cash flow1.
4. CRC will maintain balance sheet strength. In 2021, CRC will continue hedging ~80% of its production to underpin cashflows and ensure a return on capital. In addition, CRC will focus on retaining low leverage of <1.5x Net Debt/Adjusted EBITDAX1.

A word of gratitude

I would like to thank the talented women and men of CRC for their dedication and support as we chart a new course for CRC. The reliability of our workforce has proven to be just as critical as the resilience of our assets. Our essential workers have safely and reliably met the energy needs of their fellow Californians before and during the pandemic. Just as the workforce led us through this challenging time, it will implement the actions necessary to CRC's future success. With a foundation built upon focused operations on core assets and our commitment to ESG, CRC is set up to drive both sustainable energy production and shareholder returns.

Thank you,

Mark A. (Mac) McFarland

Chairman, President and Chief Executive Officer

California Resources Corporation

• Adjusted EBITDAX, discretionary cash flow, free cash flow and net debt are non-GAAP measures. See the Investor Relations page at www.crc.com for additional information about these non-GAAP measures and reconciliations of non-GAAP measures to their closest GAAP equivalents.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission File Number 001-36478

California Resources Corporation

(Exact name of registrant as specified in its charter)

Delaware	46-5670947
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

27200 Tourney Road, Suite 200

Santa Clarita, California 91355

(Address of principal executive offices) (Zip Code)

[phone]

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	CRC	New York Stock Exchange

	Securities registered pursuant to Section 12(g) of the Act: None
	Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.	Yes ' No Í
	Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.	Yes ' No Í

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to

file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes Í No '

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter

period as the registrant was required to submit such files).

Yes Í No '

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	'	Accelerated Filer	'	Non-Accelerated Filer	Í
Smaller Reporting Company	Í	Emerging Growth Company	'

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. '

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. '

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ' No Í

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. Common Stock aggregate market value held by non- affiliates as of June 30, 2020: $59 million.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes Í No '

At February 28, 2021, there were 83,319,660 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement to be filed within 120 days after December 31, 2020 with the Securities and Exchange Commission in connection with the registrant's 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.