California Resources (CRC) - Get Report filed for protection from creditors in Chapter 11 of bankruptcy law after the oil and gas producer was overwhelmed by imploding oil prices brought on by the coronavirus-pandemic shutdown.
The Santa Clara, Calif., company, which filed a prearranged restructuring in U.S. Bankruptcy Court for the Southern District of Texas, said it had reached an agreement for a $1.1 billion debtor-in-possession financing package.
The restructuring will eliminate more than $5 billion of debt. Term lenders have agreed to backstop a $450 million equity-rights offering and a $200 million second-lien exit-financing facility
"We have consistently operated within cash flow, significantly reducing the outsized debt burden we inherited from Occidental Petroleum (OXY) - Get Report at our December 2014 spinoff," Todd Stevens, CRC's president and chief executive, said in a statement.
However, today’s unprecedented market conditions, including oversupply and reduced demand due to covid-19, require that we further reduce our debt through a Chapter 11 process."
In May, CRC said it was adding a "going concern" warning its its risk factors, due to the covid-19 outbreak's impact on crude oil prices.
The company joins more than 200 oil explorers that have filed for court protection since 2015, and more may be coming, Bloomberg reported.
Denbury Resources (DNR) - Get Report and Noble Corp. (NE) - Get Report missed their July debt payments, and Chaparral Energy (CHAP) - Get Report asked lenders for more time, setting the company on course for a possible default.
The coronavirus outbreak has severely limited travel, resulting in an oversupply of oil, tumbling prices and energy-company bankruptcies.
Last month, the International Energy Agency said global oil demand was unlikely to return to prepandemic levels for at least another two years, following the biggest downturn in oil-market history.