A Look at California Resources’s Valuation Following $400 Million Senior Notes Ahead of Berry Merger

California Resources (CRC) just wrapped up a $400 million senior notes offering, a move closely linked to its pending merger with Berry Corporation. For investors, this kind of debt financing hints at both confidence and preparation as the anticipated combination approaches.

See our latest analysis for California Resources.

California Resources’ recent moves, including the $400 million senior notes issuance and redemption of older debt, have unfolded alongside anticipation for its pending Berry merger. The share price has gained almost 8% over the past month and is up 11% over the last 90 days, while the one-year total shareholder return sits at just over 7%. With momentum clearly building around these developments and an eye on the company’s upcoming quarterly results, investors appear to be factoring in both growth prospects and some evolving risks.

If this wave of M&A action gets you thinking about broader opportunities, now may be the perfect time to broaden your search and discover fast growing stocks with high insider ownership

With shares trending higher and the upcoming Berry merger on the horizon, the real question is whether California Resources is still trading below its true value or if the market has already priced in all the future upside.

Most Popular Narrative: 18.7% Undervalued

The narrative's fair value estimate of $65.64 is notably above California Resources’ last close of $53.36, setting expectations for meaningful upside if the underlying projections hold true. The spread between market price and consensus fair value raises questions about what is fueling analysts' conviction, especially with structural and operational headwinds lingering in the background.

Recent and potential regulatory reforms in California aimed at improving oil and gas permitting and supporting local energy security may provide CRC with increased operational flexibility and access to its extensive project inventory. This could unlock higher production volumes and drive top-line revenue growth. The company's advanced progress and upcoming operational launch of California's first CCS project, alongside legislative support for CO2 pipelines and clean power procurement, positions CRC to capture meaningful new, high-margin revenue streams from carbon management services, boosting long-term earnings and margins.

Read the complete narrative.

Why are analysts ignoring declining revenue and profit projections to arrive at such a bullish fair value? The path to this number is paved with bold assumptions, especially regarding California’s regulatory environment and transformative new revenue sources. Want to know what forecasts make this narrative so optimistic? The details behind the fair value calculation may surprise you.

Result: Fair Value of $65.64 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent regulatory uncertainty in California or slower progress on carbon capture projects could challenge analyst optimism and trigger a reassessment of CRC’s valuation narrative.

Find out about the key risks to this California Resources narrative.

Build Your Own California Resources Narrative

If you see the story from a different angle or prefer to dive into the numbers yourself, you can build your own view in just a few minutes. Do it your way

A great starting point for your California Resources research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Don't let the next big opportunity slip away. Smart investors use the Simply Wall Street Screener to spot standout stocks before the crowd does.

• Capture the potential of future health breakthroughs by checking out these 32 healthcare AI stocks, which is making waves in medical innovation and technology-driven care.
• Unlock income streams and stability by targeting these 19 dividend stocks with yields > 3%, which offers strong yields and a history of rewarding their shareholders.
• Ride the momentum of next-generation computing with these 26 quantum computing stocks, set to redefine industries through powerful advancements and emerging applications.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com