California Resources (CRC) risk factors, FY2024 10-K

Risks Related to Carbon TerraVault and Our Carbon Management Segment

1. 01Risk Factors Related to Our Business Generally
2. 14We may not be able to grow our Carbon TerraVault business and develop large scale CCS projects
3. 15whether we will be able to access CO2 emissions in sufficient quantities or on terms that are acceptable to us
4. 16Our ability to achieve our emissions and other goals related to our carbon management activities is subject to risks and uncertainties
5. 17Our Carbon TerraVault business and other CCS projects depend on financial and tax incentives to be economical, and these incentives may not currently be sufficient for our Carbon TerraVault business and other CCS projects to be economical, may not be fully realized, or could be changed or terminated
6. 18Our Carbon TerraVault JV with Brookfield is subject to inherent uncertainties which could adversely affect our ability to implement our carbon management strategy
7. 19Increasing activism against the industries in which we operate, including the oil and gas industry and our involvement in carbon capture, storage, utilization and sequestration, presents risks to our business
8. 20Increased attention to ESG matters may adversely impact our business
9. 21Acquisition and disposition activities, including continued integration of the Aera Merger, involve substantial risks
10. 22We may incur substantial losses and be subject to substantial liability claims as a result of pollution, environmental conditions or catastrophic events. We may not be insured for, or our insurance may be inadequate to protect us against, these risks
11. 23Cybersecurity attacks, systems failures, and other disruptions could adversely affect us

Risks Related to Our Oil and Gas Business

1. 02Prices for our products are volatile and a substantial decline in prices over an extended period could have a material adverse effect on our financial condition, results of operations, cash flow and ability to invest in our assets
2. 03Our producing properties are located exclusively in California, making us vulnerable to risks associated with having operations concentrated in this geographic area, including drought, earthquake and wildfire risks
3. 04Any of the forgoing operational risks could cause actual results to differ materially from the expected payback or cause a well or project to become uneconomic or less profitable than forecast
4. 05Our business involves substantial capital investments and we may be unable to fund these investments which could lead to a decline in our oil and natural gas reserves or production
5. 06We may be negatively impacted by inflation
6. 07We are subject to economic downturns and the effects of public health events which may materially and adversely affect the demand and the market price for our products
7. 08The military conflicts in Ukraine, Israel and other countries in the Middle East have caused price volatility and geopolitical instability which impact our business
8. 09Some of our competitors have greater resources than us and we may not be able to successfully compete in acquiring and developing new properties
9. 10Our hedging activities limit our ability to realize the full benefits of increases in commodity prices
10. 11Estimates of proved reserves and related future net cash flows are not precise. The actual quantities of our proved reserves and future net cash flows may prove to be higher or lower than estimated
11. 12In addition, our reserves information represents estimates prepared by internal engineers. Although 85% of our estimated proved reserve volumes as of December 31, 2024, were audited by our independent petroleum engineer, NSAI, we cannot guarantee that the estimates are accurate
12. 13From time to time we may engage in step-out drilling or drilling in new or emerging plays. Our drilling results are uncertain, and the value of our undeveloped acreage may decline if drilling is unsuccessful

Risks Related to Regulation and Government Action

1. 24We may face material delays related to our ability to timely obtain permits necessary for our operations or be unable to secure such permits on favorable terms or at all as a result of numerous California political, regulatory, and legal developments
2. 25We may face increased local restrictions on oil and gas exploration and production operations or even be prohibited from operating in certain areas as a result of recently enacted California legislation
3. 26Recent and future actions by the State of California could reduce both the demand for and supply of oil and natural gas within the state and consequently have a material and adverse effect on our business, and financial condition and results of operations
4. 27Our operations are subject to complex and stringent federal, state, local and other laws and regulations relating to the exploration and development of our properties, as well as the production, transportation, marketing and sale of our products
5. 28New and developing regulations related to the CO2 unitization, permitting and pipeline safety could negatively impact our business, financial condition and results of operations
6. 29Our operations and financial performance may be negatively affected directly or indirectly by changes in trade policies and tariffs
7. 30Concerns about climate change and other environmental issues may prompt governmental action that could have a material adverse effect on our operations or results
8. 31The Inflation Reduction Act could accelerate the transition to a low-carbon economy and could impose new costs on our operations
9. 32We are subject to taxation by various tax authorities at the federal, state and local levels where we do business. New legislation could be enacted by any of these government authorities that could adversely affect our business
10. 33Financial assurance requirements related to plugging and abandonment costs, decommissioning, and site restoration on those who acquire the right to operate wells and production facilities could impact our ability to sell or acquire assets in California or increase our costs in connection with the same

Risks Related to our Indebtedness

1. 34We may not be able to amend or refinance our existing debt to create more operating and financial flexibility and to enhance shareholder returns
2. 35Our existing and future indebtedness may adversely affect our business and limit our financial flexibility
3. 36We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy the obligations under our indebtedness, which may not be successful
4. 37Our Revolving Credit Facility is an important source of our liquidity. Our ability to borrow under our Revolving Credit Facility is limited by our borrowing base, the size of our lenders’ commitments and our ability to comply with covenants
5. 38Restrictive covenants in our Revolving Credit Facility and the indentures governing our Senior Notes may limit our financial and operating flexibility
6. 39The Revolving Credit Facility also requires us to comply with certain financial maintenance covenants, including a leverage ratio and current ratio
7. 40Variable rate indebtedness under our Revolving Credit Facility subjects us to interest rate risk, which could cause our debt service obligations to increase significantly

Risks Related to Our Common Stock

1. 41Our ability to pay dividends and repurchase shares of our common stock is subject to certain risks
2. 42The trading price of our common stock may decline, and you may not be able to resell shares of our common stock at prices equal to or greater than the price you paid or at all
3. 43Future issuances of our common stock could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us
4. 44The ownership position of certain of our stockholders limits other stockholders’ ability to influence corporate matters and could affect the price of our common stock
5. 45Sales of shares of our common stock by our executive officers could negatively impact the market price for our common stock