Royal Bank of Canada (RBC) Capital Markets has included California Resources (CRC.N) in its top-performing energy stocks portfolio. The investment bank states that due to its carbon capture capabilities and industry classification, this energy company has a "relatively attractive" valuation and strong growth potential, thus being added to RBC's global energy best ideas list. RBC analyst Greg Pardy stated in a report to clients on September 3rd, "Compared to its peers, the company has more catalyst opportunities and multiple recent events that could unlock future [carbon management business] potential." RBC has a target price of $65 for CRC, indicating a 25% upside potential. The stock has had a relatively narrow trading range this year and is currently down 4%, reflecting the decline in energy prices.

Although the stocks in RBC's global energy best ideas list declined by 2.4% overall last month, while the iShares S&P Global Energy Sector ETF only fell by 0.5%, the stock portfolio has risen by 182% since its establishment in February 2013. Meanwhile, the ETF has returned approximately 40% over the same period. The industry has risen by 6.5% this year, underperforming the overall market. However, RBC expects CRC stock to outperform the industry in the next 12 months.

California Resources recently enhanced its fundamentals through the acquisition of Aera Energy for $2.1 billion. According to RBC analysts, this transaction has "significantly expanded" the company's free cash flow per share and helped expand its oil, gas, and carbon management divisions.

The investment bank's analysts also emphasized that California's first Carbon Capture and Storage (CCS) permit for six Class I facilities may be issued to CRC by the end of October. This permit would enable CRC to capture the carbon dioxide emissions from power plants and inject them into depleted oil and gas fields. The analysts stated, "This could also drive discussions and potential agreements related to CRC's zero-carbon data center opportunities. We believe this initiative could create significant value for CRC shareholders, in addition to potentially expanding its investor base."