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California Resources Corp. is said to consider bankruptcy as debt mounts amid oil war

Pump jacks in the Elk Hills Oil Field
Pump jacks operate in California Resources Corp.'s Elk Hills Oil Field last year.
(Robert Gauthier / Los Angeles Times)

California Resources Corp. is seriously considering bankruptcy after the troubled oil and gas company’s efforts to rework its debt out of court fell short amid a crash in energy prices, according to people with knowledge of the matter.

Management is exploring alternatives to address its nearly $5 billion of debt after the Santa Clarita-based company pulled a proposed bond exchange because of poor market conditions, said the people, who weren’t authorized to comment publicly.CRC’s debt starts maturing next year, and about $74 million of interest is due in June.

“We have significant operating flexibility and are focusing on controlling what we can control, including reducing our capital program and operating costs,” the company said Friday in a statement. “We will continue to consider all options with our advisors as we work through this unprecedented downturn and do not intend to provide updates on on-going discussions.”

The company’s shares plummeted as much as 62% on Friday, before trading was halted, for the biggest intraday tumble since they began trading in late 2014.

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California’s biggest oil producer has struggled to manage its debt since it was spun off from Occidental Petroleum Corp. in late 2014, during the early stages of a crash in crude prices. Recently, low cash and tighter state regulations have added to the pressure, with more than 60% of its $1-billion credit facility drawn, according to Bloomberg Intelligence.

Further pressure came this month from the effects of crashing oil demand over the coronavirus and the war for market share between Saudi Arabia and Russia, which has seen global crude prices tumble. CRC’s bonds plunged to around 6 cents on the dollar this month after oil fell more than 50% to the low $20 range per barrel.

The producer is getting advice from Perella Weinberg Partners, according to a prior statement; Perella declined to comment. The senior lenders are working with Davis Polk & Wardwell and Evercore Inc., the Wall Street Journal previously reported. Representatives for those firms didn’t immediately respond to a request for comment.

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