Joe Coletti
Welcome to Powering Sustainable Ideas, a podcast series from RBC Capital Markets where we interview the leaders and companies powering the sustainable future. I'm your host for this episode, Joe Coletti. Today, we're at RBCs, Global Energy, Power and Infrastructure Conference here in New York, and we're joined by Cleo Crespy Chief Financial Officer at California Resources Corporation. Today we'll explore how Cleo and her team are building a resilient capital strategy to support decarbonization at scale, and how CRC is positioning itself at the intersection of traditional energy and the low carbon future. Cleo, great to have you on the podcast.

Clio Crespy
Thank you, Joe. Really appreciate being here.

Joe Coletti

Sarah Thompson
So you stepped into the CFO role earlier this year, I believe January of this year. Can you talk about how you view your mandate, how the company deepens its focus on carbon management and low carbon growth.

Clio Crespy
Yes absolutely. So I stepped in early January into the CFO role at a really exciting time for CRC, but also for the energy industry. The sector is undergoing a fundamental shift, and investors today are really looking for businesses that can deliver strong returns, but also play a pivotal role in a low carbon future. And CRC can really deliver both, which is pretty unique. We have a high quality, low decline asset base that generates strong free cash flow. And we're also building a leading carbon management business in California, which is one of the world's largest economies. It's the fourth globally, if it were a country. With some of the most ambitious decarbonization plans. And Joe, you, you asked about my mandate, so let me dive into that. I see it as twofold. First and foremost, it's really continuing to strengthen the financial foundation of CRC. Capital discipline, cost efficiency, smart allocation is really front and foremost. We have a premier balance sheet, a robust hedge program, in place, and are delivering on our synergies, so we're in really good shape there. And secondly, it's setting up our CCS business, so our Carbon Tera Vault Platform for long term value creation, and that means scaling it very thoughtfully. You really need the right policy support. I'm sure we'll dive into that, the right customer partnerships and also the financing structures to work. And in that sense, we've got a unique, bespoke joint venture with Brookfield Global Transition Fund, and are well equipped to to scale that business and to do so profitably.

Joe Coletti
So CRC has really undergone a significant transformation, particularly in the past 12 months, from the Arrow Energy merger to progress, as you mentioned on Carbon Terra Value, from a financial leadership perspective, can you talk a little bit more about the current strategic vision, but also like, what else you're doing to try to shape it moving forward?

Clio Crespy
Yes, so you're absolutely right. We did a transformative deal last year. The merger with Arrow really doubled the size of our company and strengthened our portfolio. We added more long life, low decline assets in a critical market in California. That generates stable cash flow. And we also added valuable CO2 core space, so this provides a solid base for both our core operations as well as our CCS growth strategy. And from a financial leadership perspective, the vision is really to integrate all these pieces into a capital efficient, resilient platform that also has sound industrial logic. And so that means capturing meaningful synergies from the deal. We've made a lot of progress there. We are already realized 74% of our target synergy, which was a significant amount. It was 235 million. So we're well on track there. And it means ensuring that we're disciplined on how we allocate our capital across our energies or oil and gas and power assets, as well as our CCS business. I'd like to add a few points, really, that help support that financial leadership strategy. Our sound balance sheet is foundational to that. Our leverage is below one turn, that puts us in a position to have tremendous amount of flexibility and optionality. Our hedge book is also really strong and provides a critical role. It helps us lock in those cash flows for us to be able to deliver on our plans. We're in a great position to fund our operations, to invest for the future, but also to return meaningful capital to our shareholders.

Joe Coletti
So I want to mention that Carbon Terra Vault recently received EPA class six permits and approval, for California's first carbon capture and storage project. Can you talk a little bit more about what those milestones really mean both your capital strategy, but also sort of how you're thinking about project financing and scale?

Clio Crespy
Yes, it was a major milestone moment for CRC and for California. We were the first in the US to receive a class six permit for a depleted oil and gas reservoir, and the first ever in California. So that gives us a clear first mover advantage in one of the most strategically important CCS markets in the US. So that was something that we were very pleased to see happen. And earlier this year, just after receiving the permit, we reached FID on our first project, so CTV one, and we're targeting first injection and first cash flow by the end of this year, so making it very tangible for all constituents this project will sequester CO2 from our Elk Hills cryogenic gas plant. It is small versus our other projects. It's 100,000 tons per annum, but it's really a critical proof point for our customers, for regulators and for capital markets. So to your point, from a capital strategy standpoint, the permitting really unlocks a more concrete investment roadmap. So we receive permitting for 26R we have an additional seven permits that are earmarked according to the EPA tracker for the next 12 to 18 months. And so now we can really push forward on our commercial negotiations, on our project financing, and ultimately on these construction of the future projects. So a really exciting time. We're also seeing some nice positive developments on critical items of the CCS value chain. So we're seeing developments on CO2 transportation, we're tracking the progress of California's Assembly Bill 881, which supports CO2 transport infrastructure and that should be another key enabler for us to enable scale in CCS and to really enable investment. If you look at project finance more specifically, , we're approaching it with a disciplined, risk adjusted lens, so we're looking at long duration infrastructure with a very different risk reward profile from oil and gas. So our focus is really on structuring the capital in a way that protects our balance sheet, but also preserves upside for us, and that's where our joint venture with Brookfield global transition fund comes in. They made an initial commitment of 500 million. They've invested 92 million in our 26R projects, and it really helps us efficiently leverage those fit for purpose, large pools of capital and provides, really, for CRC to position as a credible platform for long term capital efficient growth in California and in CCS.

Joe Coletti
It's so interesting and so much progress in that area. You know, we keep I mentioned the arrow, the arrow transaction already. But it obviously was a major step at CRC. Can you talk a little about the financial and operational synergies that are most important to fully realize the value of that deal, especially in the context of your sort of low carbon ambitions?

Clio Crespy
So we made a lot of progress on those synergies, and we're expecting to realize 185 million synergies this year. If we unpack those drivers, first is our operational efficiencies. We were able to combine adjacent and sometimes overlapping positions and operations, especially in the San Joaquin basin, and there we're capturing cost synergies through shared infrastructure, through optimized field developments as well as centralized support functions. And those are real dollars that are improving our margin profile, and that's been visible, really in our financials. Second there's significant capital efficiency grains. So that's also something that has been a clear value on lock. And third, on the low carbon side, we've expanded our carbon management runway with this transaction. In terms of low carbon strategy, era was already advancing a significant project. So that was a carbon frontier, and that is something that is very advanced in the EPA tracker, and really strengthens our position in CCS, in the San Joaquin basin there's also an additional permit for Cole Slough that we're moving forward. So great projects there, and it allowed to expand our position, and now we're up to 2 million mineral acres, and so that's very valuable as well.

Joe Coletti
So as I understand, CRC has identified, do I have this right over a billion metric tons of CO2 storage potential? Talk to me a little bit about how you're prioritizing investment across that pipeline. How you think about that, and how do you evaluate sort of the return on capital and emerging decarbonization markets?

Clio Crespy
So yes, it's a very big number. Sequestration is a cornerstone of our carbon management strategy, and we're very intentional on how we're going to move forward from potential to execution and ramp up really, what is an emerging business for us. So as you can imagine, not every opportunity is created equal in our portfolio and capital allocation will really reflect that. Now that we have a clearer picture on permits that we have in hand, as well as permits in queue, we're going to prioritize projects really following three main criteria. The first one is the proximity of the emissions. The second one is partner considerations, really the credit worthiness of the counterparty, the execution know-how. Many other factors that come with regards to our partner selection. And then the last but not least, is really a clear path to strong economics. And so that encompasses the types of credits that it qualifies for. The credit mix, the cost of capture for certain projects, the cost of transportation. So really moving forward profitable projects with a with a strong return threshold. That's something that we're keenly focused on. As far as project finance goes. In our returns framework, we're adapting that traditional project finance metrics, but applying it to CCS, so we're looking at our long term contract and long term cash flows, but injection rates, capital intensity, the suite of available credits. So that goes beyond just 45Q in California, that also includes the low carbon fuel standard, LCFS and the cap and invest. So there is a much larger pool of incentives to capture. And this is still an emerging market, so we're stress testing under the different policies, under different carbon regimes. We're making sure those returns remain resilient, and the opportunity is still compelling. And so that's something we continue to do. It's very dynamic. Our first project, we're targeting over 20% IR, and that really looks at the fact that it's an early stage and a project that's fully in our control, but generally speaking, as we scale, we're looking to structure deals with quite a bit of downside protection, whether that's through increased ownership and end to end control or. Customer pre commitments or incremental third party capital. We're moving along and de risking those projects. I'd say the end goal for us is really to scale a portfolio that delivers a real decarbonization impact but also meets our return thresholds, and we'll stay very disciplined on that, and right now, what we offer to investors really is a scalable de risk entry point into CCX.

Joe Coletti
So before I ask you to look ahead a little bit more, I do want to ask you about what I characterize as the uniquely complex California regulatory and permitting landscape. How do you factor that in to your capital planning? And what do you need from a policy, from policy and regulatory partners to enable these long term investments?

Clio Crespy
I think many folks that are monitoring and watching California are like ourselves, encouraged by a positive shift in the regulatory environment in California. Don't get me wrong, the energy supply chain is in a delicate state, with several market participants having made public comments. The state is importing over 70% of its crude, over 90% of its gas, and ultimately that's leading to higher prices for end consumers. So we've seen action. We've seen the government take notice. They're working on a plan to reduce those risks and deliver affordable, reliable, low carbon energy to Californians. And you saw, you know, California Governor Newsom effectively issue a letter, a public letter, calling for greater cooperation between the California Energy Commission and the refiners. So that's something that we're seeing a lot of momentum behind. So whether it's upstream oil and gas permitting or CCS permitting, that that regulatory confidence and certainty is paramount. If you can't get permitted, you can't really allocate capital confidently, and so that's something that's just permanent for us to get and to maintain. Frankly, for CCS specifically, I am very much looking forward to items that could help accelerate the business so things like keeping the current EPA tracker to advance pore space and having that track on time. delivering on CO2 pipeline regulation is also a critical element of scaling this business. So those would be good starts. I think those would allow developers and customers to sign long term contracts with a great, greater level of confidence on both sides, and really that will foster long term investment into these projects. To be clear, we view California as an opportunity rich environment. It does have a high barrier to entry, but it has really the ability to be a leading market in CCS. And so getting from that ambition to action is going to require close collaboration between industry regulators and communities, and CRC is committed to playing a leadership role there.

Joe Coletti
I want to I want to close by asking you to look ahead, particularly to the next 12 to 24 months. Can you talk about the key priorities, but also the inflection points that investors should watch as CRC executes on its strategy.

Clio Crespy
So we do have several priorities, and I think that those are things that investors should be monitoring closely. So on the upstream side, it's all about execution. We're continuing to deliver on cost discipline, on margin optimization, on free cash flow generation for from our expanded assets, and so you should expect to see the benefits of those synergies flow through our results as we integrate those operations and we optimize that capital deployment. So very exciting time there. We also anticipate progress on new drilling permits in the second half of the year. So that's something investors should watch for on our end, on the upstream side. On CCS, we are really moving from permitting to commercialization with our first project. And that's going to be the proof point to begin to validate the longer term proposition there. We will, continue advancing, or seven other permits, and that will get us to a very nice point from a scaled business proposition. So I'd say investors should watch how CCS goes from theory to practice in the US, and how companies can translate what is an early move or advantage into real scale. So we're one of the few positioned to do so and to help improve the model. And for us, it's really where the now meets the next and something pretty exciting for investors.

Joe Coletti
Think that's a great point to end on. Yes. Cleo, thanks so much for being with us. We wish you and CRC, good luck, and we hope you'll come back next year.

Clio Crespy
Appreciate the invitation. Has been fantastic, talking with you.

Joe Coletti
Well, that's all for our conversation today. Thanks again for listening to Powering Sustainable Ideas, brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. Thanks again for listening to powering sustainable ideas. Brought to you by RBC Capital Markets. This episode was recorded on June 3, 2025. Please remember to subscribe to get more great content and be alerted about future episodes. See you all Next time.