CRC's permit win shifts risk to execution
- Q1 2026 average net production reached 154,000 Boe/d after the Berry deal added Utah and more California assets.
- Management now guides to a 2026 exit gross production rate of 175,000 BOE/d and over $800 million of free cash flow.
- CRC says it has all permits needed for its seven-rig 2026 drilling plan.
- Carbon TerraVault I is built and waiting on final EPA approval before first CO2 injection.
- The main debate is whether higher reinvestment creates value faster than buybacks would.
Permits bought time, execution must earn it
CRC looks stronger than it did at the start of 2026. Management raised its full-year plan after Q1. It now targets a 2026 exit gross production rate of 175,000 BOE/d, adjusted EBITDAX of $1.45 billion, and free cash flow above $800 million, based on a $91 Brent oil price assumption.
The key change is permits. CRC says it has all permits needed to run seven rigs in 2026, with six rigs in California and one in Utah. That matters because California permits have been one of the biggest blocks on growth. If the wells perform, CRC can show that its bigger post-Berry asset base can grow without a huge capital step-up.
The stock still has a hard proof phase ahead. CRC raised its 2026 capital program to a $540 million midpoint, so cash that could have gone to buybacks is going back into drilling. Investors need to see that this spending hits the production target, protects free cash flow, and does not leave the balance sheet too stretched if oil prices fall.
Carbon TerraVault is the other swing factor. The first project has finished construction and is waiting on final EPA approval for injection. If CO2 injection starts and the company shows a real revenue model, CRC becomes more than a California oil producer. If approvals, costs, or customer demand slip, it stays mostly a commodity business.
California barrels fund a carbon option
CRC makes most of its money by producing crude oil, natural gas liquids, and natural gas. It sells those products into California and Salt Lake City markets. The Berry merger, which closed on December 18, 2025, added production, proved developed reserves, Utah acreage, and C&J Well Services.
The oil and gas unit is the cash engine. CRC spends capital to drill wells, work over older wells, and keep production from declining. Its 2026 plan is more aggressive than before, with a seven-rig program and about 357 new wells and sidetracks planned for the year.
Carbon TerraVault is the growth option. The idea is to capture CO2, move it, and store it underground for customers that need to cut emissions. The first project is tied to the Elk Hills cryogenic gas plant and the nearby 26R storage reservoir. It had no revenue in Q1 2026, so the business is still early.
This model breaks if oil prices fall, permits slow again, wells disappoint, or carbon storage fails to move from project to profit. It also depends on market access. If more crude tries to enter the same California pipeline system, CRC may face worse pricing or transport choices.
What CRC sells
Crude oil
Crude oil is the core product. CRC produces it mainly from California fields and now also has Utah exposure after the Berry merger.
Natural gas liquids
NGLs are hydrocarbon liquids produced with oil and gas. They add value, but they are still tied to commodity prices.
Natural gas
Natural gas comes from the same field base. CRC sells it into regional markets and also uses some energy inside its own operations.
C&J Well Services
C&J came with the Berry merger. It provides well servicing and abandonment work in California, giving CRC more control over field operations.
Elk Hills power plant
The Elk Hills power plant supplies electricity for CRC's own operations and sells power to the California grid. It helps support the large field base.
Carbon TerraVault
Carbon TerraVault is CRC's carbon capture and storage service. CTV I is built, but it needs final approval and first injection before it can prove the model.
One segment pays today
For Q1 2026, CRC reported Oil & Gas and Carbon Management as its two reportable segments. Carbon Management had no revenue in the three months ended March 31, 2026, so current revenue is concentrated in Oil & Gas.
What could go wrong
Oil price drop
High impact · Medium oddsCRC's 2026 adjusted EBITDAX guide assumes Brent oil averages $91 per barrel. If prices fall, cash flow can shrink while the company is still funding a larger drilling program. That could make buybacks, debt control, and growth harder to balance.
Seven-rig plan misses
High impact · Medium oddsCRC has the permits, but it still has to drill and complete the wells well. The plan includes about 357 new wells and sidetracks for 2026. If costs rise or well results lag, the higher capital budget may not deliver the promised production growth.
California rules tighten again
High impact · Medium oddsSB 237 helped create a clearer path for new well permits in Kern County. That does not make California an easy place to run an oil company. Local and state rules can still limit drilling, workovers, or existing operations.
Carbon TerraVault delay
Medium impact · Medium oddsThe first carbon storage project has completed construction, but first injection still depends on commissioning and final regulatory approval. The segment had no revenue in Q1 2026. Delays would push out the proof that carbon storage can become a real business for CRC.
Market access squeeze
Medium impact · Medium oddsThe shutdown of the San Pablo Bay Pipeline has already made transportation more important. CRC also disclosed risk from a possible restart of the offshore San Ynez Unit, which could add up to 60,000 barrels per day of competing crude into California markets. More barrels chasing limited pipeline space could hurt pricing or logistics.
Berry integration slips
Medium impact · Medium oddsThe Berry merger made CRC larger and added C&J Well Services, but integration is still ongoing. Management raised the Berry synergy target by $10 million, which is a good sign, but also raises the bar. Missed synergies would weaken the post-merger return story.
In one breath
What does California Resources Corp do?
CRC produces oil, natural gas liquids, and natural gas in California and Utah. It is also building Carbon TerraVault, a business meant to capture and store CO2 underground for customers.
Why does permitting matter so much for CRC?
Most of CRC's oil and gas activity is in California, where drilling permits can limit how fast a producer grows. CRC says it now has all permits needed for its seven-rig 2026 plan, which lowers one big risk for this year.
What is Carbon TerraVault I?
Carbon TerraVault I is CRC's first carbon capture and storage project. It is tied to the Elk Hills cryogenic gas plant and is waiting on final EPA approval before first CO2 injection.
What is EBITDAX?
EBITDAX is a cash-flow style profit measure used by many energy companies. It adds back items like interest, taxes, depreciation, amortization, and exploration costs, so investors can compare operating power across producers.