Thanks to rising production costs and softening oil prices, profits fell during the third quarter at California Resources Corp., the oil producer that is to be spun off from Occidental Petroleum Corp. next month.
California Resources, which for now is headquartered in Los Angeles, reported pro-forma net income of $188 million in the third quarter, down 20 percent from $235 million for the same period a year ago.
The drop in net income came despite record oil production in the quarter of 100,000 barrels a day, up 12 percent from a year earlier.
“Our record oil production is a result of our strategic focus on drilling for high margin oil to maximize shareholder value,” California Resources Chief Executive Todd Stevens said in the earnings statement.
But that oil proved expensive to get at, as production costs rose due to higher energy costs, chiefly for natural gas used to power steam flood operations, the company said in its earnings statement. Also, crude oil prices fell 10 percent to $96.27 a barrel during the third quarter.
The largest oil production gains came from the San Joaquin Basin and the Los Angeles region, while the Sacramento Basin saw production drop.
California Resources is expected to complete its spinoff by the end of next month, with Occidental initially distributing to its shareholders at least 80 percent of California Resources common stock.
This month, in advance of the spinoff, California Resources raised $5 billion through a senior note offering and distributed the proceeds to Occidental. The company also secured a $1 billion loan, which it will pay to Occidental prior to the spinoff.
California Resources’ interim headquarters is in the same Westwood building that served as Occidental’s headquarters until that company moved to Houston earlier this year. The company is in the midst of a search for a permanent headquarters: Long Beach, Los Angeles, Santa Clarita and Bakersfield are considered the most likely candidate cities.