California Resources Corp (NYSE: CRC) sees light at the end of the tunnel as crude oil prices begin to rebound and its belt-tightening measures continue. In 1Q2016, the management talked about generating free cash flow equal to the year ago quarter despite facing stronger headwinds.
Benefits of internal efficiency
According to California Resources Corp (NYSE: CRC)’s CEO, Todd Stevens, the company continues to see the benefits of its operational controls. That is another way of saying that California Resources’ austerity measures are bringing the company closer to its dream despite the fact that the situation still remains fluid in the energy industry.
Oversupply in the crude oil market damaged prices and the situation is only beginning to improve. California Resources is trying to keep its expenses down so that it positions itself properly for maximum gains when crude oil prices eventually recover. A meeting of the OPEC members planned for next month is expected to discuss crude oil production cuts to help strengthen prices.
Besides internal efficiency drive, California Resources is also seeing the benefits of its diverse asset portfolio, CEO Stevens added.
The strengthening the balance sheet
Amid weak market conditions, California Resources Corp (NYSE: CRC) is focusing its attention on improving balance sheet leverage. In the recent quarter, the company was able to reduce its outstanding debt thanks primarily to strong cash flow from operations. As such, the company not only continued with stabilizing its balance sheet, but also boosted its liquidity position to allow for more flexible operations.
Management has talked about assessing more options to strengthen the balance sheet as it anticipates recovery in the oil market.
What happened in 1Q2016?
California Resources Corp (NYSE: CRC) posted adjusted EPS loss of $0.26 in 1Q2016 compared to $0.25 in the corresponding quarter a year earlier. Average oil production in the quarter fell 9% to 98,000 barrels per day. NGL production also shrank 6% to 17,000 barrels per day in 1Q2016. Natural gas output also fell 19% to 196 million cubic feet (MMcf) per day.
The drop in production played a role in the weaker earnings posted in the latest quarter.