California Resources, State's Largest Driller, Files for Bankruptcy

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 [e-mail]

(END) Dow Jones Newswires

July 15, 2020 22:48 ET (02:48 GMT)

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