California Resources Corp (CRC): what the price assumes

In the published model solve dated 2026-Q2, anchored at $52.23, California Resources Corp (CRC) is priced for -1.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/CRC

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: n/a

Valuation X-Ray

The price is supported by earnings-power value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.5%); the inversion above states its own rate.

Per-Model Detail (n=9)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 16.3%); the trailing year was depressed.

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• The advantage here is regulatory rather than geological, since the 10-K states "We are the largest operator in California and currently operate all of our core oil and gas fields", in the one state where permitting a new competitor is close to impossible.
• Today's price works off through-the-cycle economics rather than current ones, because trailing operating income is negative at $160 million against a normalized figure near $467 million, and the March 2026 quarter produced a net loss of $711 million.
• The two things to watch are the eight Class VI carbon-storage applications pending at the EPA as of February 28, 2026 and whether first injection at Elk Hills, anticipated for spring 2026, arrives on that schedule.

Bull Case

Most oil producers compete on geology and cost. This one competes on a permit. California has spent two decades making it progressively harder to drill inside its borders, and the practical consequence is that the incumbent with existing operations, existing approvals and existing infrastructure faces a competitive set that cannot easily expand. The 10-K puts the position plainly: "We are the largest operator in California and currently operate all of our core oil and gas fields." Regulation is usually a cost. Here it is also a moat, and it is the single most important thing to understand about the company.

That moat shows up where a moat should show up, in the margin. Through the cycle the business converts about 16.3 percent of revenue into operating profit. Set that against the cohort of independent producers: CHRD earns a 3.6 percent operating margin, OVV 5.1 percent, CRGY 10.1 percent, MUR 10.7 percent, SM 11.2 percent. Only the gas-weighted names clear it comfortably, with CRK at 30.3 percent, MTDR at 24.4 percent and AR at 23.1 percent. A California operator carrying the highest compliance burden in the country still turns a larger share of each revenue dollar into operating profit than most of the shale complex, which is what a structural position looks like when it reaches the income statement.

The second advantage is that the crude fits the local market. The filing notes that in-state "refineries are generally designed to process crude with characteristics similar to those of our production", and separately that "California imports nearly 95% of its natural gas from other states and Canada". A barrel produced in Kern County does not need to reach the Gulf Coast to find a buyer configured to process it, and the gas sold locally is priced against a market that is structurally short. Both are quiet advantages that never appear in a production headline.

Scale improved recently without a drilling campaign. Production rose 13 MBbl/d, from 111 MBbl/d to 124 MBbl/d, in the first quarter of 2026 against the same quarter a year earlier, and the filing attributes that entirely to the Berry Merger. Buying producing California barrels is currently a cheaper way to add volume than trying to permit new ones, which is a direct consequence of the same regulatory position described above.

Then there is what sits underneath, which the reserve disclosures put a number on. At December 31, 2025 the discounted value of proved reserves, computed on the SEC's prescribed pricing and a 10 percent discount rate, was 8,717 million dollars before future income taxes and 6,666 million dollars after. The filing is careful about what that is: "Standardized measure is prescribed by the SEC as an industry standard asset value measure to compare reserves with consistent pricing, costs and discount assumptions." It is a standardized comparison, not an appraisal, and it moves with the trailing average price used to compute it. But it is the disclosed value of the barrels already booked, and it is larger than the whole enterprise the market is currently pricing.

Carbon storage is the free option on top. The 10-K reports that "As of February 28, 2026, we have eight Class VI UIC project applications related to our carbon management segment pending with the EPA in different stages of the permitting process", with first injection at Elk Hills anticipated in spring 2026 and roughly $15 million of 2026 capital allocated to completing that work. Fifteen million dollars is not a bet, it is a research budget. The same depleted reservoirs and the same subsurface engineers that produced the oil are what a storage business needs, and the state that made drilling hard is the same state pushing hardest for sequestration. If it works, the asset base gets a second revenue life; if it does not, the amount at risk barely registers. The company also intends to fund the year from its own operations, stating "We intend to fund our 2026 capital program using cash flow from operations."

Bear Case

Peak earnings and sustainable earnings are the same argument in a commodity business, and here the two sit on opposite sides of zero. Trailing operating income is negative at $160 million. The figure the price is actually working from is a normalized one near $467 million, built by applying the company's through-the-cycle margin to current revenue rather than using the trough that just occurred. That substitution is defensible practice and it is also the entire thesis. Every conclusion downstream rests on the assertion that the last twelve months were the exception and 16.3 percent is the truth.

The most recent quarter did not help that assertion. The three months ended March 31, 2026 produced a net loss of $711 million, against $12 million of net income in the immediately preceding quarter, with a loss before income taxes of $760 million versus $23 million. The dominant driver was a net loss from commodity sales derivatives of $848 million, against a $126 million gain in the prior quarter. Most of that is a revaluation rather than money leaving, since net settlements on those derivatives came to $68 million in the quarter. But the revaluation is telling you something real: the hedge book is now positioned against the forward curve, which caps what a price recovery can deliver to the income statement in the periods the recovery would arrive.

The demand side of this particular cycle has a California-specific problem the national one does not. The 10-K observes that "In recent periods, certain California refineries and interconnected pipelines have announced closures or reductions in operations, and additional reductions in refining capacity may occur in the future." Read that alongside the advantage described elsewhere in the same filing, that local refineries are configured for this crude, and the two facts collide. The customer base that is uniquely suited to the product is shrinking, and there is no straightforward substitute market for a landlocked California barrel. The company also flags that "Recent 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 adds that "Local restrictions may be adopted notwithstanding state-level permitting frameworks, and the resulting regulatory landscape may vary significantly by jurisdiction, increasing compliance complexity and uncertainty." The regulatory barrier that keeps competitors out is the same barrier that can be tightened on the incumbent.

The non-oil earnings are also past their high-water mark. On the power side the filing states "We experienced peak pricing for resource adequacy contracts in 2025 as compared to 2024.", and market prices for 2026 contracts declined as more capacity became available. That business had been an offset to commodity weakness. It is now a smaller one.

The balance sheet leaves less room than the mid-cycle framing suggests. Net borrowings run about 1.4 billion dollars against 40 million dollars of liquid assets, which works out to roughly 2.99 times operating profit on the through-the-cycle basis, or 3.78 times measured after tax. On the trailing basis that ratio has no denominator at all. Operating profit covers interest about 4.4 times through the cycle, and the March quarter added a charge for retiring borrowings early on top of the regular interest bill. Meanwhile the share count has risen at roughly 3.1 percent a year over the four years to March 2026, since both recent acquisitions were paid for partly in stock. Equity interests held outside the operating business total about $102 million, a little over two percent of market value, so there is no meaningful cushion there either. Should the through-cycle margin turn out to be an artifact of a better decade rather than a description of this one, the leverage stops being modest very quickly.

Valuation

Strip the accounting noise out and the market is paying about 13 times what this business earns in an average year rather than in this one. That multiple implies company-wide operating profit compounding at roughly 3.7% a year for about five years, which is a pace the company has cleared before. The number should be held loosely: it comes from a single solve at a 9.31 percent cost of capital, and each additional percentage point on that rate moves the implied growth requirement by about 5.7 points. The direction is more informative than the decimal. What the price is asking for is not heroic growth. It is normalization.

The methods split along exactly that line. Approaches that project forward cash generation land above the price, including the one that carries recent free cash flow growth into a terminal value. Peer multiples land essentially on top of it, within a rounding error of the quote. The approaches anchored on recorded book value sit well below, with the price at roughly 1.7 times where they center, and the earnings-power lens that capitalizes current profit with no growth assumed lands between those book-value reads and the quote. Capitalizing $380 million of free cash flow at a 9.3 percent required return with no growth at all, for instance, produces a figure the price sits well above. That is the whole disagreement in one sentence: the forward-looking methods believe the normalization and the backward-looking ones do not.

Against that, the reserve disclosures pull the other way. At December 31, 2025 the discounted value of proved reserves on the SEC's prescribed pricing and a 10 percent rate came to 8,717 million dollars before future income taxes and 6,666 million dollars after, the difference being 2,051 million dollars of discounted future tax. Those figures exceed the enterprise the market is pricing. They are computed on a trailing average price and include undeveloped reserves that still require capital, so they are not an appraisal. But they explain why the book-value approaches read low: historical cost accounting for oil properties bears little relation to what the SEC's own standardized measure says the barrels discount to.

The peer set makes the cyclicality concrete rather than abstract. CRK converts 30.3 percent of revenue into operating profit with revenue up 60.3 percent year over year, while CHRD converts 3.6 percent with revenue down 1.0 percent, and CRGY runs a negative 7.5 percent net margin on 18.3 percent revenue growth. Those are companies producing similar molecules in the same year, and the spread between them is what commodity leverage does to reported results. A single year's number, for this business or any of them, is not a description of the business.

The balance sheet is where the mid-cycle framing gets tested in practice. Net borrowings of about 1.4 billion dollars sit against 40 million dollars of liquid assets, roughly 2.99 times operating profit on the through-the-cycle basis and 3.78 times after tax, with interest covered about 4.4 times. The company states that it intends to fund the 2026 capital program from operations, and the share count has grown at roughly 3.1 percent a year over the four years to March 2026 because the recent acquisitions were paid for in part with equity. What the buyer is holding, then, is a levered claim on a mid-cycle margin that the current year is not producing, backed by a reserve base the SEC's own measure values above the enterprise, in a state whose policy can move either variable.

Catalysts

The carbon business has its first hard checkpoint in months rather than years. The 10-K reports eight Class VI underground injection applications pending with the EPA as of February 28, 2026, with a final decision expected on the permits for the Carbon TerraVault sites and first CO2 injection at Elk Hills anticipated in spring 2026. About $15 million of 2026 capital is earmarked for completing that work. A granted permit and an actual injection would convert a segment that currently consumes a rounding error of capital into one with a demonstrated operating capability, which is a different thing from a stated ambition.

The oil business has a nearer and less pleasant checkpoint. The March 2026 quarter carried a net loss of $711 million on an $848 million net loss from commodity sales derivatives, and the hedge book is the reason a rising forward curve now shows up as a charge rather than a benefit. Production, by contrast, moved the right way, rising to 124 MBbl/d from 111 MBbl/d year over year on the Berry Merger, and the filing notes that "The Berry Merger affected the comparability of our financial results for the three months ended March 31, 2026 to the prior comparative period." The June quarter is the first clean look at the combined asset base without a merger closing inside the comparison.

Two slower items sit behind both. California's in-state refining capacity is contracting, and the company has said additional reductions may occur, which changes who buys the barrel and at what differential. And on the power side, resource adequacy contract pricing peaked in 2025 and 2026 contracts were struck lower as more capacity came available. Neither resolves on an earnings date. Both determine whether the through-cycle margin the price relies on is still the right normal.

Peer Cohorts (Per Segment, With Filing Citations)

Oil and Natural Gas (reported)

• CRK (COMSTOCK RESOURCES, INC.)
• FY2025 10-K: …financial position, results of operations and prospects, as could the adoption of new laws or regulations which levy taxes or other costs on greenhouse gas emissions from other industries, which could result in changes to the consumption and demand for natural gas. We may also be assessed administrative, civil and/or…
• FY2025 10-K: …of approximately 1.7 Bcf per day in 2026 on the long-haul pipelines. To the extent we are not able to deliver the contracted natural gas volumes, we may be responsible for the transportation costs. Competition The natural gas and oil industry is highly competitive. Competitors include major oil companies, other…
• MUR (MURPHY OIL CORPORATION)
• FY2025 10-K: …contracts in place which are expected to generate revenue from sales to customers for a period over 12 months starting at the inception of the contract. Location Commodity End Date Description Approximate Volumes U.S. Natural Gas and NGLs Q2 2030 Deliveries from dedicated acreage in Eagle Ford Shale As produced…
• FY2025 10-K: …index-priced and natural gas physical forward sales fixed-price contracts. For the offshore business in Canada, contracts are based on index prices and revenue is recognized at the time of vessel load based on the volumes on the bill of lading and point of custody transfer. The Company also purchases natural gas in…
• SM (SM ENERGY CO)
• FY2025 10-K: …the United States; • the increased demand for, price, and availability of alternative fuels or sources of energy; • technological advances in, and regulations affecting, energy consumption and conservation; • the ability of the members of OPEC+ to maintain effective oil price and production controls; • War and…
• FY2025 10-K: …of and transport fresh and produced water, own drilling rigs or production equipment, or generate electricity, all of which, individually or in the aggregate, could provide such companies with a competitive advantage. 19 We also compete with other oil and gas companies in securing drilling rigs and other equipment…
• CRGY (Crescent Energy Company)
• FY2025 10-K: …of oil and natural gas production and transportation, general economic conditions and changes in supply and demand. In addition, the amount of oil and natural gas that can be produced and sold may be subject to curtailment in certain other circumstances outside of our or our operators' control, such as pipeline…
• FY2025 10-K: …we can release it to others, thus reducing our potential liability. Competition The oil and natural gas industry is intensely competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil or natural gas, but also carry on midstream and…
• MTDR (Matador Resources Company)
• FY2025 10-K: …increased operating costs and reduced demand for the oil, natural gas and NGLs we produce, while the physical effects of climate change could disrupt our production and cause us to incur significant costs in 30 Table of Contents preparing for or responding to those effects" and "Risk Factors-Risks Related to Laws and…
• FY2025 10-K: …and natural gas reserves are estimated and may not reflect the actual volumes of oil and natural gas we will recover, and significant inaccuracies in these reserves estimates or underlying assumptions will materially affect the quantities and present value of our reserves" and "Risk Factors-Risks Related to our…
• CHRD (Chord Energy Corp)
• FY2025 10-K: …oil and natural gas prices and other factors, many of which are beyond our control. Due to the limited production history of our undeveloped acreage, the estimates of future production associated with such properties may be subject to greater variance to actual production than would be the case with properties having…
• FY2025 10-K: …containing proved reserves, our estimated net proved reserves will decline as those reserves are produced. Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future crude oil, NGL and natural gas…
• OVV (Ovintiv Inc.)
• FY2025 10-K: …that may be drilled in a unit; the rate of production allowable from oil and natural gas wells; and the unitization or pooling of oil and natural gas properties. In the U.S., some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands…
• FY2025 10-K: 29. Supplementary Oil and Gas Information (unaudited) The unaudited supplementary information on oil and natural gas exploration and production activities for 2025, 2024 and 2023 has been presented in accordance with the FASB's ASC Topic 932, "Extractive Activities - Oil and Gas" and the SEC's final rule,…

Carbon Management (reported)

• CRGY (Crescent Energy Company)
• FY2025 10-K: …to attract considerable public and scientific attention. As a result, our operations as well as the operations of our non-operated assets are subject to a series of regulatory, political, litigation, and financial risks associated with the production and processing of fossil fuels and emission of GHG. At the federal…
• FY2025 10-K: …adopting legislation, regulations or other regulatory initiatives that are focused on such areas as GHG cap and trade programs, carbon taxes, reporting and tracking programs, and restriction of GHG emissions. For example, California, through CARB has implemented a cap and trade program for GHG emissions that sets a…
• SM (SM ENERGY CO)
• FY2025 10-K: …control systems, to acquire emissions allowances, or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and 63 thereby reduce demand for, the oil and gas we produce. Consequently, legislation and regulatory programs to reduce…
• FY2025 10-K: …and Government Regulations - Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. Climate Change and Air Quality. In June 2013, President Obama announced a Climate Action Plan designed to further…
• AR (ANTERO RESOURCES CORPORATION)
• FY2025 10-K: …with ONE Future, well below the ONE Future voluntary industry target of 1%. 16 Table of Contents During 2025, our GHG/methane emission reduction efforts included the following activities : ● Continued our responsibly sourced gas certification effort that is Trustwell certified by Project Canary. ● Conducted four…
• FY2025 10-K: …and we could face unexpected material costs as a result of our efforts to maintain this goal and any future revisions to it. We continue to evaluate a range of technology and other measures, such as carbon offsets, that could assist with meeting this goal. Given uncertainties related to the use of emerging…
• RRC (RANGE RESOURCES CORPORATION)
• FY2025 10-K: …and program elements. These timing adjustments do not eliminate underlying obligations but may shift the phasing of compliance activities and expenditures for applicable facilities. Compliance with these or any similar subsequently enacted regulatory initiatives could directly impact us by requiring installation of…
• FY2025 10-K: …increased levels of GHGs, including carbon dioxide and methane, have contributed to and continue to contribute to climate change which has led to numerous regulatory, political, litigation and financial risks associated with the production of fossil fuels and emissions of GHGs. Oil and natural gas development…
• CHRD (Chord Energy Corp)
• FY2025 10-K: …to be the Company's Chief Operating Decision Maker ("CODM"), to make key operating decisions, such as the allocation of resources and the evaluation of operating segment performance. The primary measure of profit and loss evaluated by the Company's CODM for its single reportable segment is consolidated net income.…
• FY2025 10-K: …system sources, and impose standards for reducing methane emissions from oil and gas operations through limitations on venting and flaring and the implementation of enhanced emission leak detection and repair requirements. Recent actions by the Trump Administration seek to eliminate, delay or reduce GHG…
• OVV (Ovintiv Inc.)
• FY2025 10-K: …intention papers that target methane emissions, carbon pricing mechanisms, permitting of new infrastructure and mechanisms to cap future emissions. These proposed mechanisms include: an oil and gas sector emissions cap to achieve a 33-38 percent reduction in emissions below 2007 levels by 2030; the requirement for…
• FY2025 10-K: …impose a hard cap on GHG emissions from the oil and natural gas industry, seek to reduce methane emissions from the oil and natural gas industry by 75 percent below 2012 levels by 2030 and ensure GHG emission reductions are on a pace and scale sufficient to reach net-zero by 2050. In November 2021, Canada and other…
• DVN (DEVON ENERGY CORP/DE)
• FY2025 10-K: …impact our business through restrictions or cancellations of oil and natural gas activities, a requirement to pay damages, greater costs of compliance or consumption (thereby reducing demand for our products) or an impairment in our ability to continue our operations in an economic manner. In addition to regulatory…
• FY2025 10-K: …for, a variety of proposals, such as the development of cap-and-trade or carbon tax programs. At the international level, over 190 countries have signed the Paris Agreement, which requires member nations to submit non-binding GHG emissions reduction goals every five years. Subsequent United Nations climate…
• MNR (Mach Natural Resources LP)
• FY2025 10-K: …affect, the Company's internal control over financial reporting. Management's Assessment of Internal Control over Financial Reporting Management, including the principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial…
• FY2025 10-K: …and natural gas facilities. The emissions reported under the Greenhouse Gas Reporting Program will be the basis for any payments under the Methane Emissions Reduction Program. Also in January 2025, President Trump issued an executive order directing the heads of all federal agencies to identify and begin the process…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.