In a notable move within the energy sector, the Denver-headquartered Sourcerock Group augmented its stake in California Resources Corporation, increasing its ownership by roughly 1.18 million shares throughout the third quarter of the year. The latest filing with the Securities and Exchange Commission, issued on November 14, reveals that this addition brings Sourcerock's total share count in CRC to around 3.18 million, valued at $169.14 million by the end of September. This increase equates to a net position change of $77.77 million compared to the previous quarter.
Sourcerock's holdings in CRC now constitute approximately 11.5% of the fund’s assets under management reported in Form 13F filings. This significant weighting reflects a strategic allocation within their broader portfolio, which includes prominent positions such as a $261.30 million investment in NYSE-listed Aramark (AR), comprising 17.77% of their total assets, as well as stakes in Neptune Wellness Solutions (NE), Talos Energy (TALO), and Chord Energy (CHRD).
Despite CRC’s recent stock price falling by nearly 11% over the last twelve months to close at $44.60 per share as of the previous Monday, underperforming the broader S&P 500 index which gained approximately 15.5% during the same period, Sourcerock’s increased exposure indicates confidence in the company's underlying fundamentals rather than short-term market movements.
California Resources Corporation operates as an integrated oil and gas entity within California, engaging in the exploration, production, gathering, processing, and marketing of hydrocarbons. Their business model extends to generating and selling electricity to both utilities and the wider grid, positioning the company with diverse revenue streams primarily derived from commodity sales and electricity generation. The company services various California refineries and other purchasers, utilizing established transportation and storage infrastructure to support its operations.
The investment thesis reflected in Sourcerock’s enhanced position appears to rest on CRC's demonstrated ability to generate substantial operating cash flow and free cash flow, as illustrated in its most recent quarterly performance metrics. In the third quarter, California Resources generated $279 million in operating cash flow and $188 million in free cash flow. Capital expenditures during this period stood at $91 million, enabling the company to maintain strong financial flexibility.
This positive cash flow position has facilitated corporate activities such as dividend distributions, share repurchases, and debt reduction. Notably, management has recently increased the quarterly dividend payout by 5% to $0.405 per share. Additionally, the company retired its outstanding 2026 notes, extending debt maturities and enhancing liquidity, which now totals an estimated $1.15 billion. These financial maneuvers underscore management's commitment to strengthening the balance sheet while returning value to shareholders.
Net income for the quarter was reported at $64 million, with adjusted EBITDAX reaching $338 million, highlighting the resiliency of the company's integrated model even with oil prices remaining substantially below cyclical peaks. This stability in earnings and cash flow generation offers a buffer against volatility inherent in the energy sector.
With its substantial mineral acreage and operational concentration within California, CRC occupies a distinct market position benefiting from local demand dynamics and regulatory policies impacting energy producers in the region. Its integrated infrastructure and diversified revenue streams contribute to operational efficiencies that may yield advantages in both stable and fluctuating market environments.
Overall, the Sourcerock Group's sizeable investment in CRC reflects a high-conviction stance focused on cash flow generation and long-term value accrual rather than short-term growth prospects. The firm's approach signals a willingness to accommodate interim volatility in favor of sustainable financial returns through dividends, debt management, and capital appreciation potential.