Ambani's Reliance In Focus as EU Warns Refiners Using Russia Oil
Reliance bought Abu Dhabi's Murban crude in a rare purchase late last week, traders said, adding that it picked up the cargo soon after Friday's sanction package. The private refiner isn't a regular buyer of the UAE grade, a premium crude that tends to be costlier than its regular appetite of Russian Urals and heavier Middle Eastern varieties.
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When I evaluate a company, I don't think in terms of stock charts, quarterly earnings beats, or Wall Street narratives. I think about businesses. Specifically: Would I want to own 100% of this company at this price and hold it for the next 5-10 years? In that spirit, let's take a closer look at California Resources Corporation (CRC). It's an upstream oil and gas company operating in one of the most misunderstood marketsCalifornia. On the surface, this company produces oil. But beneath that, there's something else: a deeply undervalued asset base, durable cash flows, and an intriguing second enginecarbon capture and storagethat just might turn CRC into a long-term compounder hiding in plain sight. Warning! GuruFocus has detected 6 Warning Sign with LNG. CRC is not your typical shale operator. It holds long-life, conventional oil fields in the San Joaquin and Los Angeles Basins, including names like Elk Hills and Kern Front. These aren't high-decline, capital-hungry assets. These are slow-and-steady producers that have been pumping for decades and still have decades to go. As of year-end 2024, CRC reported 545 million barrels of oil equivalent in proved reserves, with over 80% in oil. That equates to nearly an 11-year reserve life, which is unusually long for an independent producer. Importantly, CRC owns its infrastructurepipelines, steam generation plants, even mineral rights in many of its operating areas. This vertical integration creates both operating efficiency and margin stability. And in a business where the price of the commodity can swing dramatically, any degree of cost control is a significant advantage. Think of it as owning not just the oil, but the entire value chain through which that oil flows. But oil isn't the only thing buried in CRC's asset base. Through a business unit called Carbon TerraVault, the company is turning depleted reservoirs into carbon storage sites. With the U.S. government now offering $85 per metric ton of CO? stored (under the 45Q tax credit), CRC has a shot at transforming geological leftovers into a regulated, cash-flowing service business. It's a free call option on energy transition infrastructureand few investors seem to be paying attention to it. CRC stands out as a rare case where the quality of the underlying assets is matched by the quality of its leadership. The business generates steady, durable cash flowsand management has shown a clear commitment to disciplined, shareholder-focused capital allocation. After emerging from Chapter 11 bankruptcy in 2020, CRC didn't go on a spending spree or chase high-risk growth. Instead, the company cleaned up its balance sheet, focused on capital discipline, and made a few smart movesmost notably, acquiring the remainder of Aera Energy, which came with synergistic cost reductions now expected to save the company $65 million annually. But the best evidence of management quality comes from how they treat shareholders. In Q1 2025 alone, CRC returned $258 million via dividends and share buybacks. That's over 6% of its market cap in just one quarter. In full-year 2024, around 85% of free cash flow was returned to shareholders. They're not trying to become Exxon or drill in far-flung frontiers. They're doing what I wish more public companies would do: generate surplus cash and give it back to the owners. If I can buy a dollar for fifty centsand the dollar is growingthat's a business I want to own. CRC generated around $355 million in free cash flow in 2024, and added another $131 million in Q1 2025, bringing its trailing 12-month free cash flow to over $450 million. Right now, its market capitalisation sits at roughly $4.2 billion. That gives the stock a free cash flow yield of approximately 10.7%, calculated as $450 million $4.2 billiona figure that speaks directly to the company's ability to return capital while remaining self-funded. When a company is throwing off this much cash relative to its sizeand returning most of it to shareholdersthat's the kind of setup worth paying attention to. It also trades cheaply at 4.2 times EV/EBITDA and only 8.2 times earnings. Now here's the kicker: CRC's proved reserves carry a PV-10 value of $8.9 billion, assuming around $80 Brent crude. That's nearly double the company's current enterprise value. This is what I call a real margin of safety. Even if you haircut the PV-10 by 25% to be conservative, the adjusted asset value still comes in well above the current stock price. And this doesn't account for the carbon business at all. If Carbon TerraVault becomes even a moderately successful carbon sequestration platform, that's hundreds of millions in future earnings being given away for free today. When insiders and seasoned investors make moves, I pay attention. James Chapman, the company's director, has been quietly increasing his stake. And he's not the only one leaning in. Howard Marks (Trades, Portfolio)' Oaktree Capital may have trimmed its stake, but still holds 1.38 million shareshardly a vote of no confidence. Jeremy Grantham (Trades, Portfolio) boosted his position by nearly 38%, now holding 1.22 million shares. Ken Griffin's Citadel ramped up its stake by over 90%, now sitting on 1.16 million shares. And Renaissance Technologies (Trades, Portfolio)? They more than doubled downraising their position by over 185% to more than 590,000 shares. The signal is clear: CRC isn't just cheap. It's attracting the kind of capital that tends to be earlyand usually right. Many investors avoid CRC for one reason: it operates in California. The Golden State's regulatory environment is tough on oil producers. Permitting is slow. Environmental opposition is fierce. And long-term state policy is tilted toward renewables. This California discount is realand it's precisely why CRC trades so cheaply relative to its assets. But what if that discount is backward-looking? CRC already operates under the strictest oil rules in the countryand still generates 10%+ free cash flow. Its assets are permitted. Its reservoirs are mature. It doesn't need to grow production. In fact, it's better off not growing, just maintaining stable output and maximizing returns. Ironically, California's aggressive climate stance may become a tailwind for CRC's carbon capture business. The same regulatory system that makes drilling difficult also supports carbon sequestration. With 45Q credits, state incentives, and access to industrial CO? emitters, CRC could end up being one of the most profitable climate infrastructure plays in the countryhidden inside an oil company. Of course, CRC isn't without risk. Oil prices are volatile, and CRC's earnings are sensitive to Brent crude. If prices fall to $50 or below, cash flows will compress. That's the nature of a commodity business. And while the CCS business is promising, it's still early. There's execution risk, regulatory complexity, and market uncertainty. Not every CCS project will succeedor scale profitably. But here's where CRC is different from speculative startups or over-leveraged E&Ps: even without CCS, it's a healthy business. Its existing oil fields, infrastructure, and free cash flow give investors a solid floor. The upside from CCS is just thatupside. The best use of capital is to reinvest at high rates of return. But if you can't do that, you should return it to shareholders. CRC appears to be doing both. It continues to invest modestly in CCS and other internal improvementsprojects with a clear path to economic return. At the same time, it is aggressively returning capital through buybacks and dividends. Unlike many in its industry, it's not chasing growth for growth's sake. That's rare. With net debt only $882 million and operating cash flows more than covering capex and dividends, this is a self-funding business that doesn't rely on capital markets or leverage to survive. That's a trait I value deeply. Let's put it all together. If I could buy CRC for $4 billion, I'd be acquiring: Nearly $9 billion in PV-10 value of proved reserves (even more if oil prices stay strong). A carbon storage platform with substantial optionality and favorable federal tax incentives. A vertically integrated infrastructure network that lowers operating costs. A management team that acts like owners and returns cash instead of hoarding it. Even with conservative assumptionshaircutting reserve values and assuming zero value for CCSCRC still looks like a business selling at a 3040% discount to intrinsic value. Add in the fact that shareholders are being paid over 10% annually in cash while they wait, and it's hard not to see the appeal. Warren Buffett (Trades, Portfolio) once said: Price is what you pay, value is what you get. In CRC's case, the price is modest. The value is real. And the optionality is free. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Fox News
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Trump unveils massive trade deal with European Union
President Donald Trump announces a trade deal between the United States and the European Union with European Commission President Ursula von der Leyen.
