Message from the CEO

A Message From The CEO

California Resources Corporation delivered an exceptional year in 2025.

We generated strong financial results, achieved production growth for the third consecutive year, and returned substantial capital to shareholders – all while operating in one of the most demanding regulatory environments in the United States. We did so profitably and with a focus on sustainability, as reflected by MiQ methane performance certifications for production assets across the Los Angeles, Ventura, and San Joaquin basins. This underscores that strong operational performance and responsible development go hand in hand.

Importantly, California's regulatory environment now recognizes the importance of local production in delivering energy affordability and reliability. The passage of Senate Bill 237 and resolution of litigation regarding Kern County's environmental impact report provided permitting clarity in Kern County, and CRC has begun receiving new drilling permits to support its planned 2026 drilling program. This clarity enables CRC to allocate and invest capital with confidence in 2026 and beyond.

As the energy landscape continues to evolve, CRC is anchored by long-duration, low-decline conventional reservoirs that provide stable production, modest reinvestment requirements, and durable free cash flow across commodity cycles. In a period defined by price volatility, disciplined capital markets, and growing energy demand in California, our intentionally integrated strategy builds on this resilient foundation. By pairing our core operations with disciplined expansion in carbon management and power, we are positioned to support the state's long-term energy needs while advancing its decarbonization objectives.

2025: Disciplined Execution, Scale, and Returns

In 2025, CRC delivered another year of disciplined execution across the portfolio. Our teams improved reservoir performance, reduced corporate base decline rates, enhanced capital efficiency and, combined with the benefit of well-timed strategic mergers, enabled approximately 25% year-over-year production growth. This performance reflects both the quality of our long-life conventional asset base and the depth of our operational capability.

We also demonstrated that scale and integration are repeatable sources of value creation. Following the Aera transaction, we delivered $235 million of merger-related synergies through disciplined cost rationalization and operational efficiencies while maintaining safe operations and production stability. In December, we completed the merger with Berry Corporation, extending the life of our conventional inventory and further expanding our footprint in California. Integration is underway using the same proven playbook, with execution focused on cost structure, operational alignment, and long-term value creation.

The financial impact of strong execution in 2025 is evident in our results. Despite a 14% decline in Brent, CRC generated record adjusted EBITDAX2 and free cash flow2 in 2025, while strengthening the balance sheet and maintaining ample liquidity¹. Furthermore, we returned more than 90% of free cash flow² to shareholders through a combination of dividends and share repurchases, demonstrating our continued focus on delivering meaningful value in a previously permitting constrained environment. More broadly, since mid-2021, CRC has returned nearly $1.6 billion to shareholders, repurchasing approximately 26.8 million shares over that period. Throughout our history, our capital allocation philosophy has remained consistent: drive long-term per-share value through disciplined execution and integration.

Carbon TerraVault and Power: From Concept to Execution

CRC's long-life asset base and subsurface expertise also provide a natural foundation for carbon management and power. In 2025, Carbon TerraVault reached a significant milestone: we advanced California's first carbon capture and storage project from permitting to construction, and completed pre-operational activities at our Elk Hills Cryogenic Gas Plant. This positions the project for first carbon dioxide (CO₂) injection in the spring of 2026, subject to final regulatory approvals.

The commencement of CO₂ injection at the CTV I storage reservoir places CRC among a small group of operators globally that have developed CCS projects from concept to operation. This milestone reflects years of deliberate actions across permitting, engineering and stakeholder education. Our approach has been consistent throughout – regulatory clarity first, followed by technical readiness and commercial alignment – leveraging existing infrastructure and subsurface expertise while maintaining a disciplined, milestone-based approach to capital deployment.

Looking ahead, we see growing demand for reliable, decarbonized power solutions in California as electricity needs expand across industrial, infrastructure, and data-driven applications. CRC is uniquely positioned at the intersection of long-duration subsurface assets, existing infrastructure, and power capabilities. Our focus now is on progressing our portfolio of projects where commercial contracts, strong counterparties and compelling economics converge.

Looking Forward

As we enter 2026, our priorities are clear:

• Generate durable free cash flow through disciplined operations and capital allocation
• Complete integration activities and progress planned synergies using a proven framework
• Advance Carbon TerraVault into operations, including commencement of CO₂ injection at the CTV I storage reservoir
• Progress high-return opportunities across the portfolio based on returns and execution readiness
• Maintain balance sheet strength while supporting continued shareholder returns

CRC is not built to chase cycles. It is built to perform through them – anchored by long-duration assets, a multi-decade inventory of low-decline development opportunities, disciplined capital allocation, and an integrated strategy that generates cash today while extending relevance and value over time. That performance is enabled by our people – their expertise, discipline, and commitment to safe, responsible operations – and is what makes CRC a Different Kind of Energy Company.

I want to thank our employees for their professionalism and execution, our communities and partners for their continued engagement, and our shareholders for their confidence and support.

Sincerely,

Francisco J. Leon
President and Chief Executive Officer
California Resources Corporation