California Resources, State's Largest Driller, Files for Bankruptcy
July 15 2020 - 11:03PM
Dow Jones News
By Alexander Gladstone
California Resources Corp., the state's largest oil driller,
filed for bankruptcy protection on Wednesday to carry out a
prearranged restructuring proposal that would wipe out more than $5
billion in debt and equity interests.
The Los Angeles-based company became the latest U.S. energy
producer felled by slumping oil prices, filing a chapter 11
petition in the U.S. Bankruptcy Court in Houston to restructure
debts mostly stemming from a 2014 spinoff from Occidental Petroleum
Corp.
California Resources had struggled with the prolonged slump in
energy prices even before the Covid-19 pandemic. But the
coronavirus, combined with a price war between Russia and Saudi
Arabia, drove down oil prices in recent months, forcing several
large U.S. producers to seek concessions from creditors or file for
bankruptcy.
In response to the pricing collapse, California Resources shut
in approximately 5,000 barrels of oil equivalent a day in
production in early May, adopting an approach taken by several of
its peers. While California Resources owns some shale assets, it is
primarily a producer of conventional oil and gas, operating in the
Los Angeles, San Joaquin, Ventura, and Sacramento drilling
basins.
The Wall Street Journal reported in May that California
Resources was in talks with creditors about a possible bankruptcy
filing.
California Resources said its restructuring strategy, which is
backed by a majority of top lenders, would eliminate debt and
mezzanine equity interests and consolidate the company's ownership
of a large cryogenic gas plant and a 550-megawatt natural gas power
plant in the state.
Those facilities are co-owned by the company and Ares Management
LP, which has agreed under the chapter 11 proposal to contribute
its stake in the joint venture in exchange for debt and equity
interests in the reorganized company.
A group of creditors has agreed to supply $1.1 billion in
bankruptcy financing to keep the company afloat through the chapter
11 proceedings, California Resources said. Creditors are also
backing a $450 million equity offering and providing a $200 million
loan to ease the company's exit from bankruptcy.
Write to Alexander Gladstone at alexander.gladstone@wsj.com
(END) Dow Jones Newswires
July 15, 2020 22:48 ET (02:48 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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