Work on a carbon capture and sequestration system at a Kern County natural gas-fired power plant is continuing despite the bleak financial future of the company spearheading the project.
California Resources Corporation continues navigating financial difficulties created by the COVID-19 response and volatile commodity pricing, but is moving forward with its carbon-capture project at the 550-MW Elk Hills Power Plant in Kern County.
In March, executives stated the project would move forward despite a dire financial forecast outlined in the company's recent U.S. Securities and Exchange Commission filing.
"Our Elk Hills Carbon subsidiary is proceeding with the front-end engineering and design (FEED) study for our pioneering carbon capture project at the Elk Hills Power Plant," CRC spokesperson Rich Venn said in an email to California Energy Markets. "The FEED study is being prepared by the Electric Power Research Institute and Fluor Corporation, and is scheduled for completion by the end of this year. The FEED study is fully funded, primarily through financial support from the U.S. Department of Energy."
The company has also secured international funding for the project in addition to DOE funding (see CEM No. 1581).
CRC's May 8 SEC filing says the company is reeling from the effects of COVID-19 on its business as well as on commodity prices. "The COVID-19 pandemic has and will likely continue to affect the Company's business in adverse ways," it says in the filing.
CRC is an independent oil and natural gas producer, a 2014 spin-off of Occidental Petroleum, with operations solely in California. It purports to be the largest oil and natural gas producer in the state with operations in all four major basins, 65 percent of which are in the San Joaquin Basin, where the Elk Hills oil field and power plant are located.
The company is in the midst of a "restructuring of its balance sheet" in response to these various financial issues. In the SEC filing, it says that if this effort is not successful, "there is substantial doubt about the Company's ability to continue as a going concern."
CRC cites the COVID-19 pandemic as a new risk factor that "has caused crude oil prices to decline significantly in 2020, which has materially and adversely affected the Company's business, results of operation, financial condition and liquidity . . . The severity, magnitude and duration of current or future COVID-19 outbreaks, the extent of actions that have been or may be taken to contain or treat its impact, and the impact on the economy generally and oil prices in particular, is uncertain, rapidly changing and hard to predict."
CRC also stated it would not be meeting the filing deadline for its quarterly Form 10-Q and would likely file it in mid-June. It will be "withdrawing previously issued guidance for all periods after March 31, 2020 due to the high level of economic uncertainty and disruption in commodity prices as well as the COVID-19 pandemic."
That sounds far less hopeful than a March 9 statement from CRC President and CEO Todd Stevens, which said: "We believe these events are transitory in nature and have high confidence in the revenue generating potential of our low-decline assets."
Among the cost-cutting measures instituted by the company are reducing employee hours and, as of May 11, shutting in approximately 5,000 barrels of oil equivalent per day in production. Meanwhile, CRC's stock price closed May 19 at $1.52 per share.
The natural gas-fueled Elk Hills plant is anticipated to be the first CCS plant in the state when the technology goes on line in 2024. It is being designed to capture as much as 4,000 tons of carbon dioxide per day, which would be used for enhanced oil recovery.