$26.00
$67.00
bear $26.00
base $52.00
bull $67.00
margin of safety $30.00
market price* $54.33
California Resources is the largest oil and gas producer in California. It produced about 138,000 barrels of oil equivalent per day in 2025 (roughly 79% oil), has 654 million barrels of oil equivalent of proved reserves (541 million already developed), and owns 1.99 million net mineral acres, mostly in the San Joaquin Basin. It bought Aera Energy in July 2024 and Berry Corporation on December 18, 2025 (all-stock, about 6% of the shares issued). It also has a small carbon-storage business, Carbon TerraVault, which we give no value because it is not yet earning anything. HOW WE MEASURE EARNINGS. We start from operating cash flow, take out swings in receivables, payables and accruals, subtract stock compensation as a real cost, and subtract the capital spending needed to keep production going (only a small growth portion of spending is excluded). Interest is already paid inside operating cash flow, so debt is not subtracted a second time. On that basis, earnings per share were $7.05 (2021), $5.36 (2022), $5.83 (2023), $5.53 (2024) and $7.89 (2025). We reached back to 2016 but ignore the pre-bankruptcy years (2016-2019: $3.27, $0.42, $2.30, $3.98), which describe a different, more indebted company; 2020 is left out because of the bankruptcy accounting split. Depletion and impairment charges are non-cash and are not deducted; instead the eventual running-down of the reserves is handled in how long we let the earnings last. OUR STARTING POINT is $6.70 per share, the middle of 2024 and 2025, the two years that include Aera. 2025 is the only full year with Aera, and it came with Brent averaging $68, below the $80-82 of 2023 and 2024, so we did not want to use it alone. Growth check: earnings per share rose 43% in 2025 (from $5.53 to $7.89) because Aera counted for a full year rather than half; we assume 0% growth in year one, below that, because that jump does not repeat. Results since then do not clearly move the level: first-half 2026 operating cash flow was $362 million versus $351 million a year earlier, but capital spending was $280 million versus $111 million and the company posted derivative losses, so our rough estimate of first-half 2026 earnings is in the neighbourhood of $6 per share annualised. That is a little below our starting point, which we treat as consistent with it rather than a reason to move it. BASE CASE (about $52 per share): $6.70 per share a year, flat, for ten years, then fading over roughly two more years as the proved reserves run out (654 million barrels against about 50 million produced in 2025, plus Berry, is a 12-year cushion). What is credited: production and earnings at the level already achieved, with the Berry merger already paid for and in the numbers. What is left out: any growth from Berry synergies, new wells under the 2026 drilling plan, or carbon storage, because none has yet shown up in results; and any reserve replacement after today's reserves are gone. Reserve additions from drilling and improved recovery were roughly the size of annual production in 2025, but in 2023 reserves fell by about a year of production, so we do not treat replacement as proven. BEAR CASE (about $26 per share): earnings settle at $4.00 per share, flat for eight years, then end over two years. Named reasons: capital spending in the first half of 2026 was more than double the prior year's, which shows how much the business must spend to hold output; debt is $1,283 million at year-end 2025; most price protection is 2026 (swaps on about 42,000-52,000 barrels a day at $68-69 Brent), falling to about 50,000 barrels a day at $66 in 2027 and only about 7,000 in 2028; and California permitting has been a repeated bottleneck (new drilling permits in Kern County were stalled from mid-2022 until January 2026, and 10 million barrels of undeveloped reserves were removed from the five-year plan in 2025). Reserves of 113 million barrels are still undeveloped, and only 13% of last year's undeveloped total was converted in 2025. BULL CASE (about $67 per share): earnings hold at $8.00 per share for ten years, slightly above 2025 at lower oil prices, then fade over four years. This is the outcome if the merged company simply earns what Aera and legacy operations earned in 2025 on a full year of Berry, if new wells (Senate Bill 237, effective January 2026, allows up to 2,000 new wells a year for up to ten years in Kern County) are permitted and converted at the pace seen in 2025, and if improved-recovery projects such as the 27 million barrels added in 2025 keep replacing production for a few years beyond the current reserve life. WHAT WOULD MAKE THIS WRONG: oil is the swing factor. The company estimates each $10 per barrel move in Brent changes 2026 hedge settlements by roughly $179 million up or $294 million down, so hedges cap upside in 2026 and protect the downside only for 2026 and, to a lesser extent, 2027. Costs were $25.42 per barrel of oil equivalent in 2025. Any large reserve write-down, a reversal in California permitting, or an integration problem at Berry would lower these values. One item we could not reconcile from the filings: how much of the drop in first-half 2026 cash flow versus earnings is timing rather than lasting; we rely on the 2021-2025 record rather than the first half. These are values per share for the business as it stands today; the margin-of-safety price uses a wide margin because earnings depend on oil prices, on California regulation and on a debt load, all of which are already visible in the filings.