Business Context and Reporting Period
Company: California Resources Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: February 23, 2016
Event: Entry into a Material Definitive Agreement (Third Amendment to Credit Agreement).
Key Financial Metrics and Debt Structure
As of January 31, 2016, the company reported the following debt and liquidity positions under the amended terms:
- Outstanding Debt: Approximately $1.7 billion (revolving credit and term loan facilities).
- Outstanding Letters of Credit: $42 million.
- Amended Borrowing Base: Reduced to $2.3 billion.
- Revolving Facility Commitments: Reduced to $1.6 billion.
- Estimated Availability: Approximately $560 million (subject to financial covenant compliance).
- Interest Rates: LIBOR loans at LIBOR + 2.50% to 3.50%; ABR loans at LIBOR + 1.50% to 2.50% (based on utilization).
Material Changes and Covenant Requirements
The amendment imposes significant new financial performance covenants and operational restrictions effective through December 31, 2016:
- Borrowing Base Redetermination: Semi-annual reviews required on May 1 and November 1, commencing May 1, 2016.
- Cumulative Minimum EBITDAX (2016):
- Q1: $55 million
- Q2: $130 million
- Q3: $190 million
- Q4: $250 million
- Trailing Twelve-Month Interest Coverage Ratio:
- Q1 2016: 2.00:1.00
- Q2 2016: 1.50:1.00
- Q3 2016: 1.25:1.00
- Q4 2016: 0.70:1.00
- Q1 2017: Reverts to 2.00:1.00
- Leverage Ratio: The maximum first lien senior secured leverage ratio of 2.25:1.00 is suspended beginning Q1 2017.
Restrictions, Guidance, and Unusual Items
The amended agreement introduces strict limitations on capital allocation and liquidity management:
- Dividend Restriction: Prohibition on paying dividends or making distributions to common stockholders.
- Capital Investment Cap: Restricted from making capital investments exceeding $100 million during 2016.
- Cash Sweep: Required to apply cash on hand in excess of $150 million to repay the revolving credit facility.
- Asset Monetization Proceeds: 100% of proceeds from certain asset sales must repay loans. Up to 40% of proceeds from non-borrowing base asset sales may be used to repurchase notes at a significant discount.
- Additional Indebtedness: Permitted to incur up to $1 billion in junior lien debt (60% proceeds to repay credit facility) and up to $200 million in first-priority lien debt on non-borrowing base properties for note repurchases.
Note: The filing does not provide specific revenue, profit, or cash flow figures for the period, nor does it contain forward-looking guidance beyond the covenant thresholds.
Investor Verification Checklist
- Verify the company's ability to meet the cumulative EBITDAX targets of $55 million by the end of Q1 2016.
- Confirm the current cash balance to ensure it remains below the $150 million threshold to avoid mandatory debt repayment.
- Monitor the semi-annual borrowing base redetermination scheduled for May 1, 2016, which could further reduce availability.
- Assess the impact of the $100 million capital investment cap on future production growth.
- Review the interest coverage ratio trajectory to ensure compliance with the declining thresholds through Q4 2016.