Kimmeridge builds stake in California Resources to push for changes-sources

Brookfield Renewable

15/08/2022 11:00

By David French
    Aug 15 (Reuters) - Kimmeridge Energy Management Company LLC
has amassed a stake in California Resources Corp  CRC.N  and is
pushing the oil and gas producer to make changes that include
selling some acreage to real estate developers, people familiar
with the matter said.
    The energy-focused activist investment firm owns more than 3
million shares in California Resources, equivalent to about a 4%
stake, and has been in talks with the company's management in
recent weeks about how to boost its valuation, the sources said.
    The ideas pushed by Kimmeridge include divesting California
Resources' Huntington Beach acreage in Orange County, which it
believes could fetch around $800 million if sold for conversion
to residential real estate, according to the sources. 
    Kimmeridge has also told California Resources it should
focus more on its nascent carbon capture and sequestration
business (CCS).
    As well as helping California Resources reach its own net
zero targets, the investor thinks the firm would be well placed
to profit from the technology's increased deployment in the
state, due to the firm's extensive land footprint and its
in-depth knowledge of California's geology, the sources added.
    The sources spoke on condition of anonymity to discuss
confidential information. California Resources was not
immediately available for comment. A spokesperson for Kimmeridge
declined to comment.
    California Resources' shares have languished compared to
peers this year, despite high U.S. crude and natural gas prices,
as investors put money into other producers with higher growth
rates that can capture this commodity price upswing.
    Much of California Resources' oil and gas comes from older
wells which have low-but-steady production.
    The stock has risen 7.7% so far this year, giving it a
market capitalization of $3.5 billion, compared with the 41.4%
jump in the S&P energy index  .SPNY .
    Earlier this month, the Long Beach-based company announced
plans to form a joint venture with Brookfield Renewable  BEPC.N 
 BEP.N  focused on developing CCS projects across California.
Brookfield is putting up $500 million for the venture, with the
potential for another $1 billion of capital. Kimmeridge is
supportive of the move, the sources said.
    California Resources was formed in 2014 after Occidental
Petroleum Corp  OXY.N  spun off its California business into a
separate entity. Weighed by slumping oil prices at the onset of
the pandemic and a $5 billion debt pile, it filed for Chapter 11
bankruptcy in July 2020, emerging from it three months later.

 (Reporting by David French in New York; Editing by Daniel
Wallis)
 ((davidj.french@thomsonreuters.com;))