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Hawk’s Nest

California Resources (CRC) Call Buyers Target Continuation Higher as Oil Surges

by | Oct 11, 2021

California Resources (CRC) shares setting up well in a narrow bull flag under $44 and recent highs and seeing bullish options flow today with buyers of 1000 November $40 calls for $4. CRC has 5,500 January $40 calls in OI as well from a massive buy on 9/15 for $4.15M. CRC is basing at the bottom of monthly value and a move above $42 can see a nice extended run with a measured move of $48-$50. The $3.34B energy name trades 13.2X earnings, 2.45X sales, and 17X FCF with just 3% short float. CRC has a strong balance sheet and high FCF relative to their overall leverage while reinvesting in high-margin development and future projects like carbon capture. MKM starting at Buy on 9/22 with a $54 PT positive on the company’s potentially substantive carbon capture, utilization & storage, and solar power businesses citing its potential to store up to 1B metric tons of CO2 in its producing reservoirs. Assuming about $140M in net capital spending this year, California Resources should generate about $510M of free cash flows in 2021.