Episode Details

California Resources Corporation (CRC) Q2 2026 — Q2 2026 (three months ended June 30; released before the open on Monday August 10, so August 10 is the reaction session): total revenue $1,297M vs a $960M bar, GAAP EPS $5.76, adjusted EPS $0.99 vs a $1.36 bar - a 27% miss. The stock gapped down 1.6%, then closed up 3.21%, and finished August 14 at $53.31. California Resources printed a 35% revenue beat and a 27% adjusted EPS miss in the same release, and both came out of the commodity derivative book. Marking the open hedge position to market created a $370M non-cash gain booked inside revenue; settling the hedges that expired cost $165M in cash. Strip the mark and revenue is $1,092M - a 13.7% beat, not 35%. THE CALL: HOLD (3/5, MODERATE - CHEAP ON CASH, FLAT ON OPERATIONS) — base-case value ~$56.43 vs ~$53.31 today. KEY METRICS: - CALL: HOLD, 3/5. Fair value $57.84 vs the $53.31 close on August 14, about 8% higher. This is an EV/adjusted-EBITDAX grid, not an earnings multiple, because GAAP profit here is dominated by derivative marks. Bear $37.85 ($1,150M at 4.0x), base $56.43 ($1,250M at 5.0x), bull $80.64 ($1,400M at 6.0x), weighted 25/50/25. The Street is Buy - 18 buy, 5 hold, 1 sell - with an $80.00 average target. We are 28% below them. - THE QUARTER (three months ended June 30, 2026): total operating revenues $1,297M vs a $960M consensus. Revenue BEFORE commodity derivatives - the company's own line - was $1,092M, up 33% from $821M. GAAP net income $514M, diluted EPS $5.76 vs $1.92. Adjusted net income $88M, adjusted EPS $0.99 vs a $1.36 bar and vs $1.10 a year ago. Zacks put the bar at $1.31 and the miss at 24%. - THE ANGLE - ONE HEDGE BOOK MADE BOTH HEADLINES: marking the open position to market produced a $370M non-cash gain on oil plus $20M on gas, and the net $205M lands inside REVENUE. That entry is the whole difference between a 13.7% beat and the 35% one the feeds printed. Settling expired contracts cost $165M cash. Of the $5.76 GAAP EPS, $4.77 came back out in the adjustment column. - THE BARREL SHOWS IT WITHOUT ACCOUNTING: CRC realized $91.55 a barrel WITHOUT derivative settlements - 95% of the $96.87 Brent average. WITH hedge settlements it kept $76.43, only 79% of Brent, vs 100% a year ago. That is $15.12 a barrel handed to the counterparty on 120 thousand barrels a day. Natural gas realized $1.84 vs $3.56 in Q1. - THE OPERATING TRUTH: adjusted EBITDAX $338M vs $324M, up only 4.3%, on production up 8.8% to 149 MBoe/d and after absorbing the Berry merger that closed December 18, 2025. Per barrel that is a DECLINE, $25.95 to $24.94. Overhead per barrel rose 13.9% even as management captured $103M of annualized Berry synergies. First-half free cash flow fell 66%, $240M to $82M, on capital up 152%. - THE GUIDE POINTS DOWN: full-year adjusted EBITDAX is guided $1,200M-$1,300M. With $642M booked in the first half, the back half implies about $608M - 5.3% BELOW the half just finished. Q3 alone is guided $285M-$325M vs the $338M just delivered. What was raised was efficiency: maintenance capital cut about 5% to $450M-$475M on six rigs, not seven. What to watch: UP: Crimson closing in Q3 with the promised incremental guidance; adjusted EBITDAX per barrel recovering from $24.94; the hedge book rolling off toward the 95% of Brent CRC realizes unhedged. DOWN: a third quarter at the low end of the $285M-$325M guide, overhead per barrel rising above $6.57, or California permitting slowing 2027. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.