UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.         )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

CALIFORNIA RESOURCES CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

California resources corporation 2020 proxy report and notice of annual meeting 2021

Letter to Shareholders from the Chairman of the Board

Dear Shareholders,

CRC faced many challenges in 2020 including a voluntary Chapter 11 bankruptcy restructuring process that was required to address an unsustainable debt burden given the prevailing commodity markets at the time.  CRC emerged from the bankruptcy process with a right-sized balance sheet and a new Board of Directors committed to charting a new course for the Company.  

Today, we are engaged in a full-scale business review to serve as the foundation for a strategic repositioning effort.  Based on this work, CRC has already realigned its senior management team and broader organization to fit our vision of a leaner and more efficient organization.  CRC’s 2021 plan will focus on further development and enhancements of our core areas while rationalizing our asset base.  As a result, CRC will be better able to drive down costs and improve efficiencies while maintaining our safety and environmental stewardship standards.  We have increased our hedging levels to lock in cash flows and are focused on capital discipline to increase free cash flow generation.  The following strategic targets will help CRC maintain financial strength while driving returns to our shareholders through the delivery of robust and resilient free cash flow:

Our new board members collectively bring operational turnaround experience, financial and capital markets expertise as well as over 100 years of E&P leadership and knowledge and will provide valuable leadership to our repositioning effort.  

Each member of the Board is up for re-election this year and we would encourage you to vote at or prior to our Annual Meeting on May 12, 2021.  

Thank you for your support.

Mark A. (Mac) McFarland

Chairman, President and Chief Executive Officer

California Resources Corporation

PLEASE NOTE:  This letter and the Proxy Statement contain forward-looking statements that involve risks and uncertainties that could materially affect our expected results of operations, liquidity, cash flows and business prospects. For a discussion of these risks and uncertainties, please refer to the “Risk Factors” and “Forward-Looking Statements” described in our Annual Report on Form 10-K. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will” or “would” and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in our Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business.  Any forward-looking statement speaks only as of the date on which such statement is made and we undertake no obligation and expressly disclaim any duty to correct or update any forward-looking statement, except as required by applicable law.

We have included in this letter and the Proxy Statement certain voluntary disclosures regarding our Sustainability Goals, Sustainability Reports and related matters because we believe these matters are of interest to our investors; however, we do not believe these disclosures are “material” as that concept is defined by or construed in accordance with the securities laws or any other laws of the U.S. or any other jurisdiction, or as that concept is used in the context of financial statements and financial reporting. These disclosures speak only as of the date on which they are made, and we undertake no obligation and expressly disclaim any duty to correct or update such disclosures, whether as a result of new information, future events or otherwise, except as required by applicable law.

Notice of the 2021 Annual Meeting of Stockholders

Purposes of the 2021 annual meeting of stockholders:

Information relevant to these matters is set forth in the accompanying proxy statement.

The close of business on March 15, 2021 was fixed as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment or postponement thereof. Only our stockholders of record or their legal proxy holders as of the record date or our invited guests may attend the annual meeting in person.

Due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our employees and shareholders, the annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2021.  You will not be able to attend the annual meeting physically.  If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 65 of the proxy statement.  We have also provided information regarding how stockholders can engage during the Annual Meeting, including how they can vote, ask questions, request technical support and access information following the Annual Meeting within this proxy statement.

Beginning on March 30, 2021, we mailed a Notice of Internet Availability of Proxy Materials to our stockholders containing instructions on how to access the proxy statement and vote online and made our proxy materials available to our stockholders over the Internet.

By Order of the Board of Directors,

Michael L. Preston

Senior Executive Vice President, Chief Administrative Officer and General Counsel
Corporate Secretary

IMPORTANT VOTING INFORMATION

If you owned shares of our common stock at the close of business on March 15, 2021, you are entitled to one vote per share upon each matter presented at our 2021 annual meeting of stockholders to be held on May 12, 2021. In order for stockholders whose shares were held in an account at a brokerage firm, bank or other nominee (i.e., in “street name”) as of March 15, 2021 to vote their shares at the 2021 annual meeting, they will need to obtain a legal proxy from the broker, bank or other nominee that holds their shares authorizing them to vote in person at the annual meeting.

If you hold shares in “street name,” unless you provide specific instructions by completing and returning the voting instruction form or following the instructions provided to you to vote your shares via telephone or the Internet, your broker is only permitted to vote on your behalf on ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2021, and may not vote on the election of directors and other matters to be considered at the annual meeting. For your vote to be recognized, you will need to communicate your voting decisions to your broker, bank or other nominee before the date of the annual meeting.

YOUR VOTE IS IMPORTANT

Your vote is important. Our Board of Directors strongly encourages you to exercise your right to vote. Voting early helps ensure that we receive a quorum of shares necessary to hold the annual meeting.

QUESTIONS

If you have any questions about the proxy voting process, please contact Broadridge at (800) 579-1639. The Securities and Exchange Commission also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a stockholder. You also may contact our Investor Relations Department by phone at (818) 661-3731 or by e-mail at IR@crc.com.

ATTENDING THE ANNUAL MEETING

Due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our employees and shareholders, the annual meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2021.  You will not be able to attend the annual meeting physically.  If you wish to attend the annual meeting, you must follow the instructions under “Attending the Annual Meeting” on page 65 of the proxy statement.

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF

PROXY MATERIALS FOR THE STOCKHOLDER MEETING

TO BE HELD ON MAY 12, 2021

The Notice of the 2021 Annual Meeting of Stockholders, the Proxy Statement for the 2021 Annual Meeting of Stockholders and the 2020 Annual Report to Stockholders (which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2020) of California Resources Corporation are available at http://www.proxyvote.com.  You will need the 16-digit control number included on the Notice that was mailed to you, on your proxy card or on the instructions that accompanied your proxy materials.

TABLE OF CONTENTS 

CALIFORNIA RESOURCES CORPORATION    i

Proxy Statement Summary 

Proxy Statement Summary

This summary highlights information contained in the proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.  California Resources Corporation, together with its subsidiaries, is referred to herein as “we,” “our,” “us,” the “Company” or “CRC.”  The 2021 annual meeting of stockholders described below is referred to herein as the “Annual Meeting.”

2021 Annual Meeting of Stockholders

Due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our employees and shareholders, the Annual Meeting will be held in a virtual meeting format only at https://www.virtualshareholdermeeting.com/CRC2021.  You will not be able to attend the Annual Meeting physically.  If you wish to attend the Annual Meeting, you must follow the instructions under “Attending the Annual Meeting” below.

Agenda and the Board’s Recommendation on Voting Matters

The following table summarizes the items that will be brought for a vote of our stockholders at the annual meeting, along with the recommendation of our Board of Directors as to how stockholders should vote on each item.

Voting: Stockholders as of the record date are entitled to vote. Each share of common stock entitles its holder to one vote for each director nominee and one vote for each of the proposals to be voted on.

Restructuring of Company

On July 15, 2020, to address an unsustainable debt burden given the prevailing commodity markets at the time, the Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.  In conjunction with that bankruptcy filing, CRC entered into a Restructuring Support Agreement with a large majority of its creditors.

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Proxy Statement Summary 

On October 27, 2020, CRC completed its financial restructuring and emerged from the bankruptcy process with a strong balance sheet and a new Board of Directors.  CRC’s Joint Plan of Reorganization (the “Plan”) in its Chapter 11 case cancelled pre-existing debt, consolidated CRC’s ownership in the Elk Hills power plant and cryogenic gas plant, and provided for payment in full of all valid and undisputed trade and contingent claims in the ordinary course of business.

Pursuant to the Plan, the following directors ceased to serve on the Board as of the emergence date: William E. Albrecht, Justin A. Gannon, Harry T. McMahon, Richard W. Moncrief, Avedick B. Poladian, Anita M. Powers, Laurie A. Siegel and Robert V. Sinnott.

As of the emergence date, the Company’s Board consisted of eight members, including the following seven members who were appointed as of that date:  Douglas E. Brooks, Tiffany (TJ) Thom Cepak, James N. Chapman, Mark A. (Mac) McFarland, Julio M. Quintana, William B. Roby and Brian Steck.  Todd A. Stevens, the chief executive officer of the Company at that time, continued to serve on the Board.

On December 31, 2020, Mr. Stevens left the Company and Board of Directors, and the Board appointed Mr. McFarland to act as Interim Chief Executive Officer and initiated a search process for the Company’s next chief executive officer. At the conclusion of the CEO search process on March 22, 2021, the Board appointed Mr. McFarland as President and Chief Executive Officer on a permanent basis in addition to his role as Chairman.

Directors

The Board of Directors is comprised of six independent directors, plus our Chairman, President and Chief Executive Officer (“CEO”). The following table provides summary information about each director and whether the Board of Directors considers each director to be independent under the New York Stock Exchange’s (“NYSE”) independence standards. Each director is elected by a plurality of votes cast.

Corporate Governance Highlights

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Proxy Statement Summary 

Compensation Program Highlights

In connection with the unprecedented circumstances affecting the industry and market volatility resulting from the COVID-19 pandemic, beginning in March 2020, the Former Compensation Committee (as defined below) reviewed the annual and long-term incentive programs to determine whether those programs appropriately aligned compensation opportunities with the Company’s then current goals and ensured the stability of the Company’s workforce. Following this review, in May 2020, the Former Compensation Committee approved changing the incentive compensation program for the organization, including the NEOs, to an all cash program consisting of a Retention Bonus Award and a Quarterly Incentive Award.

Following our emergence from the bankruptcy process, our New Compensation Committee (as defined below) immediately began setting a new course for our post-emergence compensation program, reinstituting long-term performance equity awards in line with compensation best practices and good governance policies.

Compensation Program Practices

Our executive compensation program is designed to motivate our executives to take actions that are aligned with our short- and long-term strategic objectives, appropriately balancing risk versus potential reward. It is designed to incorporate compensation best practices, and is governed going forward from our emergence from bankruptcy by our New Compensation Committee. Prior to our restructuring in 2020, our annual incentive awards and long-term incentive plans were performance-based and intended to align with the long-term best interests of stockholders and retain our management team. During the first half of 2020, our Former Compensation Committee changed our compensation programs to address the challenging environment and impending restructuring, including the elimination of long-term incentives for 2020 due to the diminished value of the Company’s stock. Now that we have emerged from the bankruptcy process, our New Compensation Committee has taken action to realign our executive compensation program with our new stockholders’ interests and with best practices and good governance policies.

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Proxy Statement Summary 

The New Compensation Committee has engaged in best practices to align executive pay with Company performance and to ensure good governance in the following ways:

WHAT WE DO √ We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. √ We are stockholder aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majority of the outstanding long-term incentive awards for our named executives are stock-based. √ We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. √ We solicit feedback from stockholders. We regularly reach out to our largest stockholders for feedback on our governance and executive compensation. √ We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. √ We have stock ownership requirements. We maintain stock ownership guidelines for our named executive officers and stock grant delivery mechanics for our directors that require meaningful stock ownership in the Company. √ We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. √ We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.

WHAT WE DON’T DO We do not have individual employment agreements. We do not have employment agreements with any of our named executive officers. We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for executives. We do no encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives or inappropriate risk for the Company.

WHAT WE DON’T DO. X We do not allow hedging or pledging. Our Insider Trading Policy prohibits certain transactions involving our stock, including hedging and pledging. X We do not allow the repricing of stock options. Our equity incentive plan prohibits the repricing or backdating of stock options. X We do not offer enhanced retirement benefits. Our nonqualified defined compensation plan provides restorative, but not enhanced, retirement benefits for our executives. X We do not encourage excessive risk or inappropriate risk taking through our incentive programs. Our plans do not motivate executives to engage in activities that create excessive or inappropriate risk for the Company.

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Board of Directors and Corporate Governance 

Board of Directors and Corporate Governance

Our Board of Directors

Our Board of Directors has nominated seven directors for election at the 2021 Annual Meeting. All of our nominees currently serve as CRC directors.  Each nominee has agreed to serve another term, if elected.

Our Board exhibits an effective mix of diversity, perspective, skills and experience.

INDEPENDENCE 14% non-independent 86% independent GENDER 14% female 86% male AGE 14% 40s 43% 50s 43% 60s

INDEPENDENCE 10% 90% independent non-independent GENDER 20% 80% male female AGE 10% 40% 50% 50s 60s 70s

Independence 10% non-independent 90% independent Gender 20% female 80% male AGE 10% 50s 50% 60s 40% 70s

Set forth below is a chart that summarizes the specific experience, qualifications, attributes and skills of our directors and biographical information regarding each of our directors. There are no family relationships between any of our directors and executive officers. Pursuant to the Restructuring Support Agreement, the New Board was initially selected by certain of our creditors and a noncontrolling interest holder upon our emergence from bankruptcy in October 2020. There are no ongoing arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any person will be selected as a director or an executive officer.

Director Skills and Qualifications

CALIFORNIA RESOURCES CORPORATION    5

Board of Directors and Corporate Governance 

•   Member of the Nominating and Governance Committee

Mr. Brooks, 62, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Brooks is a private investor and currently serves as the Chief Executive Officer and as the Board Chair of Oasis Petroleum Inc., an oil and natural gas company, and as the Board Chair of OMP GP LLC, the general partner of Oasis Midstream Partners LP. He previously served on the Board of Directors of Chaparral Energy, Inc. from 2017 to October 2020 and also served on the Board of Directors of Madalena Energy Inc. (now Centaurus Energy, Inc.) in Canada. From April 2017 he served as President and Chief Executive Officer as well as a member of the Board of Directors of Energy XXI Gulf Coast, Inc., an offshore Gulf of Mexico exploration and production company, until it was acquired by an affiliate of Cox Oil LLC in October 2018. From 2015 to 2016, he served as president and chief executive officer and a member of the Board of Directors of Yates Petroleum Corporation, a privately owned exploration and production company, which merged with EOG Resources. From 2012 to 2014, he served as Chief Executive Officer as well as a member of the Board of Directors of Aurora Oil & Gas Limited until it merged with Baytex Energy Corp. In 2012, he served as a senior vice president at Forest Oil Corporation. From 2006 to 2012, Mr. Brooks also built two private equity sponsored firms focused on unconventional resource projects in the western U.S. In addition, he spent 24 years with Marathon Oil Company in roles of increasing responsibility, lastly as the director of upstream mergers and acquisitions and business development for the Americas. He holds a Bachelor of Science degree in business management from the University of Wyoming – Casper and a Master of Business Administration, Finance from Our Lady of the Lake University in Texas.

•   Chair of the Audit Committee

•   Member of the Operations and Sustainability Committee

Ms. Cepak, 48, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Ms. Cepak has 26 years of energy industry experience, including both financial and operational appointments. She has served as a director of Patterson-UTI, a company that provides land drilling and pressure pumping services, directional drilling, rental equipment and technology, since August 2014 and as a director of Penn Virginia Corporation, an independent oil and gas company, since September 2019. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast Inc. from August 2017 to October 2018.

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Board of Directors and Corporate Governance 

Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak originally joined EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and an M.B.A. in Management with a concentration in Finance from Tulane University.

•   Chair of the Compensation Committee

•   Member of the Nominating and Governance Committee

Mr. Chapman, 58, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Chapman serves as a non-executive Advisory Director of SkyWorks Capital, LLC, an aviation and aerospace management consulting services company based in Greenwich, Connecticut, which he joined in December 2004. Prior to SkyWorks, he was associated with Regiment Capital Advisors, LP, an investment advisor based in Boston specializing in high yield investments, which he joined in January 2003. Prior to Regiment, Mr. Chapman acted as a capital markets and strategic planning consultant with private and public companies, as well as investment advisers and hedge funds (including Regiment), across a range of industries. Prior to establishing an independent consulting practice, Mr. Chapman worked for The Renco Group, Inc. (a multi-billion dollar private corporation with diverse investment holdings located throughout the world) from December 1996 to December 2001. Prior to Renco, he was a founding principal of Fieldstone Private Capital Group, Inc. in August 1990 where he headed the Corporate Finance and High Yield Finance Groups. Prior to joining Fieldstone, Mr. Chapman worked for Bankers Trust Company from July 1985 to August 1990, most recently in the BT Securities capital markets area. Mr. Chapman has over 35 years of investment banking experience in a wide range of industries including aviation/airlines, metals/mining, natural resources/energy, automotive/general manufacturing, financial services, real estate and healthcare. Mr. Chapman has served on the Board of Directors of Denbury, Inc. since September 2020, and on the Board of Directors of Arch Resources, Inc. since 2016. Mr. Chapman received an M.B.A. degree with distinction from Dartmouth College in 1985 and was elected an Edward Tuck Scholar. He received his BA degree, with distinction, magna cum laude, at Dartmouth College in 1984 and was elected to Phi Beta Kappa, in addition to being a Rufus Choate Scholar.

CALIFORNIA RESOURCES CORPORATION    7

Board of Directors and Corporate Governance 

Mr. McFarland, 51, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. McFarland has been the Executive Chairman of GenOn Energy, Inc., an independent power producer, since December 2018, but stepped back from his Executive Chairman role in connection with his appointment as President and Chief Executive Officer of the Company (he will remain on the board of GenOn Energy). From April 2017 to December 2018, he was the President and Chief Executive Officer of GenOn and served on its Board of Managers. From 2013 to 2016, he served as Chief Executive Officer of Luminant Holding Company LLC, a subsidiary of Energy Future Holdings Corporation, an electric utility company. From 2008 to 2013, he served as both Chief Commercial Officer of Luminant and Executive Vice President, Corporate Development and Strategy of Energy Future Holdings. From 1999 to 2008, Mr. McFarland served in various roles at Exelon Corporation, including as Senior Vice President, Corporate Development from 2005 to 2008 and Vice President, Exelon Generation from 2003 to 2005. He served on the Board of Managers of Bruin E&P Partners, LLC from March 2020 to August 2020. He served on the Board of Directors of TerraForm Power, Inc. from October 2017 to July 2020. He served on the Board of Directors of Chaparral Energy, Inc. from December 2019 to October 2020. Mr. McFarland earned his Masters of Business Administration from the University of Delaware and a Bachelor of Science degree in Civil Engineering (Environmental Concentration) from Virginia Polytechnic Institute and State University. He received his professional engineer license in 1995.

•   Member of the Audit Committee

•   Member of the Operations and Sustainability Committee

Mr. Quintana, 61, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Quintana served as the President and Chief Executive Officer of Tesco Corporation, an oilfield services company, from 2005 until his retirement in January 2015, and was a member of Tesco’s Board of Directors from September 2004 to May 2015. Prior to his appointment as President and Chief Executive Officer, Mr. Quintana served as Executive Vice President and Chief Operating Officer at Tesco beginning in September 2004. Prior to his tenure at Tesco, Mr. Quintana worked for Schlumberger Corporation as Vice President of Integrated Project Management and Vice President of Marketing for the Americas from November 1999 to September 2004. Prior to Schlumberger, Mr. Quintana worked from June 1980 to November 1999 for Unocal Corporation, an integrated E&P company. Mr. Quintana held various

CALIFORNIA RESOURCES CORPORATION    8

Board of Directors and Corporate Governance 

operational and managerial roles in production, drilling and asset management. His last roles at Unocal were Asset Manager for the MidContinent Region and Asset Manager for Deepwater Gulf of Mexico. Mr. Quintana brings 41 years of experience in various aspects of the oil and gas exploration and production industry, including strong experience in upstream operations, a deep understanding of drilling and asset management technologies, and broad human resources management skills and experience. He is a member of the Board of Directors of SM Energy since July 2006, a member of the Board of Directors of Newmont Mining since October 2015, Chairman of the Board of Basic Energy Services and member of its Board of Directors since December 2016. Mr. Quintana has a degree in Mechanical Engineering from The University of Southern California and is a Licensed Petroleum Engineer in California.

•   Chair of the Operations and Sustainability Committee

•   Member of the Audit Committee

•   Member of the Compensation Committee

Mr. Roby, 61, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Since 2015, Mr. Roby has served as the Chief Executive Officer of Shepherd Energy, LLC, Mr. Roby’s consulting company. From 2013 to 2014, he acted as Chief Operating Officer of Sheridan Production Company, LLC. From 2000 to 2013, he held a number of U.S. and international management positions with Occidental Petroleum Corporation, most recently as Senior Vice President, Worldwide Operations and Production/Facility Engineering. Prior to his work at Occidental, he was Vice President of Operations of Altura Energy Ltd., a joint venture between Shell Oil Company and Amoco Corporation in the Permian Basin, following 15 years of various managerial and engineering roles with Shell Oil. Mr. Roby has served as a member of the Board of Directors of the international E&P firm Vermilion Energy Inc. since 2017. He has a bachelor’s degree in mechanical engineering from Louisiana State University.

•   Chair of the Nominating and Governance Committee

•   Member of the Compensation Committee

Mr. Steck, 53, has served as a member of California Resources Corporation’s Board of Directors since October 2020. Mr. Steck is the Chairman of Bonanza Creek Energy, Inc. (NYSE: BCEI), where he has served on the Board of Directors since April 2017. Until August 2020, Mr. Steck served as a Partner at Mangrove

CALIFORNIA RESOURCES CORPORATION    9

Board of Directors and Corporate Governance 

Partners, where he had worked since 2011. Previously, Mr. Steck was Head of U.S. Equities at Tisbury Capital, and earlier in his career he spent ten years at UBS and its predecessors, where he was Global Co-Head of Equity Hedge Fund Coverage. Mr. Steck serves on the Board of Directors of Chesapeake Energy Corporation, and he previously served on the Board of Directors of Penn Virginia Corporation. Mr. Steck received a B.S., with the highest honors, from the University of Illinois at Urbana-Champaign.

Board Refreshment and Evaluation

Identifying and Evaluating Nominees for Directors

Our Nominating and Governance Committee is responsible for leading the search for individuals qualified to serve as directors and for recommending to the Board nominees as directors to be presented for election at meetings of the stockholders or of the Board of Directors. Our Nominating and Governance Committee evaluates candidates for nomination to the Board of Directors, including those recommended by stockholders, and conducts appropriate inquiries into the backgrounds and qualifications of possible candidates. The Nominating and Governance Committee may retain outside consultants to assist in identifying director candidates in its sole discretion, but it did not engage any outside consultants in connection with selecting the nominees for election at the Annual Meeting.

Director Criteria, Qualifications and Experience

Our Corporate Governance Guidelines contain qualifications that apply to director nominees recommended by our Nominating and Governance Committee. In the event that a vacancy on the Board of Directors arises, the Nominating and Governance Committee will consider and review the candidate’s following qualifications, relevant skills, qualifications and experience:

Board Diversity

The Board recognizes the value of having directors from a wide variety of backgrounds who bring diverse opinions, perspectives, skills, experiences, backgrounds and orientations to its discussions and its decision-making processes. A diverse board enables a more balanced, wide-ranging discussion in the boardroom, and is also important to the Company’s stockholders, its management and employees. For these reasons, the Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the Board of Directors.

Board Evaluations and Incumbent Directors

Our Board believes that a robust annual evaluation process is an important part of its governance practices.  For this reason, the Nominating and Governance Committee oversees an annual evaluation of the performance of the Board.  The committee distributes written evaluation surveys to each director, and the Chairman of the Board discusses the results of these written surveys with the individual directors. In addition, the Chairman shares the results of the surveys and interviews with the full Board for consideration with respect to director nominees, and Board and committee structure, composition and effectiveness.

CALIFORNIA RESOURCES CORPORATION    10

Board of Directors and Corporate Governance 

With respect to the reelection of an existing director, the Nominating and Governance Committee will consider the results of the evaluation process and review the director’s:

Board Education

The Board of Directors engages in various activities to obtain additional insight into our business and industry, beneficial perspectives on the performance of the Company, the Board and our management, and on the Company’s strategic direction.  From time to time, the full Board receives presentations from its committees, and internal and external advisors, regarding current topics of interest.  The Company also makes resources available to individual directors, including access to director education from third party providers.

Director Independence Determinations

Majority independent directors 20% non-independent 80% independent

The Board of Directors has reviewed all direct or indirect business relationships of which it is aware between each director (including his or her immediate family) and us, including those relationships described under “Related Party Transactions” below, as well as each director’s relationships with charitable organizations, to assess director independence as defined in the listing standards of the NYSE. Based on this evaluation, the Board of Directors has determined that Messrs. Brooks, Chapman, Quintana, Roby and Steck and Ms. Cepak are independent directors as that term is defined in the listing standards of the NYSE. Mr. McFarland, our Chairman, President and Chief Executive Officer, is not considered by the Board of Directors to be an independent director because of his current employment with CRC.

Prior to the Company’s emergence from bankruptcy, the former Board of Directors used the same evaluation process to determine that Messrs. Albrecht, Gannon, McMahon, Moncrief, Poladian and Sinnott and Mses. Powers and Siegel were independent directors as that term is defined in the listing standards of the NYSE.  Mr. Stevens, our prior President and CEO, was not considered by the Board of Directors to be an independent director because of his then current employment with CRC.

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Board of Directors and Corporate Governance 

Board Leadership Structure and Committees

Chairman

Historically, the Board of Directors’ leadership structure has separated the CEO and Chairman of the Board positions. However, due to Mr. Stevens’ departure as our CEO at year end 2020, Mr. McFarland served as our Interim CEO in addition to his role as Chairman while the Company engaged in a CEO search process, and in conjunction therewith the Board appointed a Lead Independent Director.  At the conclusion of the CEO search process on March 22, 2021, the Board appointed Mr. McFarland as President and CEO on a permanent basis in addition to his role as Chairman.  

As of the printing of this proxy statement, the Board continues to evaluate whether to separate the CEO and Chairman positions.  The Board of Directors believes that there is no single, generally accepted approach to providing board leadership and that each of the possible leadership structures for a board must be considered in the context of the individuals involved and the specific circumstances facing a company, as the right leadership structure may vary as circumstances change.

Lead Independent Director

Mr. Chapman has served as Lead Independent Director since year end 2020 when Mr. McFarland was appointed as Interim CEO. The responsibilities of the Lead Independent Director include acting as chair at meetings of the Board of Directors when the Chairman is not present, and preparing the agenda and presiding over executive sessions of the non-management directors of the Board of Directors.    

Board Meetings and Attendance

During 2020, the Board of Directors prior to the Company’s emergence from bankruptcy (sometimes referred to herein as the “Former Board”) held 22 meetings, and the Board of Directors after the Company’s emergence from bankruptcy (sometimes referred to herein as the “New Board”) held 5 meetings.  Each of the standing and special committees held the number of meetings included in the description of the committees set forth below in 2020. The committees of the Former Board are sometimes referred to herein as “Former Committees,” and the committees of the New Board are sometimes referred to herein as “New Committees.”  Except for Harold M. Korell, each director attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served that occurred during such directors’ terms in 2020. Mr. Korell attended 67% of the such meetings that occurred during his term in 2020, but he did not stand for reelection and his term expired at the 2020 annual meeting.

Pursuant to our Corporate Governance Guidelines, directors are encouraged to attend our annual meetings of stockholders. All of the directors of our Former Board attended the virtual annual meeting in May 2020.

Executive Sessions of the Board

The Board of Directors intends to hold meetings of independent directors in executive session without management present on a regular basis. In addition to regularly scheduled Board meetings, executive sessions may be called upon the request of any independent director. In 2020, the Former Board held two executive sessions, and the New Board held four executive sessions.

Committees of the Board

As of the date of this proxy statement, our Board of Directors has four separately designated standing committees. On November 9, 2020, after the Company’s emergence from bankruptcy, the New Board also established two temporary special committees, Finance and Operations. The formation of the special committees was undertaken to enhance the New Board’s ability to quickly develop an in-depth understanding of the Company, including its operations and assets, particularly in light of the fact that all non-management members of the New Board became directors in connection with the Company’s emergence from bankruptcy.  On March 9, 2021, the New Board dissolved the Finance and Operations special committees, and amended

CALIFORNIA RESOURCES CORPORATION    12

Board of Directors and Corporate Governance 

the charter of the Sustainability Committee to change its name to the Operations and Sustainability Committee and to expand its purpose to encompass oversight of matters relating to the Company’s operations.

The membership and purposes of each of the standing and special committees are described below. Each of the standing committees operates under a written charter adopted by the Board. The Board of Directors and each committee has the power to hire independent legal, financial or other experts and advisors as it may deem necessary, without consulting or obtaining the approval of any officers of the Company in advance.

Standing Committees of the Board

CALIFORNIA RESOURCES CORPORATION    13

Board of Directors and Corporate Governance 

CALIFORNIA RESOURCES CORPORATION    14

Board of Directors and Corporate Governance 

Special Committees of the Board

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Board of Directors and Corporate Governance 

The Board’s Role in Risk Oversight

BOARD OF DIRECTORS Informed through committee reports and by the President and CEO about known risks to the Company’s strategy and business. Regularly reviews information regarding the Company’s credit, liquidity and operations, including the risks associated with each. COMPENSATION COMMITTEE Oversees the management of risks relating to the Company’s executive compensation plans and arrangements. AUDIT COMMITTEE Oversees financial risks and the ethical conduct of the Company’s business, including the steps the Company has taken to monitor and mitigate these risks, and reviews material related party transactions. NOMINATING AND GOVERNANCE COMMITTEE Manages risks associated with the independent of the Board of Directors and potential conflicts of interest. OPERATIONS AND SUSTAINABILITY COMMITTEE Responsible for overseeing the management of risks in the Company’s operations and risks relating to sustainability and health, safety and environment.

Our Company’s management is responsible for the day to day management of risks to the Company.  The Board of Directors has broad oversight responsibility for our risk management programs.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee is now, or at any time since the beginning of 2020 has been, employed by or served as an officer of CRC or any of its subsidiaries or had any business relationship requiring disclosure with CRC or any of its subsidiaries. None of our executive officers is now, or at any time has been, since the beginning of 2020, a member of the compensation committee or board of directors of another entity one of whose executive officers has been a member of our Board of Directors or Compensation Committee.

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Board of Directors and Corporate Governance 

Communications with Directors

Our Board of Directors welcomes communications from our stockholders and other interested parties. Communications to our Board of Directors, to any committee of our Board, or to any director in particular, should be sent to:

Board of Directors, committee name or director’s name, as appropriate

California Resources Corporation

Attention: Corporate Secretary

27200 Tourney Road, Suite 200

Santa Clarita, California 91355

We will forward all correspondence directly to the committee or individual director, as appropriate. Our independent directors approved our process for collecting and organizing stockholder communications to the Board of Directors.

If any stockholder or third party has a complaint or concern regarding accounting, internal controls over financial reporting or audit matters at CRC, they should send their complaint in writing to Ms. Cepak, the Chairman of the Audit Committee, at the address listed above.

Availability of Corporate Governance Documents

We are committed to good corporate governance. In furtherance thereof, the Board of Directors has adopted governance documents to guide the operation and direction of the Board and its committees, which include Corporate Governance Guidelines, a Business Ethics Policy (which applies to all directors and employees, including the Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer) and charters for the Audit, Compensation, Nominating and Governance and Operations and Sustainability Committees. Each of these documents is available on our website (www.crc.com), and stockholders may obtain a printed copy, free of charge, by sending a written request to California Resources Corporation, Attention: Corporate Secretary, 27200 Tourney Road, Suite 200, Santa Clarita, California 91355. We will also promptly post on our website any material amendments to these documents and any waivers from the Business Ethics Policy for our directors and principal executive, financial and accounting officers.

Certain Relationships and Related Transactions

Policies and Procedures

Our Board of Directors adopted written policies regarding related party transactions. We review all relationships and transactions in which we and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Our Corporate Secretary’s office implements procedures to obtain information from the directors and executive officers with respect to related party transactions. The Audit Committee reviews and discusses with management and the independent registered public accounting firm any material related party transactions as defined by, and required to be disclosed under, the rules of the Securities and Exchange Commission (“SEC”) and the NYSE. Agreements that embody transactions that are material in amount or significance are filed with the SEC as required.

Our business ethics and corporate policies prohibit significant conflicts of interest. Any waivers of these policies require approval by the compliance officer, or in the case of conflicts of our executive officers or directors, the Board of Directors. Under our Business Ethics and Corporate Policies, conflicts of interest generally are deemed to occur when private or family interests do not appear impartial, interfere or compete with the interests of our Company.

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Board of Directors and Corporate Governance 

We have multiple processes for reporting conflicts of interests and related party transactions. Under our Business Ethics and Corporate Policies, all of our directors and employees are required to report any known or apparent conflict of interest, or potential conflict of interest, to their supervisors, the compliance officer, a member of the corporate compliance committee, our legal counsel, human resources, or the Board of Directors, as appropriate. As part of any review of any conflict of interest, potential conflict of interest or related party transaction, the following factors are generally considered:

We also have other policies and procedures to prevent conflicts of interest and related person transactions. For example, the charter of our Nominating and Governance Committee requires that the committee members assess the independence of the non-management directors at least annually, including a requirement that it determine whether any such directors have a material relationship with us, either directly or indirectly, as defined therein and as further described above under “Director Independence Determinations.”

Related Party Transactions

This section discusses transactions and relationships with related persons since the beginning of our most recently completed fiscal year.

We sell and purchase products with subsidiaries of Plains All American Pipeline, L.P. (“Plains”). Funds managed by Kayne Anderson Capital Advisors L.P., of which Mr. Sinnott serves as co-chairman, and affiliates (“Kayne Anderson”) own approximately 7.42% of the general partner of Plains, approximately 1.60% of the limited partner units of Plains and an additional approximately 2.30% general partner interest in Plains GP Holdings, L.P. (the public portion of the general partner). Mr. Sinnott served as a director for the general partner of Plains until September 30, 2020. For the year ended December 31, 2020, transactions with Plains accounted for approximately $138 million of our oil and gas sales. As discussed above in “Restructuring of Company,” Mr. Sinnott ceased being a member of our Board of Directors on October 27, 2020.

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Sustainability and Stewardship

Sustainability and Stewardship

In 2017 we adopted four 2030 Sustainability Goals – for water recycling, integration of renewable energy into our operations, methane emission reduction and carbon capture and sequestration – which advance the State of California’s 2030 goals and aid in our life-of-field planning. Last year CRC issued its third annual Sustainability report (www.crc.com/sustainability) which detailed strategic objectives and initiatives in Environmental, Social and Governance (ESG) and summarizes our sustainability strategy, goals and performance.  Our 2030 Sustainability Goals are measured against a 2013 baseline and are summarized as follows:

Water Goal – Increase volume of recycled produced water by 30%.

We have increased our recycled produced water volume by almost halfway above our 2013 baseline and we continue to evaluate additional projects that would keep us on track to achieving our 2030 Water Sustainability Goal.

Renewables Goal – Integrate renewables into oil and gas operations by adding 10 MW from renewable sources.

We have entered into Power Purchase Agreements for 40 MW of behind-the-meter solar projects to supply multiple CRC fields, which would reduce our energy use from the grid and generate Low Carbon Fuel Standard (LCFS) credits under the Innovative Crude Provisions of the standard.  We are currently focusing on pursuing the financing necessary to develop these projects.

Methane Goal – Reduce methane emissions by 50%.

CRC has surpassed its 2030 Methane Goal, achieving in excess of a 60% reduction in methane emissions from our operations and we continue to evaluate reduction projects.

Carbon Goal – Design and permit a carbon capture and sequestration system by 2030.  

In 2020, we completed the Front End Engineering and Design for a Carbon Capture and Sequestration project at Elk Hills. In 2021, we anticipate evaluating this FEED study and recommending next steps.

We are proud to note that CRC’s ESG performance and its progress on 2030 Sustainability Goals continues to be directly tied to the performance-based compensation of our employees, including executives and senior managers, further highlighting our standing commitment and dedication to a cleaner and more sustainable future for California. The Board will continue to highlight, monitor and provide guidance to our efforts to serve as a responsible steward of California’s natural resources, to integrate sustainability, HSE and community engagement into our life-of-field planning and to advance California’s long-term goals.      

We view our workforce as an asset and the Board provides oversight over significant aspects of our human capital.  Management provides periodic updates to and receives guidance from the Board with respect to employee engagement, diversity and career development initiatives.

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Audit Committee Report 

Audit Committee Report

The Audit Committee of the Board of Directors of California Resources Corporation approves the appointment and services of the independent registered public accounting firm, and monitors (1) the integrity of the financial statements of CRC; (2) the independent registered public accounting firm’s qualifications, independence and performance; (3) the effectiveness and performance of CRC’s internal audit function; (4) CRC’s system of disclosure controls and procedures, internal control structure over financial reporting and compliance with ethical standards; and (5) the compliance by CRC with legal and regulatory requirements related to financial statements.

The Board of Directors has determined that each of the members of the Audit Committee satisfies the standards of independence established under the SEC’s rules and regulations and listing standards of the NYSE. The Board of Directors has further determined that each of the members of the Audit Committee is financially literate and that Ms. Cepak and Mr. Roby are “audit committee financial experts” as defined by the rules and regulations of the SEC.

In connection with our financial statements for the year ended December 31, 2020, the Audit Committee has:

Based on the review and discussions with CRC’s management, independent registered public accounting firm and independent reserves audit firms, as set forth above, the Audit Committee recommended to CRC’s Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing with the SEC.

Audit Committee,

Tiffany (TJ) Thom Cepak

Julio M. Quintana

William B. Roby

March 9, 2021

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Compensation Discussion and Analysis

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) provides a description of the elements and key features of our compensation program, as well as context and rationale for decisions made with respect to the compensation for our “named executive officers” or “NEOs” for the year ended December 31, 2020, who are identified below:

Table of Contents

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Compensation Discussion and Analysis

Restructuring of the Company

On July 15, 2020, to address our unsustainable debt burden given the prevailing commodity markets at the time, the Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.  

On October 27, 2020, the Company emerged from the bankruptcy process with a new Board of Directors, new equity owners and a strong balance sheet.  CRC’s Joint Plan of Reorganization (the “Plan”) in its Chapter 11 case cancelled all equity interests of the Company, including outstanding shares of the Company’s common stock issued and outstanding immediately prior to the emergence date. As a result, all outstanding stock-based compensation awards under our Long-Term Incentive Plan were also cancelled upon our emergence from bankruptcy, eliminating our NEOs’ prior equity interests in the Company.  

Pursuant to the Plan, as of the emergence date, the pre-emergence Compensation Committee members (the “Former Compensation Committee”) ceased to serve on the Board and a new Compensation Committee was designated from the new Board members (the “New Compensation Committee”).

The Plan also provided for issuance of new common stock to certain of the Company’s creditors and a joint venture partner and reservation of common stock for issuance under a new employee incentive plan. In January 2021, our new Board of Directors adopted the 2021 Long Term Incentive Plan.

As illustrated below, compensation decisions before, during and after our bankruptcy were made by our Former Compensation Committee, the bankruptcy court, and our New Compensation Committee.

Elements of Compensation Program Approved by Former Compensation Committee Bankruptcy Court New Compensation Committee Pre-Chapter 11 Former Compensation Committee Jan 1 – July 14  • Original 2020 Compensation Program • Revised 2020 Compensation Program Chapter 11 Bankruptcy Court July 15 – Oct 26 • Quarterly Incentive Plan • Prior equity award cancellation • Creation of new equity incentive plan Emergence Bankruptcy Court Oct 27 Setting a New Course New Compensation Committee Oct 28 and forward • One-time emergence equity grants • 2021 annual incentive plan

Setting a New Course for 2021

Our 2020 executive compensation program was driven by unprecedented circumstances that our Former Compensation Committee believed required extraordinary changes to the original 2020 compensation program the Former Compensation Committee had previously approved in order to retain and motivate our executive management team and broader organization through our financial restructuring.  

Following our emergence from bankruptcy, our New Compensation Committee got right to work with the assistance of Lyons Benenson & Company, Inc.(“LB&Co”), independent compensation consultant to the New Compensation Committee, designing a new compensation program for 2021 which returns to a mix of short- and long-term incentives that are primarily performance-based, with a significant majority provided as equity awards, immediately aligning our NEO compensation with our new shareholders’ interests.  

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Compensation Discussion and Analysis

2021 Compensation Program Actions

Peer Group Selection

The first action taken by the New Compensation Committee was to develop a new compensation peer group.  With consultation from LB&Co, in November 2020, the New Compensation Committee adopted a new compensation peer group consisting of 20 companies in the same Global Industry Classification Standard (GICS) Sub-Industry classification of similar size and/or having similar geographic operating locations as the Company.  This new compensation peer group was utilized by the New Compensation Committee in making decisions regarding the 2021 executive compensation program.

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Compensation Discussion and Analysis

Long-Term Incentive Grants

The New Compensation Committee next focused on long-term incentives for the executive management team.  Working with LB&Co, the New Compensation Committee determined that the long-term incentive program for 2021 should consist of multi-year sized emergence grants to immediately realign the NEOs with shareholder interests and to reestablish the retention value of multi-year equity grants, since all of the NEOs’ prior Company stock holdings and equity awards were cancelled upon our emergence from bankruptcy.

In January 2021, the New Compensation Committee approved emergence grants allocated between Restricted Stock Unit Awards and Performance Stock Unit Awards. The target grant date values for the awards were split evenly between the two award types for each NEO.

2021 Restricted Stock Unit Award

The 2021 Restricted Stock Unit Award (“2021 RSU Award”) is a stock-based and stock-settled long-term incentive award primarily intended to promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts. One-third of the 2021 RSU Award vests on each of the first three anniversary dates of the grant date. The delivery of vested shares under the 2021 RSU Award is generally deferred until the final vesting date.

2021 Performance Stock Unit Award

The 2021 Performance Stock Unit Award (“2021 PSU Award”) is a stock-based and stock-settled long-term incentive with performance measures based on the attainment of pre-determined 60-trading day Volume-Weighted Average Price (“VWAP”) thresholds for the Company’s shares during the three-year performance period commencing on the grant date. Utilizing VWAP thresholds for the performance criteria is intended to focus the NEOs on actions that will increase shareholder value over the performance period.

The 2021 PSU Award will cliff vest on the third anniversary of the grant date and payout in shares based on the performance level attained during the performance period.

Annual Incentive Program

In March 2021, the New Compensation Committee established a revised policy related to the annual incentive program or “AIP” to incentivize the AIP participants to undertake actions and invest capital to achieve sustainable long-term value for CRC.  The construct of the new AIP recognizes the material impact that fluctuations in commodity prices have on CRC’s financial measures including adjusted EBITDAX, free cash flow and others.  As such, while any AIP program cannot eliminate the impact of such fluctuations, the new AIP adds metrics related to capital efficiency and cost reductions, as well as the Company’s asset retirement obligations.  Further, there is continued incentive for health, safety and environment (“HSE”) performance.  CRC has always been committed to HSE standards and related policies, and continues the focus on the HSE metrics as well as the formation of a new Operations and Sustainability Committee serving at the discretion of the Board.

The New Compensation Committee also has adopted a policy whereby management’s ability to achieve a maximum payout under the AIP should be due to extraordinary results, whether via financial performance or the other non-financial metrics incorporated into the AIP.  The goal is to lessen the impact of commodity price volatility on AIP payouts.

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Compensation Discussion and Analysis

CEO Agreements

Mr. McFarland was named Interim CEO following the departure of Mr. Stevens on December 31, 2020.  We had an agreement with Mr. McFarland, that provided for a fee of $175,000 per month for his services as an independent contractor while he served as our Interim CEO.  During the period he served as Interim CEO, he did not receive cash retainer fees for serving on our Board, but remained eligible to receive a non-employee director emergence grant.

Effective March 22, 2021 (the “Effective Date”), the Board named Mr. McFarland President and CEO, removing his previous interim title.  In connection with Mr. McFarland’s appointment, the Company and Mr. McFarland entered into an Employment Agreement (the “Employment Agreement”). The Employment Agreement provides for a two-year term beginning on the Effective Date, during which either the Company or Mr. McFarland may terminate the employment relationship for any or no reason. The Employment Agreement may be extended by mutual agreement for additional one-year periods. The Employment Agreement provides for an annualized base salary of $850,000 and an annual cash bonus target for 2020 of 120% of his base salary, reduced by certain amounts he received as Interim CEO.  Mr. McFarland also received an initial long-term incentive award consisting of Performance Stock Units and Restricted Stock Units, under the 2021 Long Term Incentive Plan in connection with his appointment as President and CEO of the Company.

Original 2020 Compensation Program

In February 2020, the Former Compensation Committee made decisions regarding the design of our compensation program prior to its reformulation in May, 2020 (the “Original 2020 Compensation Program”) that focused on paying for performance, motivating and retaining the current management team and managing shareholder dilution and the remaining shares available for grants with the continued low stock price, without the expectation of the unprecedented circumstances and restructuring which soon followed.

Original Compensation Program Changes Made for 2020

The Former Compensation Committee considered the favorable feedback received through stockholder outreach regarding the changes to the compensation program made in 2019 and determined that the structure of the program remained appropriate for 2020 with the following changes to the performance metrics under the program’s annual incentive awards:

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Compensation Discussion and Analysis

2020 Compensation Peer Group Selection

The Former Compensation Committee believed that the most relevant compensation peer companies are those that could compete for our talent with similar operating complexity and financial characteristics to CRC. The Former Compensation Committee reviewed the peer companies each year based on the criteria below and made adjustments as necessary to ensure alignment with those objectives.

Peer company selection based on equity market capitalization would generally result in companies that are much smaller in complexity and scope of operations than CRC due to our highly leveraged balance sheet and resulting depressed equity market capitalization. The Former Compensation Committee did not believe that companies with similar equity market capitalizations represented the competitive market for our executive team’s skills and experience and accordingly believed that setting CRC compensation levels consistent with these smaller companies would penalize our management team for factors beyond their control, causing substantial retention problems.

2020 Peer Group

In October 2019, the Former Compensation Committee reviewed the compensation peer companies and determined that no changes were needed for 2020 compensation planning purposes, other than removing Newfield Exploration Company and EP Energy Corporation, in light of their acquisition and distressed condition, respectively.

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Compensation Discussion and Analysis

Original 2020 Compensation Program Elements

Our Original 2020 Compensation Program for our CEO and other NEOs was comprised of the following elements, which are discussed in more detail below:

ORIGINAL 2020 COMPENSATION PROGRAM ELEMENTS

Restricted Stock (40% of LTI) > Time-vested 1/3 per year > Stock- and cash-settled Long-Term Incentive (LTI) Annual Incentive B se Salary Performance Stock (50% of LTI) > 3-year performance period > 50% VCI (three-year average) > 50% Relative Total Shareholder Return (TSR) - CRC vs. 2020 Peer Companies > Stock-based, stock- and cash-settled Stock Options (10% of LTI) > Vest 1/3 per year > 7-year exercise period > Exercise price 10% above grant date price Annual Incentive Award > VCI (current year) > EBITDAX > Debt > Sustainability - Safety (combined injury and illness rate (IIR)) - Spill prevention rate - Net water supplied to agriculture - Project milestones relating to: Water recycle Renewable energy Methane capture Carbon capture Workforce diversity and development Community partnerships > Individual goals

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Compensation Discussion and Analysis

2020 Base Salaries

The Former Compensation Committee reviewed the base salaries of the NEOs to determine if they remained appropriately positioned against the market data and internally aligned, and as a result the Former Compensation Committee decided to make no changes for 2020 as compared to 2019 based on each individual’s performance, scope of job responsibilities, internal alignment and position relative to peer group compensation data.

Original 2020 Annual Incentive Design

The annual incentive component of our Original 2020 Compensation Program was designed to promote the achievement of financial, operating and strategic results that are aligned with creation of stockholder value. Based on feedback from stockholders to emphasize the quantitative portion of the award, the performance measures were comprised of quantitative financial and operational measures for 80% of the target annual incentive and qualitative individual objective measures for 20% of the target annual incentive.

Aligning performance criteria with our strategic areas of focus for the year, the Former Compensation Committee approved performance measures designed to encourage decision making that would enhance stockholder value creation. The Former Compensation Committee approved performance criteria based on expected results under CRC’s business plan at the time the criteria were established in February 2020. Target performance criteria were set at levels that would represent successful execution of the 2020 business plan, and maximum performance criteria were set at levels that would represent significant outperformance against the 2020 business plan.

Project milestones relating to water recycling, renewable energy, methane capture, carbon capture, workforce diversity and development and community partnerships were added for 2020 to drive progress toward our 2030 Sustainability Goals. Many of our 2030 Sustainability Goals are multi-year efforts, so the project milestone approach would allow tracking interim progress during the current year against multi-year goals.

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Compensation Discussion and Analysis

The table below provides the weightings for each performance measure as established by the Former Compensation Committee.

All executives were subject to the same investment, sustainability, and liquidity quantitative measures.

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Compensation Discussion and Analysis

Original 2020 Annual Incentive Targets

The Former Compensation Committee reviewed the annual incentive targets for each of our NEOs against the 2020 Peer Group market data, and with consideration to internal alignment. In February 2020, the Former Compensation Committee determined that the original 2020 annual incentive targets for the NEOs, other than Messrs. Leon and Weiss, remained appropriate at the 2019 levels and no changes were made for 2020. For Messrs. Leon and Weiss, the Former Compensation Committee determined their targets should be increased by 5% based on the scope of their jobs and internal alignment.

Original 2020 Long-Term Incentives

For the Original 2020 Compensation Program, the long-term incentives (“LTI”) consisted of a mix of time-vested restricted stock unit awards and performance-based awards, to promote retention and pay for performance. The total grant date values were allocated 40% to time-vested restricted stock unit awards and 60% to performance-based awards. The performance-based awards consisted of performance stock unit awards and premium-priced stock options.

2020 LONG-TERM INCENTIVE MIX (percent of grant date value) Restricted Stock Units (RSU) 40% Premium-Priced Stock Options (10%) Performance Stock Units (PSU) 50%

2019 LONG-TERM INCENTIVE MIX (percent of grant date value) Stock Options Restricted Stock Units (RSU) 40% Performance Stock Units (PSU) 50%

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Compensation Discussion and Analysis

2020 Restricted Stock Unit Award – The 2020 Restricted Stock Unit Award (“2020 RSU Award”) was a stock-based, stock- and cash-settled long-term incentive award intended to primarily promote retention and enhance alignment with stockholder interests through development of ownership in the Company with time-vested payouts. One-third of the 2020 RSU Award was to vest at the end of each year during the three-year period commencing at the grant date. The 2020 RSU Award would have been settled 50% in shares and 50% in cash with required tax withholding taken first from the cash portion of the payout.

2020 Performance Stock Unit Award – The 2020 Performance Stock Unit Award (“2020 PSU Award”) was a stock-based, stock- and cash-settled long-term performance award with performance measures based 50% on relative total shareholder return and 50% on VCI, both measured over a three-year period. For payouts up to the target number of units, the 2020 PSU Award would have been settled 50% in stock and 50% in cash. For payouts greater than the target number of units, the payout of such excess units would have been settled in cash. Required tax withholding on payouts would have been taken first from the cash portion of the payouts.

The performance measures for the 2020 PSU Award continued to focus the management team on making decisions that would enhance stockholder value over the long term. Utilization of the VCI measure drove our capital allocation decisions to ensure that we focused spending on the highest return projects over the long term. The relative total shareholder return measure directly ties compensation to shareholder returns.

The peer companies chosen for the relative total shareholder return performance measures under these awards were the same as those selected by the Former Compensation Committee for the 2020 Compensation Peer Group, as shown above, excluding Carrizo Oil & Gas, Inc., due to its acquisition by Callon Petroleum Company.

The PSU Award would have vested at the end of three years from the grant date based on achieved performance against pre-established performance criteria.

2020 Stock Options – The Former Compensation Committee granted stock options as part of the original 2020 long-term incentive awards to further align executives with stockholders. The 2020 stock options were granted with an exercise price that was 10% above stock price on the grant date. The options would have vested one-third at the end of each year during the three-year period commencing on the grant date and remained exercisable until the end of the seventh year following the grant date.

The Former Compensation Committee reviewed the LTI grant date target values of the NEOs to determine if they remained appropriately positioned against the 2020 Peer Group data and internally aligned. The Former Compensation Committee set the long-term incentive grant date values for the CEO and other NEOs at the same amounts as 2019 based on the individual’s performance and position relative to peer group compensation data.

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Compensation Discussion and Analysis

Linkage Between Pay and Performance

Our Original 2020 Compensation Program was designed to link the pay realized by our executives to the performance of CRC and the returns to our stockholders, while also providing incentives necessary to retain our executives through this challenging period.

The pay mix at target grant date values for our CEO and other NEOs under the Original 2020 Compensation Program was primarily long-term and performance-based.

PAY MIX OF CEO 12% salary 13% annual incentive 45% performance-based long-term incentive 30% time-vested long-term incentive 88% at risk At Risk AVERAGE PAY MIX OF NEOs OTHER THAN CEO 21% salary 19% annual incentive 36% performance-based long-term incentive 24% time-vested long-term incentive 79% at risk At Risk

Revised 2020 Compensation Program

As commodity market conditions deteriorated in March 2020, the Former Compensation Committee determined it would be in the best interest of shareholders to change the 2020 compensation program to focus on short-term cash incentives, since the Company’s diminishing stock price and increasingly likely bankruptcy filing reduced the retention and motivation value of equity-based compensation.    

After reviewing the Original 2020 Compensation Program in light of the circumstances at the time, the Former Compensation Committee determined that the performance metrics and primarily stock-based compensation awards were no longer appropriate and would not provide the compensation opportunities needed to retain our management team during those challenging times. The Former Compensation Committee engaged Alvarez & Marsal North America LLC (“A&M”), an independent outside compensation consultant, to assist in developing a revised compensation program which was all cash-based with performance metrics for variable compensation opportunities which aligned with the changed priorities of the Company as it restructured following the bankruptcy filing.

Under the revised program (the “Revised 2020 Compensation Program”), each named executive officer was eligible to earn total payments for 2020, at the target level of performance, equal to that named executive officer’s 2020 target annual incentive and grant date target value of the long-term incentive established earlier in the Original 2020 Compensation Program. A portion of each named executive officer’s target opportunity was provided in the form of a retention payment (the “Retention Bonus”) and a portion in the form of a quarterly incentive opportunity (the “Quarterly Incentive Plan”).

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Compensation Discussion and Analysis

ORIGINAL 2020 COMPENSATION PROGRAM Original 2020 Annual Incentive at Target Original 2020 Long-Term Incentive Grant Date Value Stock Options Time-Vested Restricted Stock Unit Award Performance Stock Unit Aware REVISED 2020 COMPENSATION PROGRAM Retention Bonus Award Quarterly Incentive Plan Award at Target for Q1 2020 Target for Q2 2020 Target for Q3 2020 Target for Q4 2020

The target amounts of 2020 variable compensation for the NEOs under the Revised 2020 Compensation Program were not changed from the Original 2020 Compensation Program amounts. The Retention Bonus portion of the annual target opportunity for each of the NEOs was paid immediately, subject to a requirement generally to repay the full amount, on an after-tax basis, if the NEO were to voluntarily terminate employment without good reason or were terminated for cause before the earlier of 18 months following the payment, or the Company’s emergence from bankruptcy. Given our successful emergence from bankruptcy in October 2020, this clawback requirement has terminated. The Retention Bonus replaced, and was equal in amount to, the previously established target amount of the 2020 annual incentive for each of the NEOs under the Original 2020 Compensation Program.

The annual target opportunity under the Quarterly Incentive Plan for each NEO was set equal to his 2020 long-term incentive grant date target value under the Original 2020 Compensation Program, which remained unchanged from the 2019 long-term incentive grant date target disclosed in the Company’s 2020 Proxy Statement.

Under the Quarterly Incentive Plan, NEOs were paid 50% of the annual opportunity at target for the period January 1 through June 30, 2020, and target quarterly opportunities were set at 25% of the annual opportunity for each of the quarters ending on September 30 and December 31, 2020, subject to continued employment and achievement of performance metrics determined by the Former Compensation Committee. Amounts earned under the Quarterly Incentive Plan for the third and fourth quarters could range from 0% to 200% of

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Compensation Discussion and Analysis

the target opportunity based on the level at which metrics were achieved. In the event of a termination of employment without “cause” or for certain participants for “good reason”, or due to death or disability, prior to a vesting date, the named executive officer would be entitled to a prorated portion of the applicable quarterly incentive payment, based on actual performance, and would forfeit all remaining amounts. The target opportunities for each named executive officer were payable to the extent earned under the Quarterly Incentive Plan’s performance metrics.

The Performance Metrics and associated Performance Targets with respect to each Performance Period under the Quarterly Incentive Plan, were as follows:

Cumulative Operating Margin⁽¹⁾
(Measured April 1, 2020 through end of applicable Performance Period)

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Compensation Discussion and Analysis

G&A Reduction⁽¹⁾
(Measured July 1, 2020 through end of applicable Performance Period)

Liquidity / Facility Utilization⁽¹⁾
For a Month-End Measurement

For an Intra-Month Measurement

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Compensation Discussion and Analysis

Payouts Under the Quarterly Incentive Plan – In October 2020, the Former Compensation Committee certified the performance results under the Quarterly Incentive Plan for the third quarter of 2020 as follows:

Performance Measure Expense Reduction/Control Operating Margin Liquidity/Facility Utilization G&A Reduction Sustainability (multiple weighted equally): HSE (multiple weighted equally) Combined IR Spill Prevention Rate Net Water Supplied to Agriculture Other (Project Milestones) Weighting Threshold (50% Payout) Target (100% Payout) Maximum (200% Payout) Operational Results Unweighted Payout % Payout as % of Target 35% 25% 30% 2.50% 2.50% 2.50% 2.50% 25.1% 15.0% 0.7% 0.60 99.9996% 240% 0.333 35.3% 5.0% 1.4% 0.50 99.9997% 270% 0.66 43.0% 0% 2.2% 0.40 99.9998% 290% 1.00 51.9% 0% 19.4% 0.00 100.0000% 216% 0.000 200% 200% 200% 200% 200% 0% 0% 70.00% 50.00% 60.00% 5.00% 5.00% 0.00% 0.00% Total Performance Measure Result 190.00%

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Compensation Discussion and Analysis

In February 2021, the New Compensation Committee certified the performance results under the Quarterly Incentive Plan for the fourth quarter of 2020, based solely on the stipulated criteria previously established by the Former Compensation Committee and approved by the bankruptcy court as follows:

Performance Measure Expense Reduction/Control Operating Margin Liquidity/Facility Utilization G&A Reduction Sustainability (multiple weighted equally): HSE (multiple weighted equally) Combined IR Spill Prevention Rate Net Water Supplied to Agriculture Other (Project Milestones) Weighting Threshold (50% Payout) Target (100% Payout) Maximum (200% Payout) Operational Results Unweighted Payout % Payout as % of Target 35% 25% 30% 2.50% 2.50% 2.50% 2.50% 27.7% 17.5% 2.0% 0.60 99.9996% 240% 0.333 40.3% 7.5% 3.9% 0.50 99.9997% 270% 0.667 49.0% 0% 5.9% 0.40 99.9998% 290% 1.00 51.8% 0% 24.1% 0.19 99.9999% 256% 100.000 200% 200% 200% 200% 200% 77% 200% 70.00% 50.00% 60.00% 5.00% 5.00% 1.92% 5.00% Total Performance Measure Result 196.92%

Payouts for the fourth quarter of 2020 were accrued in 2020 and are included as 2020 compensation in the Executive Compensation Tables which follow.

The table below shows the amounts realized by the NEOs under the Quarterly Incentive Plan:

Original 2020 Compensation Program Awards Forfeited – As a condition to receiving any award under the Revised 2020 Compensation Program, the named executive officers were required to waive participation in the Original 2020 Compensation Program’s annual incentive award and forfeit the long-term incentives previously granted in February 2020. However, due to the technicalities of the SEC rules for compensation disclosures, certain Original 2020 Compensation Program awards are still required to be disclosed within the Summary Compensation Table below, even though they were replaced with the new Quarterly Incentive Plan awards.

Payouts Under 2017 Performance Incentive Award – In February 2020, the 2017 cash-based Performance Incentive Awards vested and were paid in cash.  Performance under the award was based 50% on a relative Cost per Boe measure and 50% on a weighted-average VCI metric during the three-year performance period. The Former Compensation Committee certified the following performance under the award:

Cost per Boe Portion:  This portion was based on the change in CRC’s Cost per Boe of production compared to the change in Cost per Boe of production for the peer group. Cost per Boe is the sum of the production costs and general and administrative expenses, both measured

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Compensation Discussion and Analysis

on a per Boe basis for the applicable period.  CRC’s three-year weighted average Cost per Boe increased by 20.6%, while the peer groups’ three-year average weighted Cost per Boe decreased by 2.6%, resulting in a net 23.2% increase. Under the terms of the award, this performance resulted in the following payout factor of 0% of target for the Cost per Boe portion of the award as shown below:

Cumulative VCI Portion:  This portion was based on the weighted-average VCI results for 2017, 2018 and 2019.  The weighted-average VCI result of 1.42 produced a payout of 160% of target for the cumulative VCI portion of the award, as shown below:

Payout Calculation:  The resulting payout was 80% of target incentive amounts, calculated as follows:

[50% * 0% (Cost per Barrel)] + [50% * 160% (Cumulative VCI)]

The following amounts were certified and paid in 2020 to the NEOs under the terms of these 2017 Performance Incentive Awards:

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Compensation Discussion and Analysis

Other Compensation and Benefits

In addition to the components of the executive compensation program described above, we provided the following programs to our NEOs during the 2020 year.

Qualified Defined Contribution Plan – All of our employees, including our NEOs, were eligible to participate in a tax-qualified, defined contribution plan. The defined contribution plan provided for periodic cash contributions by us based on annual employee cash compensation and employee-elected deferrals. Employees were permitted to contribute into the plan a percentage of their annual salary and bonus up to the annual limit set by the Internal Revenue Service (“IRS”). Employees were able to direct their account balances to a variety of investments.

Nonqualified Defined Contribution Plans – Substantially all employees, including our NEOs, whose participation in our qualified defined contribution plan was limited by applicable tax laws were eligible to participate in our supplemental savings plan (the “SSP”), a nonqualified defined contribution plan, which provided additional retirement benefits outside of those limitations.

Annual allocations for each participant were generally intended to restore the amounts that would have been contributed to our qualified defined contribution plan but for certain tax law limitations, and certain employer allocations were subject to a vesting schedule that required the completion of three years of service. Vested account balances will be payable following separation from service.

Interest on SSP account balances was allocated monthly to each participant’s account based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor.

In addition, we sponsored a supplemental retirement plan (the “SRP II”), which was established for purposes of the assumption by us of certain liabilities under the Occidental Petroleum Corporation Supplemental Retirement Plan II, including those for all of our NEOs. All account balances under the SRP II were fully vested at all times and are credited with interest on a monthly basis based on the yield on five-year U.S. Treasury Constant Maturities plus 2% converted to a monthly allocation factor. No additional allocations were made under the SRP II other than the crediting of interest.

In order to provide greater financial planning flexibility to participants while not increasing costs under the plan, the SRP II allowed in-service distribution of a participant’s account at a specified age, but not earlier than age 60, as elected by the participant when initially participating in the plan. After a participant receives a specified age distribution, future allocations under the SRP II and earnings on those allocations are to be distributed in the first 70 days of each following year.

Nonqualified Deferred Compensation Plan – Certain management and other highly compensated employees (including each of our NEOs) were eligible to participate in our nonqualified deferred compensation plan (the “DCP”). Under the DCP, participants were able to elect to defer a portion of their base salary and annual bonus for a given year. For the year of deferral, we allocated an additional amount to a participant’s account equal to the sum of 7% (which is immediately vested) and 12% (which is subject to a vesting schedule that required the completion of three years of service) of the compensation deferred by the participant under the DCP to restore amounts that were not contributed to the qualified and nonqualified defined contribution plans due to such deferral of compensation under the DCP. Deferred amounts earned interest based on the yield on five-year U.S. Treasury Constant Maturities based on a monthly frequency plus 2%, converted to a monthly allocation factor. Vested account balances will be payable following separation from service, or upon attainment of a specified age elected by the participant.

Tax Preparation and Financial Planning – Our executives, including each of the NEOs, were eligible to receive reimbursement, up to certain annual limits, for income tax preparation, financial planning and investment advice, including legal advice related to tax and financial matters.

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Compensation Discussion and Analysis

Insurance – We offered a variety of health coverage options to all employees. NEOs participated in these plans on the same terms as other employees. In addition, for executives, including the NEOs, we paid for an annual comprehensive physical examination. We provided all employees with life insurance equal to twice the employee’s base salary. We also provided executives, including the NEOs, with excess liability insurance coverage.

Severance Benefits – We adopted a notice and severance pay plan in May 2020 that, in connection with a qualifying termination of employment that is not due to a change in control, provides for 12 – 24 months (or 18 – 30 months if termination is due to a change in control) of base salary and target annual incentive and other insurance coverage, depending on the executive level of the NEO.

This plan replaced a previous executive severance plan with the same level of benefits that was initially adopted by the Former Board in March 2020. Beginning in February 2019, the Former Compensation Committee began a review of the existing severance benefits for executives with Meridian.  Following the review, the Former Compensation Committee recommended that the Former Board adopt a new Executive Severance Plan in order to:

Employee Stock Purchase Plan – We adopted the California Resources Corporation 2014 Employee Stock Purchase Plan (the “ESPP”), effective January 1, 2015, which provided our employees (including our NEOs) the ability to purchase shares of our common stock at a price equal to 85% of the closing price of a share of our common stock as of either the first day of each offering period or the last day of each offering period, whichever amount was less.

The maximum number of shares of our common stock authorized to be issued pursuant to the ESPP was 1.5 million, subject to adjustment pursuant to the terms of the ESPP. In addition, participants in the ESPP were subject to certain limits on the number of shares that could be purchased in any given year and during any given offering period (a calendar quarter) under the ESPP.

In May 2020, our former Board of Directors terminated the ESPP, with no additional shares to be issued after March 31, 2020.

Corporate Aircraft Use – Executives and directors could use the Company’s fractional interest in aircraft for personal travel, if space was available. The executives and directors reimbursed CRC for personal use of the Company’s fractional interest in aircraft, including any guests accompanying them, at not less than the standard industry fare level rate (which is determined annually by the IRS), or income was imputed and the executive or director was reimbursed for related taxes.

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Compensation Discussion and Analysis

Compensation Objectives and Process

The purpose of our executive compensation program is to allow us to attract, retain, motivate and reward high-performing executives to maximize returns to our stockholders.

Executive Compensation Objectives

Our executive compensation objectives are to:

Compensation Program Best Practices

Our executive compensation program is designed to incorporate compensation and governance best practices and is overseen by a highly engaged Compensation Committee. Our short-term and long-term incentive plans are primarily performance-based and are intended to align with the short- and long-term best interests of stockholders. The New Compensation Committee has engaged in best practices to further align executive pay with Company performance and to ensure good governance in the following ways:

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Compensation Discussion and Analysis

WHAT WE DO We pay for performance. A significant portion of the compensation of our named executive officers is directly linked to the Company’s performance, by way of a compensation structure that includes performance-based annual and long-term incentive awards. We are stockholder-aligned. Annual and long-term incentive awards are based on performance measures that are aligned with the creation of value for our stockholders. A majority of the outstanding long-term incentive awards for our named executive officers are stock-based.  We have “double trigger” change in control provisions. Our change in control arrangements for named executive officers require both the occurrence of a change in control event and termination of employment before applicable vesting of awards occurs. We provide market-competitive compensation. Our compensation program is competitive within our industry and recognizes evolving governance practices, which allows us to attract and retain key talent. We have stock ownership requirements. We maintain stock ownership guidelines for our named executive officers and stock grant delivery mechanics for our directors that require meaningful stock ownership in the Company. We have a clawback policy. Our Compensation Recoupment and Clawback Policy allows the Company to require reimbursement of incentive compensation in certain circumstances. We seek independent advice. The Compensation Committee retains an independent advisor to review executive compensation and provide advice to the Compensation Committee.

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Compensation Discussion and Analysis

Role of Compensation Committee

Our executive compensation program is overseen by our Compensation Committee, with input from our management and outside compensation consultants. In its oversight role, the Compensation Committee is responsible for making compensation decisions involving our CEO and other executive officers and evaluating performance for compensatory purposes.

Role of Management

Our Chairman, CEO and Vice President of Compensation and Benefits provided input to the Compensation Committee with respect to executive compensation, key job responsibilities, achievement of performance objectives and compensation program design. We believe these individuals provide helpful support to the Compensation Committee in these areas given their understanding of our business and personnel, compensation programs and competitive environment. The Compensation Committee is not obligated to accept management’s recommendations with respect to executive compensation matters and meets in executive session to discuss such matters outside of the presence of our management. During 2020, the Former Compensation Committee held one executive session and the New Compensation Committee held one executive session.

Role of Independent Compensation Consultants

The Former Compensation Committee retained Meridian Compensation Partners (“Meridian”) as its independent compensation consultant in January 2015, after considering all factors relevant to Meridian’s independence from our management and members of our Former Compensation Committee and determining that it was independent and without conflicts of interest under the Securities and Exchange Commission rules and the NYSE Listed Company Manual standards.

In 2020, Meridian was responsible for reviewing our executive compensation program, assisting in the design of our original 2020 annual and long-term incentive programs and providing comparative market data and trends on compensation practices and programs based on an analysis of our peer companies and other factors. Representatives of Meridian participated in three meetings of the Former Compensation Committee during 2020 through October 2020, including an executive session without management. Meridian provided no other services to CRC.

In March 2020, the Former Compensation Committee engaged Alvarez & Marsal North America, LLC (“A&M”) to advise them regarding the Revised 2020 Compensation Program.  

The New Compensation Committee retained Lyons Benenson & Company Inc. (“LB&Co”), after considering all factors relevant to LB&Co’s independence from our management and members of our New Compensation Committee and determining that it was independent and without conflicts of interest under the Securities and Exchange Commission rules and the NYSE Listed Company Manual standards. LB&Co advised the New Compensation Committee beginning immediately following our emergence from bankruptcy.

Use of Compensation Data

Over the course of 2020, our Former and New Compensation Committees analyzed the comparative total compensation of our executive officers. To facilitate this analysis, Meridian and LB&Co, respectively, provided the Former and New Compensation Committees, respectively, with comparative Peer Group compensation data that included base salaries, annual incentive opportunities, and long-term incentive opportunities. This information reflected recent publicly available information and other market data. We believe that it provided both our Former and New Compensation Committees with a sufficient basis to analyze the comparative total compensation of our executive officers.

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Compensation Discussion and Analysis

2014 SPIN-OFF √ Occidental determines executive compensation in effect at Spin-off 2015 √ CRC Compensation Committee selects new peer group and designs compensation program 2016 √ Compensation Committee reduces base salaries by 10% during severe downturn √ Compensation Committee applies negative discretion and reduces annual incentive payouts due to severe business conditions √ Compensation Committee reduces long-term incentive grant date values in anticipation of market movement during severe downturn 2017 √ Compensation Committee changes long-term incentive to address retention concerns and equity burn rate with cash-based performance award 2018 √ Compensation Committee selects expanded peer group for 2018 √ Compensation Committee reduces qualitative portion of annual incentive √ Compensation Committee changes long-term performance award to equity-based 2019 √ Compensation Committee reduces number of metrics under Annual Incentive to provide greater focus on key objectives √ Compensation Committee changes long-term performance award metrics to include a relative Total Shareholder Return metric

Stockholder Outreach

Historically, we have regularly requested meetings with several of our stockholders to discuss our governance and executive compensation practices. Due to our restructuring in 2020, we did not do our typical outreach. We received positive feedback on our corporate governance and compensation practices as part of our 2019 stockholder outreach initiative, in particular with regards to the changes we made to our compensation program in 2019, which carried through to our Original 2020 Compensation Program:

We will resume reaching out to stockholders to solicit feedback to ensure that our governance and executive compensation practices align with stockholders’ expectations.

Stockholder Approval of Executive Compensation

Our stockholder advisory vote in 2020 on the compensation paid to our NEOs in 2019, resulted in a 92% approval of such compensation. In adjusting our Original 2020 Compensation Program, the Former Compensation Committee considered the results of last year’s advisory vote on executive compensation and many other factors, including the Former Compensation Committee's assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by Meridian, the Former Compensation Committee's independent compensation consultant, feedback from our stockholder outreach in late 2019 and review of data relating to pay practices of our compensation peer group.

Our Revised 2020 Compensation Program was included in our Joint Plan of Reorganization and approved by the bankruptcy court.

Other Compensation Matters

Stock Ownership Guidelines

We have minimum stock ownership guidelines for senior executives. The target direct and indirect ownership level for the CEO is six times annual base salary, and for the other NEOs, is three times annual base salary. Executives are expected to attain their required ownership levels within five years of assuming their senior executive role. Due to the cancellation of the Company’s stock upon emergence from bankruptcy in October 2020, executives will have five years from the emergence date to attain the minimum stock holdings.

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Compensation Discussion and Analysis

Clawback Policy

Under the Company’s Compensation Recoupment and Clawback Policy, in the event the Company is required to restate its financial statements, the Company has the right to require in certain circumstances, and to the extent permitted by applicable law, the reimbursement of incentive compensation by a named executive officer whose fraud or misconduct either caused or contributed to the need for such restatement. Such incentive compensation generally includes any cash, equity, equity-based or other award under our long-term incentive plan, or an annual bonus or annual incentive plan of the Company.

Anti-Hedging and Anti-Pledging Policy

Under the Company’s Insider Trading Policy, all directors, officers and employees, including the named executive officers, are prohibited from hedging, buying or selling options, engaging in short sales, or trading prepaid variable forwards, equity swaps, exchange funds, forward-sale contracts, collars or other derivatives or monetizations on Company securities. In addition, all directors, officers and employees, including named executive officers, may not pledge or mortgage Company securities as collateral for a loan, or hold Company securities in a margin account.

Compensation Risk Management

Our compensation programs are designed to motivate and reward our employees for their performance during the current year and over the long term, and for taking appropriate business risks to enhance CRC’s business performance. The Compensation Committee has analyzed CRC’s employee compensation programs and policies and believes that they are not reasonably likely to have a material adverse effect on CRC. CRC’s compensation programs do not encourage unnecessary or excessive risk-taking and any potential risk that the executive compensation program could influence behavior that would be inconsistent with the overall interests of CRC and its stockholders is mitigated by several factors:

Tax Considerations

Together with the Compensation Committee, the Company carefully reviews and takes into account current tax law and regulations as they relate to the design of our compensation programs and related decisions.  Prior to the enactment of tax reform legislation signed into law on December 22, 2017, which was originally known as the Tax Cuts and Jobs Act (the “TCJA”), Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), limited a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain NEOs, unless the compensation was performance-based as defined under federal tax laws. Subject to certain transitional rules, the TCJA has repealed the exemption for performance-based compensation from the deduction limitation of Section 162(m) of the Code for taxable years beginning after 2017. The Compensation Committee historically reviewed and considered the deductibility of our executive compensation programs; and provided compensation that was not fully deductible when necessary to retain and motivate certain executive officers and when it was in the best interest of the Company and our stockholders. To the extent compensatory awards are not covered by the transitional rules, the performance-based compensation exception to the deduction limitation under Section 162(m) of the Code will no longer be available to the Company and annual compensation paid to certain executives in excess of $1 million will not be deductible.

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Compensation Committee Report

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement relating to the 2021 Annual Meeting of Stockholders.

Compensation Committee,

James N. Chapman

William B. Roby

Brian Steck

March 9, 2021

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Executive Compensation Tables

Executive Compensation Tables

Summary Compensation Table (SCT)