California Resources Corp., the state’s largest oil driller, with offices in the Santa Clarita Valley, filed for bankruptcy in an effort to help reduce its debt “substantially,” officials announced Wednesday.
The move, which joins other U.S. companies in filing for Chapter 11 due to this year’s crash in oil prices, is expected to help the oil and gas producer “operate safely through the current downturn in commodity prices and establishing a solid financial foundation to enhance future value creation,” according to a company statement.
To help reduce its debt, the company and its key creditors have agreed on a comprehensive balance sheet restructuring to eliminate the debt it inherited after the December 2014 spinoff from Occidental Petroleum.
The prearranged deal will:
- Eliminate more than $5 billion of debt and mezzanine equity interest and consolidate ownership of the Elk Hills power plant and cryogenic gas plant.
- Bolster its liquidity by $1.1 billion through debtor-in-possession financing, which refinances the company’s full revolving loan facility.
- Backstop a $450 million equity rights offering and a $200 million second lien exit financing facility with term lenders.
The agreement must first receive court approval, but company officials expressed confidence in the plan to emerge stronger.
“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,” Todd A. Stevens, president and CEO of the oil company, who has served on the boards of local organizations such as Henry Mayo Newhall Hospital and the Boys & Girls Club of SCV, said in a prepared statement.