How a $6 Billion Inheritance Drove California’s Top Oil Producer to Bankruptcy

California Resources Corporation (CRC), established in 2014 as a spin-off from Occidental Petroleum, was tasked with managing California’s largest oil and gas operations while burdened with $6 billion in inherited debt. Despite efforts by leadership, including CEO Todd Stevens, to reduce debt and stabilize operations, CRC faced severe headwinds from collapsing oil prices between 2014 and 2016. The company’s precarious position worsened in 2020 when a global oil price war and the onset of the COVID-19 pandemic drastically reduced energy demand and revenue. With cash flow drying up and major debt maturities looming, CRC filed for Chapter 11 bankruptcy on July 15, 2020. The pre-arranged restructuring wiped out over $5 billion in debt and canceled all existing equity, wiping out shareholders. The company emerged just three months later with a strengthened balance sheet, secured $1.1 billion in new financing, and issued new stock, with former secured lenders taking majority ownership. Stevens stepped down at the end of 2020, succeeded by Mark A. McFarland. CRC continues to operate as California’s largest oil and gas producer, maintaining a significant economic footprint across the state’s major basins, supporting thousands of jobs, and contributing nearly $3.4 billion in taxes and revenues since 2014. The company also plays a critical role in local economies, particularly in Kern County, where it is a top employer and taxpayer, funding public services like law enforcement and education. At the same time, CRC faces intense scrutiny over environmental responsibilities, including methane emissions and the financial assurance for decommissioning idle wells. A 2023 regulatory decision not to enforce cleanup funding during its merger with Aera Energy sparked backlash from environmental groups, who warn of taxpayer liability. CRC has responded with initiatives in carbon capture and storage (CCS), aiming to capture 5 million tonnes of CO2 annually by 2027 and achieve net-zero emissions across Scopes 1, 2, and 3 by 2045. The company also invests in community programs, including $2.5 million in Kern County initiatives and partnerships with organizations like the Cesar Chavez Foundation, supporting education and public health. Despite California’s aggressive climate policies, the state remains heavily reliant on oil and gas—ranking second in gasoline consumption and first in jet fuel use in 2023—with over 60% of its crude supply imported from foreign sources. CRC argues that local production under strict California regulations is preferable to outsourcing to regions with weaker environmental oversight. The 2024 merger with Aera Energy solidifies CRC’s dominance in the state’s energy sector, but its future hinges on balancing economic necessity with environmental accountability. CRC’s journey reflects the broader challenges of the energy transition: a story of corporate resilience, market volatility, and the human cost of industrial transformation. It underscores the complex interplay between energy security, environmental stewardship, and community dependence in one of the most regulated and progressive states in the nation. As California navigates its clean energy future, CRC remains a pivotal, controversial, and enduring player in the state’s evolving energy narrative.

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