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California Resources Corp. Files for Bankruptcy

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California Resources Corp. has filed for bankruptcy.

The company has entered into a RSA with holders of approximately 84% of the Company’s 2017 term loans, 51% of the Company’s 2016 term loans and its Elk Hills midstream joint venture partner, Ares Management.

Ares has agreed to contribute its equity interests in Elk Hills Power, LLC, which is a joint venture between CRC and a portfolio company of Ares. At emergence, Ares would exchange its joint venture interests for equity and new CRC notes in the reorganized company subject to the terms and conditions of the RSA. The joint venture’s cryogenic gas plant, 500-megawatt power plant and related assets will continue to operate in the ordinary course and upon emergence will be wholly-owned by CRC.

The Company has received a commitment of over $1 billion in debtor-in-possession (DIP) financing from certain of its creditors to support its operations through the Chapter 11 process. When approved by the Court, the DIP financing would also be used to fully refinance the Company’s 2014 Revolving Credit Facility. The new DIP financing, combined with CRC’s long-standing strategy to operate within cash flow and existing cash on the balance sheet, will enable CRC to continue operating safely and in the ordinary course during the restructuring process.

CRC CEO Todd Stevens commented: “We have consistently operated within cash flow, significantly reducing the outsized debt burden we inherited from Occidental Petroleum at our December 2014 spin-off. However, today’s unprecedented market conditions, including oversupply and reduced demand due to COVID-19, require that we further reduce our debt through a Chapter 11 process. CRC will emerge from Chapter 11 as a strong, healthy company committed to providing Californians with safe, affordable, reliable and locally produced energy, good-paying jobs and millions of dollars in annual government revenues for vital public services for many years to come. We take this role very seriously, and our commitment to ensuring a safe, diverse and resilient supply of energy from California resources will not change.

“CRC’s portfolio of world-class, low-decline assets and our integrated infrastructure provide us significant operational flexibility which, coupled with our commitment to displace imported energy with our oil and natural gas production under the most stringent regulations, continues to distinguish us from many oil and gas operators. We have a track record of disciplined financial and operational decisions and, with our strong balance sheet, we won’t need to rely on higher commodity prices to be successful.“