California Resources Said to Mull Bankruptcy as Debt Mounts

(Bloomberg) -- 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 Los Angeles-based company pulled a proposed bond exchange due to poor market conditions, said the people, who weren’t authorized to comment publicly. California Resources’ 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 for the biggest intraday tumble since they began trading in late 2014, before trading was halted.

California’s biggest oil producer has struggled to manage its debt since its spinoff 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 impact of crashing oil demand due to the coronavirus and the war for market share between Saudi Arabia and Russia, which has seen global crude prices tumble. California Resources’ bonds plunged to around 6 cents on the dollar this month after oil fell more than 50% to the low $20 range.

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.

©2020 Bloomberg L.P.