California Resources Corporation (CRC) entered into a restructuring support agreement with Ares Management along with holders of approximately 84% of CRC’s 2017 term loans and 51% of CRC’s 2016 term loans.
To implement the terms of the agreement, CRC and certain of its subsidiaries filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. Upon plan confirmation, the implementation of the agreement would reduce CRC’s debt substantially, enabling the company to operate through the current downturn in commodity prices while establishing a financial foundation.
“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,” Todd A. Stevens, president and CEO of CRC, said. “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.
“I want to thank our talented and dedicated employees who have continued to go above and beyond, safely producing essential products that underpin our way of life despite COVID-19 and extreme and unprecedented economic and industry challenges.”
Ares agreed to contribute its equity interests in Elk Hills Power, 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 restructuring support agreement. 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.
CRC received a commitment of more than $1 billion in debtor-in-possession 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.
CRC has filed customary motions seeking court approval to pay owner royalties, employee wages and benefits, and certain vendors and suppliers and to meet its obligations in the ordinary course of business.
CRC is an independent California-based oil and natural gas exploration and production company.