Oil and gas producer California Resources (NYSE: CRC) missed Wall Street’s revenue expectations in Q1 CY2026, with sales falling 86.9% year on year to $119 million. Its non-GAAP profit of $0.88 per share was 2.2% below analysts’ consensus estimates.

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"We continued to demonstrate the strength of our integrated portfolio strategy, delivering solid results while advancing high-return oil developments and capturing incremental merger-related synergies," said Francisco Leon, CRC's President and Chief Executive Officer.

Company Overview

Operating some of California's most productive oil fields including Elk Hills and Belridge, California Resources (NYSE: CRC) explores for and produces crude oil, natural gas, and natural gas liquids from fields across California.

Revenue Growth

Cyclical industries such as Energy can make mediocre companies look great for a time, but a long-term view reveals which businesses can actually withstand and adapt to changing conditions. Thankfully, California Resources’s 10.9% annualized revenue growth over the last five years was decent. Its growth was slightly above the average energy upstream and integrated energy company and shows its offerings resonate with customers.

Even a long stretch in Energy can be shaped by a single commodity cycle, so extending the view to ten years adds another perspective and reveals which companies are built to grow regardless of the pricing regime. California Resources’s annualized revenue growth of 2% over the last ten years is below its five-year trend, but we still think the results were respectable.

While looking at revenue is important, it can also introduce noise around commodity prices and M&A. Analyzing drivers of revenue, on the other hand, highlights what is happening inside the asset base and whether the economic footprint of a company is expanding. Over the last two years, California Resources’s oil production per day averaged 64.1% year-on-year growth while its natural gas production per day were flat.

This quarter, California Resources missed Wall Street’s estimates and reported a rather uninspiring 86.9% year-on-year revenue decline, generating $119 million of revenue. This quarter, California Resources reported robust year-on-year Oil production per day growth of 23.4%.

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Adjusted EBITDA Margin

Adjusted EBITDA margin strips out accounting distortions tied to depletion and historical drilling spend, providing a clearer view of the cash-generating power of the underlying asset base before financing and reinvestment decisions.

California Resources was profitable over the last five years but held back by its large cost base. Its average EBITDA margin of 31.2% was weak for an upstream and integrated energy business.

Looking at the trend in its profitability, California Resources’s EBITDA margin decreased by 31 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. California Resources’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, California Resources generated an EBITDA margin profit margin of negative 486%, down 521.5 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue. This adjusted EBITDA fell short of Wall Street’s estimates.

Cash Is King

Adjusted EBITDA shows how profitable a company’s existing wells are before financing and reinvestment decisions, but free cash flow shows how much value remains after paying the cost of replacing those wells. In upstream energy, production naturally declines over time, so companies must continuously reinvest just to stand still. A producer can report strong EBITDA margins yet generate little or no free cash flow if its wells decline quickly or if new drilling is expensive. Free cash flow therefore captures not only how efficiently a company produces hydrocarbons today, but also how costly it is to sustain that production into the future.

California Resources has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.7% over the last five years, quite impressive for an upstream and integrated energy business.

The level of free cash flow is important, but its durability across cycles is just as critical. Consistent margins are far more valuable than volatile swings driven by commodity prices.

California Resources’s ratio of quarterly free cash flow volatility to WTI crude price volatility over the past five years was 3.4 (lower is better), indicating excellent insulation from commodity swings. This stability supports superior capital access in downturns and positions California Resources to act as a consolidator when weaker peers are forced to retrench.

You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI Crude prices in the case of California Resources? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.

California Resources’s free cash flow clocked in at $116 million in Q1, equivalent to a 97.5% margin. This result was good as its margin was 83 percentage points higher than in the same quarter last year, building on its favorable historical trend.

Key Takeaways from California Resources’s Q1 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded up 2.6% to $72.03 immediately following the results.

So should you invest in California Resources right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).