California Resources to extend 2014 credit agreement’s maturity, relax covenants

By Devika Patel

Knoxville, Tenn., Nov. 6 – California Resources Corp. said in a Monday press release that it has received approval from its lender group to amend its 2014 credit facility.

The company is proposing to extend the maturity date of the 2014 credit facility until 2021, amend the facility’s terms to allow California Resources to repurchase up to $100 million of junior debt and reduce the commitments under the 2014 credit facility to $1 billion and those under the 2014 term loan to $200 million. In addition, the proposed amendment would provide covenant relief.

“Our bank group has reaffirmed our $2.3 billion borrowing base and continues to provide strong support as we received approval on a proposed amendment of our credit agreement,” president and chief executive officer Todd A. Stevens said on the company’s third quarter earnings conference call on Monday.

“The amendment, which was approved by 100% of our bank group subject to certain conditions, will extend the term of the bank facility by two years to 2021 and relax the financial covenants to provide additional financial flexibility,” Stevens said.

The amendment, if completed, would be contingent upon certain conditions, including the company settling a new term loan for at least $900 million and maintaining a minimum liquidity at closing of $500 million.

All of the company’s 29 lenders have signed off on this plan.

“We have approval on an amendment from all 29 of the lenders and financial institutions that extend credit to CRC through our 2014 credit facility,” senior executive vice president and chief financial officer Marshall D. Smith said on the call.

“This amendment will extend our bank facilities two years to 2021 and modify and relax key covenants.

“Once signed, the amendment will become effective after certain conditions are met, including completion of a new money raise.

“Our borrowing base was also recently reaffirmed at $2.3 billion.

“Our ability to work constructively with our lenders to maintain our borrowing base, extend our maturity and receive improved covenant flexibility validates the endorsement we have from our lenders and underscores their deep understanding of the considerable value of our asset base and our resilient business model,” Smith said.

Proceeds of the new term loan would be used to repay some of the borrowings under the 2014 credit facility.

The company also continues to work toward deleveraging its balance sheet.

“Our focus is directed towards deleveraging,” Stevens said.

“We continue to deliver on our promise to live within our cash flow while also deleveraging our balance sheet to enhance our financial flexibility.

“Strengthening our balance sheet has been and remains CRC’s highest business priority.”

“During the quarter, we used free cash flow to reduce our bank debt by $30 million and are proactively taking steps to extend our debt maturities,” Stevens said.

“Our preference [is] to deal with our balance sheet in order of maturity and to ultimately extend our runway,” Smith added.

Adjusted EBITDAX for the third quarter was $181 million, up 10% from $164 million in the prior year period. EBITDAX was also up $23 million from the prior quarter.

The company reported $35 million of free cash flow.

The company’s debt balance at the end of the quarter was $5.1 billion, down from $5.2 billion a year ago.

California Resources is a Los Angeles-based oil and gas exploration and production company.

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