(Reuters) - California Resources Corp (N:CRC) filed for Chapter 11 on Wednesday after defaulting on interest payments, becoming the latest U.S. energy company to seek bankruptcy protection in recent months following the slump in oil prices.
The oil and gas producer reached an agreement for $1.1 billion debtor-in-possession financing package, which also refinances the company's current revolving loan facility.
The oil driller filed for pre-arranged restructuring in the bankruptcy court in the Southern District of Texas, and listed both assets and liabilities in the range of $1 billion to $10 billion.
California's biggest oil and natural gas producer has been weighed down by massive borrowings since its spinoff from Occidental Petroleum (NYSE:OXY) in 2014.
"We have consistently operated within cash flow, significantly reducing the outsized debt burden we inherited from Occidental ... 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," Chief Executive Officer Todd Stevens said.
Weak demand due to the coronavirus pandemic and a price war between major oil producers resulted in a historic plunge in oil prices.
Like many of its peers, California Resources cut its production and capital spending, and also told investors in May that the company might not be able to continue operations without restructuring its debt.
The bankruptcy filing follows debt-laden major shale independents such as Chesapeake Energy (NYSE:CHK) and Whiting Petroleum (N:WLL), which succumbed to one of worst crisis that the oil industry ever faced.
The pre-arranged restructuring will eliminate more than $5 billion of debt, and term lenders have agreed to backstop a $450 million equity rights offering and a $200 million second lien exit financing facility, California Resources said.
Sullivan & Cromwell is acting as the legal adviser, while Alvarez & Marsal serves as financial adviser to the restructuring process.