Production Methods

California Resources Corporation has a proven track record of successful exploration and development using primary, waterflood and steamflood recovery methods.

Production of oil and natural gas requires energy to lift the fluids from the reservoir deep underground to the surface. The reservoir's natural pressure provides much of this energy but is eventually supplemented by artificial lift equipment. As oil and gas is produced, the reservoir’s natural pressure is reduced. The reservoir’s pressure can be restored by injecting water or gas to mobilize and displace additional oil and gas into production wells. Even after applying these improved oil recovery (IOR) techniques, a large quantity of oil and gas may remain in the reservoir. Enhanced oil recovery (EOR) techniques such as injection of steam or carbon dioxide can allow more of the oil in the reservoir to flow into production wells. By producing oil and natural gas with IOR and EOR techniques, we extend the lives of mature fields and maximize the efficient use of existing infrastructure and land surface.

We determine the development method to use based on reservoir characteristics, reserves potential and expected returns. We seek to optimize our assets by progressively implementing primary recovery methods, which may include well stimulation and artificial lift techniques, IOR methods such as waterflooding and EOR methods like steamflooding, using both vertical and horizontal drilling. All of these techniques are proven technologies we have used extensively in California for many decades.

Primary Recovery

Primary recovery is a reservoir drive mechanism that utilizes the natural energy of the reservoir and is the first technique we use to develop a reservoir. Primary recovery is achieved by drilling and producing wells without supplementing the natural energy of the reservoir. Our successful exploration program, our leading collection of seismic imaging data and our geologic modeling continue to provide us with primary recovery opportunities. Our conventional development programs create future opportunities to convert these reservoirs to waterfloods or steamfloods after their primary production phase.

Waterfloods

Some of our fields no longer have sufficient energy in the reservoir to drive oil to our producing wellbores. Waterflooding is a well understood process that has been used in California for over 50 years to re-introduce energy to the reservoir through water injection and to sweep oil to producing wellbores. This process has been known to increase recovery factors from approximately double those experienced under primary recovery methods. Our waterflood operations have attractive margins and returns in the current price environment. These operations typically have low and predictable production decline rates and allow us to extend the productive life of a reservoir and significantly increase our incremental recovery after primary recovery. We use waterfloods extensively in the San Joaquin, Los Angeles and Ventura basins.

Steamfloods

Some of our fields contain heavy, thick oil. Steamfloods heat the oil, decreasing its viscosity, or thinning the oil, allowing it to flow more easily to the producing wellbores. Steamflooding is a well understood process that has been used in California since the early 1960s. This process has been known to increase recovery factors by 7. Steamfloods are most effective in shallow reservoirs containing heavy, viscous oil. The steamflood process is generally characterized by low capital investment with attractive margins and returns even in a low price environment as long as the oil-to-gas price ratio is in excess of five. The economics of steamflooding are largely a function of the ratio between oil and natural gas prices. After drilling, these operations typically ramp up production over one to two years as the steam continues to influence the oil production, and then exhibit a plateau for several months, with a subsequent low, predictable oil production decline rate of 5 to 10 percent per year. This gradual decline allows us to extend the productive life of a reservoir and significantly increase our ultimate recovery. We use steamfloods extensively in the San Joaquin Basin, where they have allowed us to grow our production from mature fields such as Kern Front and Lost Hills.