California | February 2020
Field Overview
Current Brent crude prices are $35.82/bbl. California, with both onshore and offshore oil production, has been supplying the U.S. with petroleum products since the 19th century. Operations are primarily focused around Kern County, the LA Basin, and the San Joaquin Valley, with the Midway-Sunset oil field in Kern County being the state’s largest.
State Drilling Statistics
Total Rigs in California- 13
Total Rigs in United States- 790
Total U.S. Rigs down 24% YTD
Financial & Economic Updates
California Resources Corporation Reduces Capital to Mechanical Integrity Level
- California Resources Corporation (NYSE: CRC) announced today it is reducing its capital investment due to recent changes in the commodity market to a level that maintains the mechanical integrity of its facilities to operate them in a safe and environmentally responsible manner.
- CRC has effectively ceased investment in its internally funded field development and growth projects until the company sees a higher degree of market clarity. The company was already on pace to invest less than $35 million of internally funded capital in the first quarter.
- Additionally, CRC has monetized all of its crude oil hedge positions following the first quarter to enhance the company’s flexibility in this volatile time period. These sales along with expected March hedge settlements are raising approximately $76 million and monetizing the maximum spread in our put-spread hedge positions.
State Highlights
State orders permanent shutdown of oil drilling site near USC
- California regulators are ordering Allenco Energy to plug wells and decommission an oil drilling site whose neighbors once complained of nosebleeds, headaches and other ailments, permanently closing the South Los Angeles facility.
- In the order, State Oil and Gas Supervisor Uduak-Joe Ntuk declared that Allenco Energy had “deserted” the facility and failed to properly fix leaks that showed that wells were deteriorating.
- Last month, one of the company’s executives told state regulators that it would no longer be spending “further capital” on the South L.A. site. Ntuk said in his order that the company must decommission the facility in accordance with state law.
California Court: Kern County Violating Law by Rubberstamping Oil Drilling
- California’s Fifth District Court of Appeals ruled that a key county analysis failed to disclose the full extent of drilling’s environmental harm, in violation of state law. Kern County used the flawed study to pass an industry-friendly oil and gas ordinance in 2015 and has issued more than a thousand permits a year since it passed.
- The court ordered that the environmental impact report and the ordinance be set aside until the county can demonstrate it complies with the law. Kern County must stop issuing permits under the ordinance within 30 days. The ruling means environmental review of new drilling proposals in Kern County will revert back to state authorities.
- According to the ruling, Kern County violated the California Environmental Quality Act by failing to fully evaluate and disclose the environmental damage that would occur as a result of the county’s plan to permit up to 72,000 wells over the next 25 years.
Refining
California Gas Production
California Oil Production
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