Kimmeridge Energy Management Company LLC has amassed a stake in California Resources Corp and is pushing the oil and gas producer to make changes that include selling some acreage to real estate developers, people familiar with the matter said.

The energy-focused activist investment firm owns more than 3 million shares in California Resources, equivalent to about a 4% stake, and has been in talks with the company's management in recent weeks about how to boost its valuation, the sources said.

The ideas pushed by Kimmeridge include divesting California Resources' Huntington Beach acreage in Orange County, which it believes could fetch around $800 million if sold for conversion to residential real estate, according to the sources.

Kimmeridge has also told California Resources it should focus more on its nascent carbon capture and sequestration business (CCS).

As well as helping California Resources reach its own net zero targets, the investor thinks the firm would be well placed to profit from the technology's increased deployment in the state, due to the firm's extensive land footprint and its in-depth knowledge of California's geology, the sources added.

The sources spoke on condition of anonymity to discuss confidential information. California Resources was not immediately available for comment. A spokesperson for Kimmeridge declined to comment.

California Resources' shares have languished compared to peers this year, despite high U.S. crude and natural gas prices, as investors put money into other producers with higher growth rates that can capture this commodity price upswing.

Much of California Resources' oil and gas comes from older wells which have low-but-steady production.

The stock has risen 7.7% so far this year, giving it a market capitalization of $3.5 billion, compared with the 41.4% jump in the S&P energy index.

Earlier this month, the Long Beach-based company announced plans to form a joint venture with Brookfield Renewable focused on developing CCS projects across California. Brookfield is putting up $500 million for the venture, with the potential for another $1 billion of capital. Kimmeridge is supportive of the move, the sources said.

California Resources was formed in 2014 after Occidental Petroleum Corp spun off its California business into a separate entity. Weighed by slumping oil prices at the onset of the pandemic and a $5 billion debt pile, it filed for Chapter 11 bankruptcy in July 2020, emerging from it three months later.