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Clio Crespy

Thank you, Francisco. Good morning, everyone, and thank you for joining us. This quarter our results exceeded the street's expectations. We delivered flat net production quarter over quarter at 141,000 BOE per day and realized prices that were 98% of Brent.
Adjusted EBITDA with $328 million. Net cash flow before changes in working capital was $252 million, and free cash flow totaled $131 million of which came in above consensus. This performance was primarily driven by our continued cost discipline. In Q1, our combined operating and G&A costs were $388 million, approximately 5% better than what we had guided.
Looking ahead, we expect to reduce our operating costs in the first half of 2025 by nearly 10% compared to the second half of 2024. We remain focused on delivering value to shareholders. This quarter, we repurchased a record $100 million in shares, nearly double our historical average, and paid EUR35 million in dividends. Altogether that's $135 million returned, or about 103% of our Q1 free cash flow.
With a strong start to the year and despite nearly a 16% decline in oil prices, we are reaffirming our full year adjusted EBITDA guidance of $1.1 billion to $1.2 billion driven mostly by our low decline assets focused on cost reduction and hedge book. We continue to target average annual production of 136,000 BOE per day with DNC capital investment between $165 million and $180 million.
Now I want to take a moment to talk about our financial resilience and highlight three core strengths. First, balance sheet strength. We have a strong financial foundation. Our leverage is below 1 time. We have more than $1 billion in liquidity and nearly $200 million in available cash. Earlier this year, we redeemed $123 million of our outstanding 2026 notes at par, and we expect to address the remainder later this year.
This balance sheet strength gives us the flexibility to reduce debt, return capital and invest in disciplined opportunities. We also have access to third party capital from Brookfield to support the growth of our carbon management business.
Second, our cost reduction progress. As Francisco mentioned, we realized $173 million in annual run rate error related synergies based on our Q1 results. We expect those to be sustainable and enhance our future margins.
Third, executing on our strategy. Our integrated approach is gaining traction. We're capturing value through resource adequacy payments for standby power capacity, natural gas marketing, commodity derivatives, and emerging opportunities in carbon management.
We're executing on our broader vision. Our gas to power and carbon capture strategies are not only actionable, but they're also scalable and position us to deliver long term value while reducing risk. We are pleased with how we started 2025 and confident in our ability to execute for the rest of the year. We're executing today and building for tomorrow.
Thank you, back to you, Francisco.

Francisco Leon

Thank you, Clio. Before we move to Q&A, let me quickly summarize today's call and offer a few things to watch for as the year unfolds.
Through our carbon management business, we continue to build scale and expect new vaults and projects to be announced later this year. Industrial partners are turning to us for solutions to energy challenges and desire for clean, reliable power. We have a leading CO2 storage reservoir business in various stages of permitting with multiple CCS projects under consideration.
We're also excited to launch California's first CCS project at the Elk Kills cryogenic gas plant, with construction breaking ground in the 2nd quarter, and with 1 injection expected later this year.
In our power business, we're pursuing multiple new opportunities with AI data center companies and other large off-takers interested in our available power capacity. A firm supply of gas, speed to market, access to land, proximity to CCS, and scalable infrastructure are key attributes in our portfolio.
The proximity of our assets to large industrial centers in the world's 4 largest economy creates multiple advantages as we progress these discussions. Stay tuned for more later this year.
CRC is executing and we sit in an advantaged position. With a strong balance sheet, quality assets, a low and declining cost structure, and well-priced hedges, our margins are well insulated from near and medium-term reductions in commodity prices. We certainly recognize the challenges presented in today's markets, but CRC has a plan.
In closing, let me reiterate my opening comment. CRC is well positioned. Our durable assets and integrated business strategy are yielding strong results today.
Operator, we're now ready for questions.

Question and Answer Session

Operator

(Operator Instructions) The first question comes from Scott Hanold. With RBC Capital Markets. Please go ahead.

Scott Hanold

Thanks all nice quarter. I was, wondering if you all could walk through how you're able to achieve the similar EBITDA using a much lower rent assumption. I mean, obviously you pointed to some things like, lower costs being one thing, but is that, is there things incrementally happening from the prior outlook that has been a tailwind, and can you give us some specifics on, what really is driving some of those OpEx costs down?

Francisco Leon

Hey Scott, thanks for the question. Yeah, definitely we're seeing a lot of tailwinds, related to our synergy targets. We've, the team is just, what we like to talk about is how the story is good, but the execution is better. The team has just been, performing every expectation in terms of, getting the air assets integrated into CRC.
So think about it at 3 stages. The first stage was around refinancing and the people aspect of a merger. The second one was around leaning in on our supply chain advantage and renegotiating good contracts to have a long term runway. What we're doing right now is we're consolidating infrastructure, and that's where we're seeing. Tailwinds were moving cost savings earlier, and that in combination with our very strong hedge book is what positions the company to be able to not only reaffirm guidance but continue to invest in this business. So excited with the progress and the results from the merger and what we expect to continue getting every dollar from our target in the synergy pocket.

Operator

The next question comes from Josh Silverstein with RBC Capital Markets. Please go ahead.

Josh Silverstein

Yeah thanks. Good morning. Yeah, just I have a question on the break even that you guys were highlighting. Obviously they're very low and so you just mentioned the hedge book. Can you give us a sense as to what it may look like on an on hedge basis? Is it closer to those, other kind of work over and sidetrack costs that you guys were alluding to earlier in that slide as well?

Francisco Leon

Hey Josh, yeah, so let me spend a couple of minutes talking through why how we got here. We have been 4 years working to position the company for to be able to manage the ups and downs in the cycle. We volatility is a given commodity prices in a commodity industry, so we have to be able to build a resilient business and deliver sustainable capital return to shareholders.
So when we look at our future, it's really underpinned by the quality of the assets. So we have very low decline predictable assets, but the steps that we've taken are steps that we take to get ready for situations with increased volatility like we have right now. So we've done M&A with ERA. We put the hedges in place. We maintain an absolute pristine balance sheet, and we're taking a proactive view on cutting costs. The result of that is, as you pointed out, our corporate break even is around $34 rent or about $30 per WTI. So that's how we run the business and we took all these actions to get ready for this moment.
So when we look at a go forward basis, that's what you should expect. It's a, it's not a reactive nature or getting caught by surprise by any macro. It's about being ready so we can deliver that certainty to the investors and so we can continue to return cash to shareholders predictably.

Josh Silverstein

And a follow-up question for me, I think I asked this a couple of quarters ago, but, we've seen, another refinery shut down in in California. Is there a growing concern about who you guys be able to sell to or the premium that you guys receive? Thanks.

Francisco Leon

Yeah, so no concern on the refinery shutdowns. We're able to place our crude with the existing refineries. And as a reminder, what we have is the refineries here were built for California crude. It's the Wright Nelson complexity. It has our production has low sulfur. So why the answer to why do we have really high realizations very on par with Brent is because of that preferential market to our crude.
California's in a tough spot. I mean, we're the largest 4th largest economy in the world, big consumer of gasoline, I think we're second to Texas. We're the largest consumer of jet fuels in the US. And the state is in a difficult situation with reduced refining capacity. But when we talk to the government, when we talked to refineries, is there are solutions. There are there are ways to improve cost structures, and that is to produce more locally. So I think the message has been received and we're seeing progress across all fronts. So it's the refining situation could be improved, but we're going to help solve that by producing more of our barrels. That is really what the refineries need.

Operator

And we have Scott Hanold from RBC Capital Markets. Please go ahead.

Scott Hanold

Yeah, thanks, for my follow up from my earlier start, Francisco, I was wondering if you could give us a sense of what you're seeing and hearing on the political landscape both in California and Washington. I know you stay pretty active and close to that, and you know what kind of progress, is occurring on things like CO2 pipeline regulation, carbon tax credits, oil and gas permitting specifically in the state, what kind of progress are you seeing at this point and is it encouraging? Are you seeing some, movement by some of the politicians to, be more open to, I guess, oil companies in the state?

Francisco Leon

Yes, Scott, I really appreciate that question. Definitely we're seeing it's very encouraging how this is playing out. We, we're really trying to solve for two things. One is to cut emissions, which aligns very well with California's objectives, but also to produce.
California has a natural advantage by having some of the best oil and gas reserves, remaining reserves in the US, so we can achieve both cutting emissions and improving affordability of energy and also delivered to energy security. So as we talk through messaging in Sacramento and Washington DC, we feel there's a lot of alignment in our projects are really the bridge between the two ideologies. There is a win-win and part of it is what we're delivering. So we do see progress on CO2 pipelines. You mentioned we do see progress on cap and trade. We see progress on oil and gas permitting. I would say across the board we're seeing indications of much more constructive engagement. Progress, tangible progress to be able to put capital to work whether it's in the new energy space or in the legacy industry. So we have a very, I would say a very positive outlook in terms of engagement on both Sacramento and Washington DC.

Operator

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

Kalei Akamine

Hey, good morning guys. For my first question, I'm looking at slide number 16 here which covers Huntington Beach. It looks like you've got visibility on the necessary permit for land use at the city level. Wondering if that opens up an opportunity to start marketing the real estate to potential buyers, and if you could give us an update on the remit timeline, that would be great.

Francisco Leon

Yeah, Kale, so absolutely. So we, as you mentioned, we submitted the proposal with the hunt with the city of Huntington Beach. We're going through community reviews.
But to be very clear in terms of marketing, the assets for sale, we would sell it for the right price right now. There's nothing holding us back other than making sure we get the best value, and we think we get the best value by abandoning the field, which we control our own pace, but it's really to get the land re-entitled for the best and optimal use, which for this property we've done a lot of work.
On preliminary development and it's a it's going to be a mixed use community that has 800 homes, 350 plus hotel rooms, so it's going to be a very nice development. This California and LA in particular needs a lot of housing. So this will be a great project and so we're launching those plans. We have had a continuous rig abandonment program since 2023, so we're making progress on that front.
And really it's about when can we get the right value to monetize in some form the property. So that's on the way. If you look at the kind of the local media, there's a lot of press and coverage on this asset. So we expect it to be roughly about a 3 year timeline to get all the approvals, and you have to go through [seco] environmental impact reviews. I'm not sure yet if that can be fast tracked, but we're doing our part to get the stress ready to go. And TRY to bring some incremental value for shareholders.

Kalei Akamine

This is not my second question, but just a really quick follow up on this. Can you share any color on how many interested bidders there are?

Francisco Leon

So you're one big question, Kelly. Okay, so we're not we don't have a formal bidding process. We just have announced to interested developers that To come talk to us, and these are big projects if you recall, we sold a small property next to Huntington Beach for about $10 million an acre. So these are big dollars. It takes a developer with a great vision for the future, we see rates coming down, interest rates coming down. That helps the project development, so. Rather than talking about a universe of bidders, think about this as a very unique property that has a lot of interest and we're marching forward to TRY to get the best value for it.

Kalei Akamine

Got it. This is my follow up question. I want to ask on the LKLS PPA, the way that we understand it is that the PPA could create demand for clean energy that you could supply from L kills with carbon capture. Carbon capture is a more expensive project than the cryo that you're breaking ground on this quarter, so wondering if you could offer any latest thoughts on funding.

Francisco Leon

Yeah, the way to think about Cal capture, we see it, the final investment decision very much connected to a PPA, so you have The clean energy incentives, we have 45Q. We have LCFS. We have avoidance of a carbon tax in California, so those are part of the revenue stack that we have. But at the end of the day we're trying to unlock a completely new business model which is baseload 24/7 natural gas fired with carbon capture, and that's kind of the mission to be able to find the right partner, the right PPA for that. So that we're advancing off fronts. Cal capture is doing, we're doing a lot of the engineering, trying to optimize some cost, but we're also looking at the funding behind it, and that comes with a view of, okay, is this power plant going to be a merchant power plant, which is today.
Is he going to participate in the resource adequacy, which also is today, or are we selling that power to a third party and that third party has the values, the clean base load electrons. So we're getting a lot of inbounds, a lot of interest on the power, and we think there's going to be hyper scales are coming back to the table. We're also seeing other off takers coming back to the picture.
Mel turned it to Cleo, so Cleo joined, as everybody knows, at the beginning of the year, and in her prior job she was kind of looking at the other side of PPAs working with technology companies, so maybe she wants to offer a few remarks.

Clio Crespy

Thanks, Francisco and Hi Kelly. Yes, so Kile, as Francisco mentioned prior to joining CRC, I was working on a number of things, but one that was keeping me very busy was brokering and structuring deals between the data center developers, so that's your hyper scalers, that's your co-locators, and power asset owners, and that's where really I recognize the significant potential of CRC's power business and how that fit a clear market need and fit that very well. So one of the most exciting opportunities I saw was related to the Al Hill power plant and was the behind the meter partnership model and opportunity that we have been progressing.
And now I've got a more in-depth view of our operations, of our assets in the market, and so I'm even more confident in the strength of our value proposition to data centers and to large off-takers. Our offering really is not only differentiated, but it's resonating strongly in ongoing discussions, and those are advancing constructively.

Francisco Leon

So just to kind of close out the question, getting the right long term partner, we want a 10 year plus PPA with the right partner that not only recognizes how valuable this opportunity is, they, the hyper scalar one speed to market, we can deliver that. We have capacity today, we have land, so we want the right PPA structure in the right way. But we also are looking to solve for the northern CTV reservoirs where we see a lot of demand, potential natural gas power generation.
Big emitters need a solution and if we can unlock this at L kills, it should ultimately also scale to our northern reservoirs and create a further business opportunity there. So a lot of things to solve for, but we are making progress. We're getting the land ready. We're getting our permits in good shape so that when we finalize the details of a contract with a third party, it'll be something that really can unlock value for us.

Operator

The next question comes from Daniel Deckelbaum with TD Cowen. Please go ahead.

David Deckelbaum

Hey. I was just curious just going back to the synergies, you, you've effectively almost achieved your 25 target. And I want to say that you all had left, call it around $60 million of additional synergies and 26 as perhaps upside. Is there any reason why that should remain in 26 versus being pulled forward, or is it the timing of certain projects that you're looking at or it seems like since you're already ahead of the game here, we might be able to see some of those elements perhaps showing up a bit earlier?

Francisco Leon

Yeah, it's love the question that really speaks to our ability to our team's ability really to deliver the targets ahead of schedule, and we keep doing that. So there's an element of that that as we lay out the incremental targets and the synergies, the team has been able to identify a number of great projects. And those are going to be, they have been activated. They've already put in place and now it's when you realize them when it counts. But I'll turn it to Omar to give a perspective on the second part of the question, which is there is a timing component and there's some really interesting projects we're working on that are going to be ready later in the year and really in full force by the beginning of next year. So Omar, do you want to share some of that.

Omar Hayat

Yeah, thanks Francisco and hi David. Yeah, if you look at the rest of the 2025, David, and how we are thinking about synergies, we are really focused on delivering operational efficiencies tied to infrastructure consolidation. So we have excess capacity in our major fields around gas processing, produced fluid treatment, and in some cases, power. And what we're working on is bringing production from our various fields in the basin.
To these central facilities to fill in the access capacity and it does two things for us. It eliminates the need to maintain and operate multiple facilities once you consolidate them. And it also helps us monetize our produced oil, gas, and natural gas liquids. And I'll give you a couple of more concrete examples around the second point. So we acquired Ventura Avenue fuel as part of the AA acquisition. A fuel that has associated gas but doesn't have the facilities to fractionate natural gas liquids from that gas. So we were actually paying a third party.
To take that production off our hand. What we're doing now is we're bringing that natural gas liquid production to our hills where we have capacity in our cryogenic gas plant and monetizing that production stream.
Similarly, Belridge, which is a major field required as part of the air acquisition, also has associated gas but do not have gas processing, and we have access capacity in our cryogenic gas plants. So we are working on a project to connect that gas to CGP, the cryogenic gas plant, drop liquids, and monetize the revenue around that. So some of these projects.
On that timescale need some initial capital investment and we are progressing them forward. They will all be completed by the end of the 3rd quarter or end of 25, but some of the revenue stream we'll see in the 1st quarter 26 and onwards. So hopefully that will help. So.

Francisco Leon

We're making the investment now. We see the benefit of incremental NGLs in 2026, and so we're going to count the synergies when they come in 206.

David Deckelbaum

I appreciate the color Omar and Francisco and maybe just as a follow up I'll stay in the weeds here for a little bit just you look at the first quarter, obviously hit your numbers and be kept at significantly, maybe $10 million of savings relative to your initial plan or guide. You reiterated full year, so I'm curious if you see that as an element of just mix of activity that was that was. Just a coincident with the first quarter or if there's elements in your capital program that you're also ahead on this year.

Francisco Leon

It is a mix and we see the sufficiencies in the numbers. But we also planned the year where we expected a light capital first quarter increase in the 2nd quarter, and then we're also increasing potentially the activity as the second half of the year comes in with a second break. So there will be a ramp up in activity that ultimately leads to higher DNC capital as the year progresses, but we are seeing efficiencies and savings through the supply chain discussions. Around capital as well, so it's a little of a mix. The story as a whole is very good.

Operator

Thank you guys. The next question comes from Nate Pendleton with Texas Capital. Please go ahead.

Nathaniel Pendleton

Good morning. Congrats on another strong quarter. Taking a step back and looking at the value you can add with ARA and the ability to decarbonize production streams, can you talk about your willingness to pursue bolt-ons in California should assets become available in this market?

Francisco Leon

Yeah, thanks for the question. So we're very focused on executing our business right now, as you saw, I think it was really important for us to get the transformational deal completed with AA as you can see by a lot of our messaging, the key is to have the infrastructure in place, the consolidation to be able to really extract value from any acquisitions. Acquisitions are an important part of our strategy going forward. We do feel that assets in California are going to be better in our hands from every standpoint.
So in terms of bolt ons when we see something that really makes sense and can be creative and I would say significantly creative to Castro per share, this is something that we would consider. But we have strong inventory. We have a lot of uses for capital in our portfolio, so it's a really high bar to think about bolttons, but it is part of the strategy as we finalize and think about. All the achievements we've done with ERA, and then what do we go next.

Nathaniel Pendleton

Got it, thanks. And I wanted to shift over to the CCS space, understanding that your business is primarily focused downstream of the capture for third party volumes. Can you provide any update on recent carbon capture technology advancements and how maybe that's impacting discussions with emitters for CO2 offtake?

Francisco Leon

Yeah, so what we, the approach we've taken from day one is to be agnostic on technologies, understanding there's a lot of capital and a lot of progress being made. But where others focus their time and effort in developing that technology, we're really our advantage comes from our land ownership, our mineral ownership. It's really the poor space is where we see the value in California CCS. So that's where we put our efforts forward now as we unlock the permitting pathway as we bring emitters both within Elk Hills and Belridge and outside. We do have much more of a sense of where the technologies are coming together. We want to see costs come down. We want to see efficiencies being achieved, but I think that's better done with third party capital. We have, our partners that are developing like Brookfield is developing their own technology. We'll give them a sandbox to come in and compete for the best offering, and we do have the ability to customize the technology solution for the type of source. And as we get further and further into post combustion capture, we'll. About what these technologies can do in a lot of ways where it's not also a lot of innovation in the space. It's pretty simple aiming units, so it's really about the cost aspect of it and who can deliver a competitive price for capture on a go forward basis.

Operator

The next question comes from Betty Jiang with Barclays. Please go ahead.

Betty Jiang

Hi team, thank you for taking my question. The, I want to ask about the base decline and the maintenance capital. What stuck out this quarter is that if I look at your 1 production versus 3Q last year, your oil volume is only down 2%, and then over that period, your capital was just around $200 million. And I know there's timing of the span, but could we just get an update on where you think maintenance capital is going forward? And then what I'm really trying to get to is in an unconstrained permitting environment, once you take into account all these cost savings and synergies, how much lower could maintenance cap backs go versus what we thought before.

Francisco Leon

Yeah, thanks for the question. It really highlights one of the reasons, one of the ways that we're different than the rest of the sector. We, most companies lead by talking about drilling and tight curves and how effective their fracs are. That's not CRC. At CRC we do a lot of our works with base decline mitigation, surveillance, and then, so that's OEC dollars and then we move on to Very efficient capital in work covers and sidetracks, so we're doing. All of that in the normal course.
So then the question comes, okay, with an unconstrained permitting scenario, what would you do? I would say we're not ready to guide into that unconstrained scenario even though we're seeing a lot of optimistic signs on the permits. Part of it is because now that we're bigger and we have all these new assets to work with. The team has continued to deliver, as you pointed out, the oil production very low decline quarter over quarter with very little capital. So what that means is that the blocking and tackling of surveillance workovers and sidetracks is working extremely well. So to project that into the future, let's look at the inventory that comes in on a well permitted basis, the well mixed.
And we'll be able to guide that on a go forward basis. What we said before is, it should take about 6 to 8 rigs to keep production flat, but that, we need to continue to evaluate it given the performance of the team. I'd like to come back when we're ready once we have the full inventory or permits ready to go for a little bit longer runway where we can start putting more capital to work.

Operator

The next question comes from Leo P. Mariani with Roth. Please go ahead.

Leo Mariani

Yeah, hi, wanted to follow up a little bit here on the production. So looking at the second quarter guidance, looks like production is going to be down versus 1, slightly over 4%, using kind of the midpoint of your guidance. Obviously that decline would be in excess of the annual decline that you guys have kind of spoken about and clearly, not nearly as good as the performance that you've been achieving the last. Couple quarters which is shallow or declined for less capital. So just wanted to see if there's anything specific about the second quarter or maybe there's some maintenance or shut-ins or whatnot. I did see that in your slides you talked about $10 million a day of production, which sounds like that's going to be going offline to kind of replace some fuel use gas, so staying more color on that would be helpful.

Francisco Leon

Yeah, Leo, thank you for the question. I think it's a very important clarification to make. So, yes, the production on a BOE basis steps down, but cash flow goes up at lower prices, right? So how do we do that? Well, the reason is, and there's a slide 13 on the deck that that's a new slide that we put to be able to highlight the dynamic that we have in place. Really the answer to the question, Leo, is it goes to our power plant. So we have this combined cycle gas power generation that is a very flexible power plant. It has a flexible configuration, so the way we run it, typically it's called a 2x1. So that means it's 2 gas turbines for one steam turbine. That's in the normal course where we're sending the full capacity. In periods during the year where in California there's a big solar penetration with it displaces a lot of the base load during parts of the day, so we have the ability and that's at our discretion to bring the plant to a one by one mode. So what that does is one, which is what you pointed out, it reduces the natural gas production. But the gas is actually still very useful. Instead of counting it as production, what we do is then we historically have been injecting that gas back to the rest of war if it didn't make sense to produce it. Now we have an alternative, another one of the benefits of the merger, where we can send that gas to Belridge. So remember these are fields that are next to each other.
And by sending that gas to Belridge, we accomplished two things. One, that gas saves those OpEx energy costs at Belridge, so we're buying less gas from third parties at Belridge and instead we're moving our non-spec gas north. And then also by going to a one by one configuration we're able to save OpEx on the plant itself. So what you have is a situation where, yes, optically you're seeing. Net production BOEs, which is about 10 million a day of gas, go down, but what you're seeing also at the same time is increased cash flows by reducing your cost. And because our view is we're here to maximize value on cash flow and not production, it's a very easy choice to make as we have this kind of redundant system where we can send the gas to the optimal use.

Leo Mariani

Okay, I appreciate that. Thorough answer. Now just jumping over to the kind of oil and gas, permanent side, you certainly talked about how things are improving of late, but can you get a little bit more specific in terms of where the EIR in kind of Kern County, sort of stands today? My understanding was I think that maybe the public comment period is maybe recently kind of wrapped up and just can you give any kind of color on where we stand and what you think the timeline is for a judge to be taking a harder look at that in your term.

Francisco Leon

Yeah, thanks for the question on permitting. It's really been a tremendous highlight. We're very encouraged by the progress being made on the permitting front and the focus has been on the EIR, but as we talked about before, we have multiple alternatives in motion which we think all of them will work into the future. So.
We're very optimistic first of all because we have what we need in terms of sidetracks and workovers. We reached what I would say is a regular way process. And have all the permits that we need for 2025. We're building inventory into 2026 for a drilling program.
Specifically as it relates to the current county EIR litigation process continues, but the county is expected to adopt a revised EIR later in the year to address the deficiencies identified by the court. So we expect some resolution and progress towards the second half of the year. But at the same time we're doing what's called a conditional use permit, which is an alternative route with a different agency where we have about 90% of approval and developed reserves in four fields and we're developing a field specific permitting process around those. So I would say if you look at it as a whole, if you step back from the specifics on EIR and kind of what's out in the public domain. If you step back, we have a very constructive dialogue with multiple agencies. There's a need for more local production. I think there's a much better understanding than in the past that the solution to affordability and cutting emissions is local production, and we want that. The CRC barrel. So this year we decided even if we get a lot more progress on permits to continue with the two rig program, but what we're doing is we're really building that inventory of high quality projects and gaining more and more confidence we'll be ready to go.

Operator

The next question comes from Phillip Johnston with Capital One. Please go ahead.

Phillips Johnston

Thanks for the question. Just wanted to clarify the wording in the press release regarding the potential PPA. It read that you guys were engaged in discussions with multiple large scale industrial customers for the PPA. Francisco, it sounds like from your comments on the call here that doesn't imply that you're no longer negotiating with other types of potential counterparties, am I hearing that right?

Francisco Leon

Hey, Phillips, thanks for clarifying. So we're very much focused on data centers as the offtaker for LIlls power, 200 megawatts plus. The implication around incremental industrial players really is more about new inbounds, that, are also looking for clean baseload power. We were California's short power in short base load power, and I think we've seen a lot of examples globally what happens if you have an overdependence on renewables, so we have similar dynamics here and the interest level on what's one of the most efficient plants in the state of California that can be turned into with a carbon capture into a low carbon to no emission plant. It's a very interesting proposition that goes beyond data centers. So the signal is not about a shift. The signal is more about an expansion of interest beyond data centers, but we still are very much engaged with data centers, both hyper-scalers and co-locators.

Phillips Johnston

Okay, that sounds great. Cleo, you noted the share buyback was really strong in the first quarter and was basically 2x the pace, as what you bought back in the prior two quarters. Can you maybe talk about what you're thinking about in terms of the pace of buybacks going forward?

Clio Crespy

Hi Philip, I'm happy to give you a bit more context around our decision around in Q1 and obviously that's going to give you color effectively on how we how we prioritize our buybacks and how we consider them versus our other capital opportunities. So we see great value in our equity and we're committed to retaining and returning shareholder.
Increasing those shareholder returns, so we saw a clear value dislocation in our stock in Q1, and we were in a strong position to act decisively as a reminder, by the year 2024, we had rebuilt a cash balance that was over $350 million. We had done that, in 6 months after the era merger closed, and we took steps to deliver in February. So we redeemed $123 million of our '26 notes, and that demonstrated our commitment to balance sheet strength and also our disciplined capital management. But with the excess cash, share repurchases were the most compelling use of capital at the time to really drive long term shareholder value.
And if you put this into perspective, since the EA merger closed in July last year, we've repurchased 20% of the shares issued at the merger close, and we did so at an average discount of about 9% versus issuance's price. So this really further enhances what was already a highly accretive deal, and I'd say it underscores or disciplined value focused approach to capital allocation.
Now if I look forward, Philip, to your comments, well, yes, we remain opportunistic in our approach. We'll continue to evaluate our buybacks alongside the other capital priorities, but you can expect us to remain focused on maximizing returns and really delivering value to our shareholders.

Operator

The next question comes from Nitin Kumar with Mizuho. Please go ahead.

Nitin Kumar

Hey, good afternoon guys, and thanks for taking my question. I want to, you talked about the cost savings, but the electricity margin guidance for the year increased quite substantially. Just want to dig into that a little bit and see, is that better pricing or lower cost or a combination.

Francisco Leon

Hey, so as I was explaining how we manage the power plant, so the way to think about the margins is where merchant power prices fluctuate and we're solving for that by going into from a 2 by 1 to a 1 by 1 operation.
The resource adequacy, which is what we call in California the capacity program, that is fixed, that's contracted, and so that as we've been talking about, it's $150 million for 2025. So when you see an expansion in the margins, that means that the steps that we also are taking on the going to buy one by one increases that margin, right? So it's a combination of how we might manage the merchant aspect of it plus the incremental value that we're seeing in the contracted in the contracted aspect of RA.

Nitin Kumar

Great thanks I I'll leave it there.

Francisco Leon

Thanks.

Operator

The next question comes from Noel Parks with Tuohy Brothers Investment. Please go ahead.

Noel Parks

Hi, good afternoon. Just a couple of things. So, you mentioned earlier that, we should, be able to look for some new, program announced, programs announced for carbontervolt later this year. I'm just wondering, could you just maybe sort of characterize the. The agreements and or the process to getting there and just you can just give us an idea of what does the home stretch look like in in getting some of these deals.

Francisco Leon

And also, yeah, the, right now the focus for carbon teravolt is executing on our first project. We're breaking ground in a few weeks. Really important that we get that first project underway. We're looking to have CO2 injected by the end of the year this year, which means first cash flow, for CCS in all of California. The team's been also progressing the conversations with the EPA around incremental permits. I think we have 6 or 7 permits that have been in the queue for a couple of years that should be getting very close to final issuance, at least in draft form, so that will increase the force space that's permitted and really expand the capacity that we have in the state. What we've seen is as we take what we get the first of a kind permits in the state as we make progress. More and more interest comes from emitters. So what I would say is that the focus right now is ELs its first project, but the way this should expand, it will be around a lot of our northern reservoirs close to the Bay Area where we have a lot of potential customers where from existing power sources or new power sources in particular there's other industrial customers that are going to look for solutions. To bring their emissions, to some of our fields. Remember in California we have a forcing mechanism beyond the incentives which is a growing carbon tax. So, from a financial perspective it makes sense for these companies to be looking to store away that CO2, and we want to be ready for that market opportunity. So I would say the announcements or the progress that you'll see on both permits and emitters to start moving. We have had a lot of focus on the Central Valley in California. This should start moving up north and that's what we're looking to expand and that's where the team is focused next.

Noel Parks

Great, so, is it fair to say that, since carbon capture carbon sequestration is going to be new in the in the state, and is, new generally at scale, is it just that there's a little bit of a standoff on the one hand, there's a recognition of the importance and the and the benefits and. And you know there is interest out there but there I guess isn't enough of a sense of urgency to make customers afraid that they're all going to have to, crowd through the door at the same time and so I guess I'm saying so the awareness that the available course space the large is finite. It isn't enough to make people maybe be more aggressive about committing to, taking up the capacity you have.

Francisco Leon

Yeah, maybe to reframe the question a little bit, I don't necessarily agree with the view that of how you frame the question around any sort of delays. It is a new business. It's a new opportunity. We're making tremendous progress. If you look at the progress that carbon Te has made compared to others nationally, we're right up there in terms of speed. Now there's a lot of aspects to cover and We have both figuratively we have a big pipeline of emitters. We also are working on physical pipelines, right? That's the part that our focus has been to really unlock and the scale of the business is there's never been a need to transport CO2 in California.
So now that there is a need and there's a market need and there's a government. Ambition, then we need to get those pipelines permitted. That takes time. That takes time a year. That takes time in basically in any state, but we're seeing a lot of progress. We're actually very optimistic about the momentum on CO2 pipelines.
We had, we're getting both the Senate and the Assembly. Bills in the California legislature where they're proposing the framework by which we're going to be able to use retrofit CO2 pipelines in the states. So look for that that's a big catalyst for the CTV business. We feel the momentum is there and the moratorium should be lifted later this year. There's a lot of support and a lot of interest both on the market and From regulators to be able to flow CO2 soon. So once that unlocks, then the ability to talk about emitters, to be able to talk about the business model is going to start crystallizing a lot more, but we need that physical connectivity that comes with CO2 pipelines being approved.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Francisco Leon for any closing remarks.

Francisco Leon

Great. Thank you so much. We're looking forward to seeing you. We're going to do several conferences throughout the summer, but thanks again for listening and, have a good day. Thanks.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.