Good afternoon. Good day, everyone and welcome to the California Resources Corporation Second Quarter Earnings Conference Call. Please note today’s event is also being recorded. At this time, I would like to turn the conference call over to Joanna Park, Vice President of Investor Relations and Treasurer. Ma’am, please go ahead.

Thanks and welcome to California Resources Corporation second quarter 2022 conference call. Participating on today’s call are Mac McFarland, President and Chief Executive Officer; Francisco Leon, Executive Vice President and Chief Financial Officer as well as the entire CRC executive team. I’d like to highlight that we have provided slides on our Investor Relations section of our website, www.crc.com. These slides provide additional information into our operations and our second quarter results. And we have also provided information reconciling non-GAAP financial measures discussed to the most directly comparable GAAP financial measures on our website as well as in our earnings release. Today, we will make some forward-looking statements based on current expectations. Actual results could differ due to the factors described in our earnings release and in our periodic SEC filings. With that, I will now turn the call over to Mac.

Great. Thank you, Joanna. We continue to deliver safe, reliable operations and strong free cash flow generation, while also demonstrating our commitment to prioritizing shareholder returns. For the second quarter in a row, we returned more than 100% of our free cash flow generated in the quarter through our share repurchase program. In fact, our 2022 year-to-date share repurchase program has already exceeded the 2021 program. Operationally, our results and our revised outlook reflects solid execution amidst today’s volatile environment. We are reaffirming our full year total production outlook and raising our EBITDAX and free cash flow guidance. And this is after adjusting for inflationary pressures to our costs and changes to our full year drilling programs related to the Current County EIR litigation delay. Francisco will describe both these issues in greater detail later on the call. Where others have been forced to pause their programs, CRC continues to leverage our large portfolio of assets, which allows us to continue drilling. In fact, we are running 5 drilling and completion rigs in California, which is the majority of the active rigs in the state. Even with the earlier-than-anticipated impacts of inflation and additional capital to support these changes, I just described, CRC is raising the midpoint of our full year guidance by 2% on EBITDAX and by 10% on free cash flow. Post quarter end, we advanced our carbon management business by entering into a carbon management partnership with Brookfield to develop industry-leading CCS projects in California. The partnership will be owned 51% by Carbon TerraVault, our wholly owned subsidiary and 49% by Brookfield to pursue capture transport and storage projects. And then starting out with the initial commitment of $500 million from Brookfield for CCS projects that are jointly approved through the JV, Brookfield will contribute $10 per ton for their 49% share of the storage assets as they are developed. The first project being developed will be our 26 reservoir at the Brookfield. The JV is targeting the injection of 5 million metric tons per year or 200 million metric tons of permanent storage and achieving these targets would require an estimated $2.5 billion of total capital. Assuming full participation by Brookfield and the 5 million metric tons per annum through the JV suggests a potential follow-on investment of more than $1 billion from Brookfield, which to be clear, would be incremental to the original $500 million. We are excited about our partnership with Brookfield and how this partnership can advance decarbonization and the energy transition in California. I will now turn it over to Francisco to discuss our quarterly results before I provide greater detail on the Brookfield partnership later on the call. Francisco?

Thank you, Mac. For the second quarter, we delivered adjusted net income of $1.13 per fully diluted share, which is in line with the prior quarter and generated $83 million of free cash flow. We returned $109 million to our shareholders in the form of dividends and repurchases of common stock under our share repurchase program during the second quarter. Our assets continue to perform well with total production averaging 91,000 BOE per day, up 3,000 barrels from the 88,000 BOE per day in the first quarter. As a reminder, in the first quarter, we completed the planned CGP1 maintenance and sold our remaining 50% interest in the Lost Hills field. Our second quarter production was positively impacted by 5,000 BOEs per day from returning of our CGP1 plant to production, which increased both our NGL and natural gas volumes. Additionally, our quarterly production was negatively impacted by approximately 800 BOE per day from asset divestitures and 1,000 barrels per day from PSC FX, which was all oil. Changes in our development plan and well mix in response to their current county environmental impact report litigation also modestly reduced our oil production volumes and increased our NGL and natural gas volumes. Our original drilling program anticipated a resolution to the EIR litigation in the first half of 2022. Another hearing is expected in the third quarter of this year, and we’re hopeful that a resolution could occur by the end of the year. The current county EIR litigation represents an operational challenge for many operators in California. However, we continue to receive permits and have a strong inventory of drilling permits for our fibric program for the remainder of the year. From a price perspective, CRC benefited from healthy realized prices across all 3 hydrocarbons. Our average realized price for…

Great. Thank you, Francisco. So, a few more details on our partnership with Brookfield. CRC has leveraged our asset base in first-mover position to secure a strategic investment from one of the largest global transitions funds in the world and advance our carbon management strategy. With $725 billion in assets under management and over $200 billion of that allocated towards energy transition and infrastructure projects globally, Brookfield is one of the leading alternative asset managers. More recently, Brookfield Renewable raised $15 billion through the Brookfield Global Transition Fund, or BGTF, the largest global transition fund raised to date, and it is BGTF that we are partnering with in this JV. Combining our carbon management business with Brookfield’s infrastructure and energy transition experience strengthens our CCS competitive position. Brookfield’s initial commitment will be directed towards CCS projects through two JV entities, Carbon TerraVault JV Storage Co or the storage go and carbon TerraVault JV Infrastructure Company, or InfraCo, are the two entities. Storage Co will build, install and operate storage facilities. As previously mentioned, Brookfield has acquired a 49% interest in Storage Co for the first reservoir, which is 26 at our Elk Hills facility at an implied value of $10 per metric ton of permitted capacity. As we continue to contribute assets towards the JV, it will be done so on the same terms and the same milestones of the $10 per ton. Brookfield’s total investment for 26R is $137 million payable in three installments. The first installment $46 million was made at closing of the JV with the second installment due once CTV received the initial permit from the EPA, followed by the third installment at a final investment decision or FID, effectively when we have a project committed for storage. The other JV, InfraCo will build, install, operate…

Our first question today comes from Scott Hanold from RBC Capital Markets. Please go ahead with your question.

Thanks all. Congrats on the JV with Brookfield. Certainly good to see a very strong and reputable partner underpinning the upside optionality you all see. Can you just give us a sense – just make sure I’m thinking about this right. With their commitment and their carry of $10 per ton, Am I wrong in kind of thinking that sort of sets a relative, we will call it, floor on what this thing is worth the carbon management business. Because when I do back the envelope math at the implied 1 billion ton kind of floor, that implies, I think, $15 to $20 of potential value to CRC, and that’s obviously just a starting point. So am I thinking about that right in terms of what they are underpinning as a minimum, if not a lot more, given that they are going to require a good rate of return?

So. Good morning, Scott, good to hear from you. Look, what I would say about the JV is that it was, say, negotiated – I don’t know whether to describe it as a floor or however you put it. But what I would say is Brookfield is contributing $10 into the JV for each ton of pore space, and that’s the initial commitment. And then we’re going to build projects on top of that, which will require incremental – excuse me, capital, which will have incremental returns on top of that. So I think that the way that I would say it is that $10 per ton for pore space is effectively the buy-in, if you will, to just the pure pore space.

Yes. Scott, Francisco. So it’s a recognition that the pore space has value, right? So it’s an important value metric on an asset class where very few transactions have been done in the space. So it establishes that value, right? We’ve been talking about how CRC and Carbon TerraVault are really well positioned in the state to enable the CCS management business. And this is the first step to recognizing that pore space has value. On top of that, you build the projects and you can incremental returns. So we’re pretty excited about putting this market out there.

Yes. And I think that’s kind of the point I was trying to get to. If they are willing to invest, I guess, they are basically saying pore space at a minimum is worth $10, right? And obviously, they want to build a return office as well. So when you apply that to your, whether it’s 200 million tons or 1 billion tons of potential time sort of like an implied 51% ownership, that’s a pretty substantial value net to CRC, like when you step back and look at it. And that’s – and that’s kind of what I’m trying to get to. Is that sort of thinking about it right, $10 per ton is sort of how they are thinking about like they are buying for the pore space. So at a minimum, that’s what it’s worth.

Got it. Okay. No, that’s helpful. And my follow-up question is, again, on the JV, but obviously, the 26R was the initial reservoir that’s been put into the JV. And can you tell us about the process of like how do you think – what is the process of getting other reservoirs into the JV? Because it seems like there is an advantage to you to getting that into the JV and they get compensated for that to stay in front of the funding – the capital calls, I guess, for the projects, right? So what is the process by which other ones will get put into the JV? What needs to happen?

Yes. So Scott, one of the things that we wanted to do when we form this JV is to make it highly actionable. And that’s why we started with 26R. It’s been filed. It’s a permit that’s been filed for over a year processing through – and so that’s why we contributed 26R into the JV, 26R into the JV, and that’s why we’ve received the initial funding, we’re doing it in three installments. As we go forward, the objective is – so that’s basically 30 million tons of storage. Our objective through this JV is to commit capital both from us as well as from Brookfield to develop 200 million tons of pore space to get to an annual injection rate of 5 million tons. So this is laid out on Page 16 in our deck. But basically, that means $2.5 billion of capital, as I mentioned in my remarks. So our intent is to deploy the capital, perfect 200 million tons of pore space and achieve 5 million tons of injection by 2027, which aligns with our previously stated goals. We’re now doing it with a partner that we really value in Brookfield on a 51-49 or basically 50-50 JV.

Right, right. And then mechanically, what gets the additional 170 million tons of reservoirs into the JV? Is it the process of permitting it and perfecting it to be ready to move to the JV at some point?

That’s exactly right. 26R is a year under file and has gone through comments, and we’ve responded to comments with the EPA. We have filed other permits, right? Last quarter, we announced the other 80 million tons that we filed, which is CTV2 and CTV3. And as those get perfected, they get shown to the JV, they get dropped into the JV and then we started assigning them projects once we do once we get to an investment with emitters that we’ve been talking to and come to an FID, we can eventually drop those in. So we will drop them either in at permitting stage, along the permitting process or when we have a – when we go to FID within an infrastructure investment through InfraCo, which is the capture part.

Yes. When it gets trapped in into that’s what traders new premium for the pore space.

Yes. Now I got it. Thanks so much.

Our next question comes from Kalei Akamine from Bank of America. Please go ahead with your question.

Hi. Good morning, guys. Thanks for taking my questions. I’ve got a couple. First one is just on the conventional business. Hoping that you can help reconcile the oil guidance that 53 to 58. With the comment in the press release had said oil production will be above the first quarter by year-end. Just given the performance that we’ve seen from your oil production year-to-date, it looks like the midpoint should be an easy bar to hurdle. So wondering why the low end is where it’s at.

Yes. Ultimately, we – there is – I mean, as we talked about, it’s a combination of the production concern contract that we have in well mix – in the changes in the well mix. So with the EIR litigation with having to change the plan and the wells that we’re drilling. And so where we can keep the rigs four the five rigs that the inventory is there, there is a change in mix. And it just adds variability into the program. So I think the guidance, Kalei, hat we have on there is just a result of that expected recognition, there is some variability as we wait for results in the EIR. And at the end of the day, we have high confidence in delivering the projects. They are very good return projects, but they tend to be gas – have more gas and NGLs in the mix. So that’s where I think the spread in the range is a recognition of the variability of what’s going to happen in the second half of the year. We also...

Yes, sure. So we also try to build the variability associated with the production sharing contract, which is a bit of an arcane thing, but the production sharing contract if prices went back to where they were during the second quarter, which they are not doing right now if you were to screen. But if prices were – we settled at almost $112 during the second quarter. That drove a lot of PSC barrels. So in other words, a reduction from gross to net barrels as we gave barrels back for – under the production sharing contract. So we try to build some of that variability. If prices were to come in high, we would probably end up towards the low end of our oil range if prices come in lower than what we’re forecasting for the balance of the year, our net production would come in higher. So there is that variability that builds itself into the range as well.

I guess the follow-up is, it appears that oil price has stabilized, at least on the script through the back end of the year. So we’re not too worried about the PSC effects. So I’m hoping that you can help me understand the other moving piece, which is the EIR. What is the pathway to resolution there?

So well, let me just first address the wellness. So what we’ve had to do was this current county EIR, I’m going to turn it over to Mike Preston, General Counsel in just a second to talk about the process there. But we were anticipating earlier in the year because it’s being litigated that it would be settled earlier. Right now, it’s still in litigation and doesn’t look like it’s going to – we don’t anticipate resolution of that until the end of the year. So what we had to do in the second quarter and going into current day was adjust our drilling program to use the permits that we have, which is a good thing because we have a lot of permits that we can go drill and that’s why we’re keeping 5 rigs active. But we had to adjust. And by doing so, what the outcome of that was that we ended up with more gas in our mix and therefore, lower oil. So that’s the impact of it. But Mike, do you want to talk about the resolution?

Sure. I think I would expect – in May, the court basically identified a small number of what we’re deemed deficiencies in the EIR process. And so those deficiencies are being addressed essentially by Kern County, and they are working on essentially fixes to those. Those fixes will need to be taken back to the court. They are being briefed by the parties over the next few weeks. And then the court will have to make a judgment on those fixes, so to speak. So we expect that process to take several weeks and probably into early in the fourth quarter before we get some clarity.

That’s great. I appreciate that. My second question is on the CCS JV. So understand that Brookfield is spending up $500 million, and that buys pore space for a reservoir 26R, but all the capital was staying with the JV. So I’m trying to understand what the $500 million will buy in terms of stores, transportation and capture and then what the cadence of that spend will be?

Well – so great question. The $500 million will either buy pore space or will actually invest and capture equipment or any other capital needs within the JV. So again, I go back to that our intent is to develop 5 million tons of injection by 2027. If we do that, it’s going to require $2.5 billion, which is going to be in excess of the initial commitment of $500 million, but it will be on a project-by-project specific basis that we will make the capital commitments and the investments, us as well as Brookfield. The difference that I was trying to establish earlier was that because of the $10 per ton that we are getting for their contribution and for the 49%, that will alleviate our capital cost for future projects because we can recycle that capital for those capital calls.

And one thing to add, Kalei, so we talked about in the past as we’re developing this new business. We have the option to just give the offtakers since we have this cash resource in the storage tanks. But we’ve also talked about how this business could very much be a full-service business. And I think the Brookfield partnership brings that second piece to reality because by having Brookfield or partnering by having this funding mechanism and then defining the JV fast storage or an InfraCo, I think what the takeaway should be is that the capital, the intent is to deploy capital all the way through the value chain. So that’s capture, midstream and storage, and that’s where the JV is going to be focusing in providing a service to California meters all the way from the emitter to the storage tanks. So the deployment of the capital is in addition to do, as Mac said, you buy the pore space and then depot capital so that we can put the infrastructure in place to be able to have 100% of that value stream.

Thanks for that, guys. The last question is just on the economics. So first off, congrats on getting some clarity on the funding, but I’m trying to understand how the revenue on a metric ton basis, how that translates to free cash flow net to CRC? Any guidance you can give us there would be extremely helpful. And I’ll leave it there.

Yes. Kalei, way to think about it is it’s a 51% JV carbon there about 49% Brookfield. So the revenue line gets split along working interest levels. Then if you’re building a model, then you add the $10 per ton from Brookfield side to our side of the year and then you run the rest of the model to working interest levels. So the expectation is the fund income on a working interest basis and then the revenue and the cash gets split equally, again, putting the $10 per ton as a contribution from Brookfield to CTV. So what that practically does, right, if you have the funding mechanism on the CTV side and you’re able to use and recycle that capital contribution, that’s what’s going to ultimately be a big share of our capital cost. Now we fully expect these projects to be – to have still to the project financing, still very much early and we need to define what the loan to values are going to be and how this is going to play out. But at the end of the day, if you assume 50% of the capital is project finance and then you have another 50% equally split roughly equally still between the partners on an equity cost and where we say getting this year of our capital, ultimately, we’re recycling the funds from Brookfield. So that’s where you get and that’s what we’re saying, it’s capital funding mechanism to the JV that gives us full exposure to our share of the cash flows without having to put capital calls from the CRC period.

I appreciate that the project financing piece isn’t yet figured out. But maybe on a plain vanilla basis, just on your equity exposure, can you help us understand how perhaps $100 per metric ton of revenue credits will translate to free cash flow.

Yes. So it’s 51% to us, 29% to Brookfield. And then you take expenses associated with the project capital and you get to your cash flow. So it’s pretty much a 50-50 JV other than the initial contribution for the pore space.

So one thing that I’d point you back to is if you go to Carbon Day last October, where we laid out our economic type curve, we’ve said somewhere between and there is assumptions laid out on that page, but we said the range of EBITDA would be $50 million to $100 million per ton of injected CO2, okay? And that still holds true regardless of our joint venture. That’s at the project level that would still hold true then there is the split as Francisco was just describing on how they get the cash flows up but to describe it a bit further, if you had just more of a storage-only type project, which means you’re not trying to recover a whole bunch of capital investment because that’s typically associated with the capture system, you’d be towards the $50 a ton of EBITDA. If you needed capital recovery, you’d be closer to the $100 a ton of EBITDA, but that’s because you’re basically recouping the initial capital investment. The cash flows, obviously, you would have less cash out at the $50 in EBITDA early on. And so it would fall more closely straight to the bottom line, without taking into consideration taxes. The $100 million would do the same, but you have a significant cash outflow upfront. That’s how it would look at the project level. Does that help?

That’s very helpful. The last question and I’m sorry to keep trying at this. But can you just tell me if it’s taxed normally just like any other tax distributions would or if there is any anomalies associated with being a tax credit?

Yes. I mean ultimately, right now, the 45Q is a tax credit. So, yes, the modeling would be LCFS, it’s a revenue line item, and then 45Q would be a tax credit that is able to offset some of the income generated by the partnership. So, there has to be – it’s a, I would say, specific tax modeling that we have to do, but very similar to what happens with solar and other renewable type projects where you are having – you are collecting credits that offset the revenue and the profitability of the enterprise.

Great guys. I will leave it there.

I would just add on to Francisco as we have stated before and we are a taxpayer this year and the years going forward. And so we actually have an appetite for the tax credit. So, there is a synergy there for us to flow through and to use those tax credits. And a typical, as Francisco was saying, renewable energy development, you would have to bring in tax equity to the projects, we can actually flow through at a consolidated basis and use our tax credits.

Great. Thanks guys.

Our next question comes from Eric Seeve from GoldenTree. Please go ahead with your question.

Hey guys. Thanks for the call and congratulations on the deal, it looks very exciting. I was just hoping you could give a little bit more color on outside of this deal, what is going on with the CMB business? And specifically, are you still progressing on deals with emitters, or do you have to sort of pause given that now you have a partner and reassess? And also, if you could give an update on how far along you are in terms of submitting with the 200 million tons for permitting. And also give us a sense of very exciting about the first 200 million tons, but is there a potential for more projects beyond that as well? And how are you thinking about the scope of this enterprise?

Yes. Good morning Eric. There were about eight questions in there. All good ones. So, we set a goal to file 200 million tons of permits by the end of the year. We filed 80. At the beginning of this year, we announced those at the first quarter earnings call, we had already filed before that 40, so we were at 120. Our goal is to be at 200 by the end of the year. We are still on track to do that. So, that’s an end of year goal. So, we will do that. With respect to the JV, our goal is to get the first 5 million tons, which is injected by 2027, which is 200 million tons of storage. But we hope that this JV is successful to where we can continue on and build on the backs of it even further. So, we are not stopping there, okay. We are not going to stop with 200 million tons of permits by the end of the year. We are going to keep going next year and file more permits because that’s the objective. We think that there is a good business case for doing so. We think it’s economic, and we think that it helps the energy transition to the net zero barrel that we think we can produce by 2045. With respect to the commercial arrangements, they are not stopping because of this JV. I would say that they are actually accelerating because of the JV. We now have additional forms of capital. We have an additional partner who brings not only the investment in the capital, but also origination, structuring, deal development, all of the things that you would want. I think that this is a really good partnership. It’s scalable. I think that we are going to continue to do that. Now, we have been in the background as we have always been working to develop emitter contracts, and we continue to do so. And we have said by the end of this year, we hope, and we plan on our target is to be aligned with the emitter that allows us to inject 1 million tons by the year-end 2025.

That’s great color, Mac. Thank you. And just sort of a follow-on. And what I am getting at is here, it’s kind of a follow on to Scott’s question I am just trying to frame what the potential value could be net to CRC. I mean I guess the quick and dirty math is you could say, okay, 200 million tons to the JV, there is now a marker on that at $10 per ton, that’s $2 billion, but then there is incremental projects that you can bring after the $200 million tons that you are looking at – the 200 million tons that you are looking at now. I am just trying to get some rough sense of – could you remind us how do you think about what the potential beyond $200 million is there in the portfolio? And I appreciate that it’s early days and you are still bring it out, but just trying to get a rough sense of the range of what could be possible.

Yes. So, the $10 a ton is a contribution by Brookfield to acquire 49% of the pore space with the objective of developing 200 million tons of storage, which allows 5 million tons per annum of injection. What I would say is Brookfield and us are very aligned on investing the capital for the capture equipment and the storage, which we have estimated if we got to our 5 million ton target would be $2.5 billion, excluding financing, etcetera, split across the investors, and we are very aligned with Brookfield. Their fund has returned targets, IRR targets and those targets align very well with what we see, we think we can develop at a project level. So, that’s incremental cash flow. I think Francisco has described it during Carbon Day that when we were the 100% owner of this target, we would generate close to $400 million roughly of EBITDA by 2027 at the midpoint of our economic type curve shown then. Now, we are going to roughly half of that because of the sell-down in the position to 200 million tons, but we are also picking up $10 a ton for the pore space.

Yes. That’s right. So, the initial assumption was $2.5 billion – $2 billion to $2.5 billion of capital would ultimately result in about $400 million of annualized EBITDA. So, now the math is for net to CTV is, you lowered the capital call by half, so 1.2 billion results in $200 million of EBITDA share to us. The difference too is that the 1.2 billion now is as Brookfield acquires more pore space that gets funded through that mechanism. So, it’s a very – we are trying to optimize capital and ultimately improve returns, and we think we have done that with this deal.

Sorry. What I am trying to get at, guys, is beyond the 5 million tons that this JV contemplates, how much more do you think your asset base might support, how much more projects might be out there beyond this 5 million tons?

So, that goes back to the original target where we said we have identified up to 1 billion tons of potential storage across our portfolio. We are trying to set interim goals, but our long-term goal is a net zero by 2045, which means that by that time, we would have to be injecting about 20 million tons per year. And if you just do the conversion math, that gets you to roughly 1 billion tons of storage. So, we are still on path to doing it. We are just stating the interim goals right now that are within the next 5 years. So Eric, I would say there is – this is focused on the first 200 million tons of storage. We are also focused on the long-term goal of 1 billion tons of storage.

Awesome. Very exciting. Thanks for the call guys.

Thanks Eric.

Our next question is a follow-up from Scott Hanold from RBC Capital Markets. Please go ahead with your follow-up.

So, one, again on the JV and then more of a financial side kind of question, but the first one is when you obviously partnered up with Brookfield, can you talk – do they bring any kind of skill set to the joint venture in terms of whether it’s a camp or transportation, are they going to also bring some skills to the project, or should we think about this pretty much you all have a lot of that already kind of handled?

Hey Scott. So yes, we really like what Brookfield brings to the table. So, beyond the financing, which has been the focus of the discussion, they are very advanced in their views around carbon capture and sequestration. We have invested in to capture systems and they need a large investment into a company called Entra , Canadian company that’s a post-combustion capture system. And so they have a really good sense of not only the technology that’s going to work, but also on the cost side of the question as to what the systems can be built towards and ultimately, how you can scale that business. That also means if they looked at emitters and they have looked at ways to capturing those emissions, not only in Canada, but in the U.S. And so when we started talking to them, the match was pretty obvious given all the time and effort they invested into CCS. And as they look across the U.S., you know they see that California, it’s a differentiated opportunity given LCFS as a place-to-place money. And then that CRC had the older components to really make this partnership work. So – and Mac talked about it, there is a structuring. They are the largest – one of the largest renewable investors in the world, right. So, there is structuring, versus origination. There is a number of – there is insurance product. There is a number of things that they can bring to the combination here of the partnership at the CTV level that we are very excited about. But to us, they were head and shoulders among others in terms of their understanding of the CCS markets and playing the technology aspect of it.

Scott, just to add on, everything Francisco said is exactly why we formed this JV or this partnership. But to be very clear, it is our skill sets, it is our assets and the subsurface knowledge of the pore space that is the focus area of this joint venture because we are building from there out. And that’s why they are contributing $10 a ton to the buy in to their 49%.

Yes. Got it. Absolutely. That makes sense. And then my follow-up is, obviously, with this partnership, as you said, you are going to have a lot of the funding needs taking care of initially. And I think going back to last year when you kind of laid us a lot, you talked about, I think about 50% of your free cash flow being allocated to your shareholder returns at 50% potentially to carbon management. When you think about like now that other half of the pool is kind of freed up, like what are your thoughts on like how you allocate that – the residual free cash flow being generated by the upstream business now that you don’t need to fund the carbon capture business. What can we expect with that?

Yes. Thanks Scott. So, exactly, we previously said after we reinvest in the business to keep production effectively flat, then we would split the free cash flow thereafter, after tax free cash flow thereafter, 50-50 between shareholder initiatives and carbon management. Now obviously, with this joint venture and with the $10 a ton, we don’t have the same capital needs on our capital cost on those cash flows. And so it gives us greater flexibility. I think is the point you were actually making your question, it gives us greater flexibility with that cash. We show that on Page 29 in the deck, where over the next 5 years, we are forecasting over $2.5 billion of cumulative after-tax free cash flow. And we can use that now, assuming that there is not a strong call on it for carbon management because of the sort of self-funding mechanism given the $10 a ton for other aspects, most – so Francis, do you want to talk about the uses there?

Yes. Absolutely.

Yes, this is the conference operator. The speaker line is still connected.

Yes, we basically are. Hey Scott. So, just to further to what Mac was saying, we – the case presented on Slide 29 has us investing in our core business to maintain our BOE production at first instance. And then after you invest in the core business, we generate in the scenario over $2.5 billion, $2.7 billion to the after-tax free cash flow. So, that’s what we see as the cumulative cash flow generated over the next 5 years on the core business. And then that allows us to think about ways to deploy that in different avenues. Certainly, we have had a very successful share repurchase program where we bought back over 10% of the shares of the company since we started the program. We can also think about growing the fixed dividend. We look at acquisitions. We can look at more investment into our core operations, perhaps around enhanced oil recovery. So, by doing this transaction and with the significant cash flow generation potential of our assets, we move into either shareholder initiatives or more investment into oil and gas as a result of being able to retain the cash and having the funding mechanism separately on the workflow.

Thanks for that.

And our next question comes from Karl Blunden from Goldman Sachs. Please go ahead with your question.

Hi. Thanks very much for the time. Just one with regard to the options around cash flow deployment, would you be able to comment on your current restricted payment capacity under the bond indenture?

Sure. So, we – so as you know, we looked first at the RBL, and we got a – we negotiated to have unlimited RP capacity subject to leverage as we described in the last earnings call. In terms of the high-yield indenture, we wanted to do – we wanted to take a similar approach. We launched a process to engage with bond holders to making a similar request for improved terms that, from our perspective, would bring our high-yield indenture to current market terms, given that we replaced our bonds in January of 2021. At the end of the day, there has been a lot of volatility in the market with the Fed doing a lot of twists and turns along the way. And we decided to pull back on that ask and bet something that we will continue thinking about. At the end of the day, though, we have specific baskets within the agreement, we have another to deploy cash as we roll off some of the lower pricing quarters into last year and start with the – it’s a cumulative net income test over the last 12 months. So, we were adding capacity as we go. And it’s more than sufficient to continue doing share buybacks to do dividends and to do investments into carbon management. Certainly, now with the Brookfield deal, it takes one of those investments. It really reduces the capital column to CRC. So, we will reassess where we want to be with the high yield indenture going forward. But certainly, after this Brookfield announcement, we are thinking differently about how to invest in the carbon management business. So, some more to come on that.

And ladies and gentlemen, with that, we will end today’s question-and-answer session as well as today’s conference call. We do thank you for attending. You may now disconnect your lines.