Delaware
(State or other jurisdiction of
incorporation or organization)
|
|
46-5670947
(I.R.S. Employer
Identification No.)
|
|
|
|
9200 Oakdale Avenue, Suite 900
Los Angeles, California
(Address of principal executive offices)
|
|
91311
(Zip Code)
|
Shares of common stock outstanding as of September 30, 2016
|
41,217,175
|
|
Page
|
|
Part I
|
|
|
|
|
|
Item 1
|
Financial Statements (unaudited)
|
|
|
Consolidated Condensed Balance Sheets
|
|
|
Consolidated Condensed Statements of Operations
|
|
|
Consolidated Condensed Statements of Comprehensive Income
|
|
|
Consolidated Condensed Statements of Cash Flows
|
|
|
Notes to Consolidated Condensed Financial Statements
|
|
Item 2
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
General
|
|
|
Business Environment and Industry Outlook
|
|
|
Seasonality
|
|
|
Operations
|
|
|
Fixed and Variable Costs
|
|
|
Financial and Operating Results
|
|
|
Balance Sheet Analysis
|
|
|
Statement of Operations Analysis
|
|
|
Liquidity and Capital Resources
|
|
|
Cash Flow Analysis
|
|
|
2016 Capital Program
|
|
|
Lawsuits, Claims, Contingencies and Commitments
|
|
|
Significant Accounting and Disclosure Changes
|
|
|
Safe Harbor Statement Regarding Outlook and Forward-Looking Information
|
|
Item 3
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 4
|
Controls and Procedures
|
|
|
|
|
Part II
|
|
|
|
|
|
Item 1
|
Legal Proceedings
|
|
Item 1A
|
Risk Factors
|
|
Item 5
|
Other Disclosures
|
|
Item 6
|
Exhibits
|
Item 1.
|
Financial Statements (unaudited)
|
|
September 30,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
CURRENT ASSETS
|
|
|
|
||||
|
|
|
|
||||
Cash and cash equivalents
|
$
|
10
|
|
|
$
|
12
|
|
Trade receivables, net
|
202
|
|
|
200
|
|
||
Inventories
|
61
|
|
|
58
|
|
||
Other current assets
|
83
|
|
|
168
|
|
||
Total current assets
|
356
|
|
|
438
|
|
||
|
|
|
|
||||
PROPERTY, PLANT AND EQUIPMENT
|
20,905
|
|
|
20,996
|
|
||
Accumulated depreciation, depletion and amortization
|
(14,952
|
)
|
|
(14,684
|
)
|
||
Total property, plant and equipment
|
5,953
|
|
|
6,312
|
|
||
|
|
|
|
||||
OTHER ASSETS
|
23
|
|
|
303
|
|
||
|
|
|
|
||||
TOTAL ASSETS
|
$
|
6,332
|
|
|
$
|
7,053
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
||||
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
74
|
|
|
$
|
100
|
|
Accounts payable
|
205
|
|
|
257
|
|
||
Accrued liabilities
|
379
|
|
|
222
|
|
||
Current income taxes
|
—
|
|
|
26
|
|
||
Total current liabilities
|
658
|
|
|
605
|
|
||
|
|
|
|
||||
LONG-TERM DEBT - PRINCIPAL AMOUNT
|
5,173
|
|
|
6,043
|
|
||
|
|
|
|
||||
DEFERRED GAIN AND ISSUANCE COSTS, NET
|
410
|
|
|
491
|
|
||
|
|
|
|
||||
OTHER LONG-TERM LIABILITIES
|
584
|
|
|
830
|
|
||
|
|
|
|
||||
EQUITY
|
|
|
|
||||
|
|
|
|
||||
Preferred stock (20 million shares authorized at $0.01 par value) no shares outstanding at September 30, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
||
Common stock (200 million shares authorized at $0.01 par value) outstanding shares (September 30, 2016 - 41,217,175 and December 31, 2015 - 38,818,048)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
4,841
|
|
|
4,782
|
|
||
Accumulated deficit
|
(5,327
|
)
|
|
(5,683
|
)
|
||
Accumulated other comprehensive loss
|
(7
|
)
|
|
(15
|
)
|
||
|
|
|
|
||||
Total equity
|
(493
|
)
|
|
(916
|
)
|
||
|
|
|
|
||||
TOTAL LIABILITIES AND EQUITY
|
$
|
6,332
|
|
|
$
|
7,053
|
|
|
|
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
REVENUES AND OTHER
|
|
|
|
|
|
|
|
||||||||
Oil and natural gas net sales
|
$
|
424
|
|
|
$
|
520
|
|
|
$
|
1,157
|
|
|
$
|
1,687
|
|
Net derivative (losses) gains
|
(14
|
)
|
|
68
|
|
|
(157
|
)
|
|
50
|
|
||||
Other revenue
|
46
|
|
|
38
|
|
|
95
|
|
|
100
|
|
||||
Total revenues and other
|
456
|
|
|
626
|
|
|
1,095
|
|
|
1,837
|
|
||||
|
|
|
|
|
|
|
|
||||||||
COSTS AND OTHER
|
|
|
|
|
|
|
|
||||||||
Production costs
|
211
|
|
|
246
|
|
|
583
|
|
|
730
|
|
||||
General and administrative expenses
|
58
|
|
|
129
|
|
|
186
|
|
|
290
|
|
||||
Depreciation, depletion and amortization
|
137
|
|
|
253
|
|
|
422
|
|
|
757
|
|
||||
Taxes other than on income
|
37
|
|
|
42
|
|
|
118
|
|
|
150
|
|
||||
Exploration expense
|
3
|
|
|
5
|
|
|
13
|
|
|
29
|
|
||||
Interest and debt expense, net
|
95
|
|
|
82
|
|
|
243
|
|
|
244
|
|
||||
Other expenses, net
|
29
|
|
|
23
|
|
|
45
|
|
|
74
|
|
||||
Total costs and other
|
570
|
|
|
780
|
|
|
1,610
|
|
|
2,274
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net gain on early extinguishment of debt
|
660
|
|
|
—
|
|
|
793
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
546
|
|
|
(154
|
)
|
|
278
|
|
|
(437
|
)
|
||||
Income tax benefit
|
—
|
|
|
50
|
|
|
78
|
|
|
165
|
|
||||
NET INCOME (LOSS)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share of common stock
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
13.45
|
|
|
$
|
(2.72
|
)
|
|
$
|
8.97
|
|
|
$
|
(7.10
|
)
|
Diluted
|
$
|
13.06
|
|
|
$
|
(2.72
|
)
|
|
$
|
8.79
|
|
|
$
|
(7.10
|
)
|
|
|
|
|
|
|
|
|
||||||||
Dividends per common share
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
—
|
|
|
$
|
0.03
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income (loss)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
Other comprehensive income (loss) items:
|
|
|
|
|
|
|
|
||||||||
Pension and postretirement losses
(a)
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(7
|
)
|
||||
Reclassification to income of realized losses on pension and postretirement
(b)
|
2
|
|
|
6
|
|
|
8
|
|
|
11
|
|
||||
Other comprehensive income (loss), net of tax
|
2
|
|
|
2
|
|
|
8
|
|
|
4
|
|
||||
Comprehensive income (loss)
|
$
|
548
|
|
|
$
|
(102
|
)
|
|
$
|
364
|
|
|
$
|
(268
|
)
|
(a)
|
No associated tax for the three and nine months ended
September 30, 2016
. Net of tax of
$3 million
and
$5 million
for the three and nine months ended
September 30, 2015
. See Note 9, Retirement and Postretirement Benefit Plans, for additional information.
|
(b)
|
No associated tax for the three and nine months ended
September 30, 2016
. Net of tax of
$(4) million
and
$(7) million
for the three and nine months ended
September 30, 2015
, respectively. See Note 9, Retirement and Postretirement Benefit Plans, for additional information.
|
|
Nine months ended
September 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
||||
Net income (loss)
|
$
|
356
|
|
|
$
|
(272
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
||||
Depreciation, depletion and amortization
|
422
|
|
|
757
|
|
||
Deferred income tax benefit
|
(78
|
)
|
|
(165
|
)
|
||
Net derivative losses (gains)
|
157
|
|
|
(50
|
)
|
||
Proceeds from settled derivatives
|
86
|
|
|
17
|
|
||
Net gain on early extinguishment of debt
|
(793
|
)
|
|
—
|
|
||
Deferred gain and issuance costs amortization
|
(53
|
)
|
|
—
|
|
||
Other non-cash (gains) losses in income, net
|
53
|
|
|
126
|
|
||
Dry hole expenses
|
—
|
|
|
9
|
|
||
Changes in operating assets and liabilities, net
|
(5
|
)
|
|
(10
|
)
|
||
Net cash provided by operating activities
|
145
|
|
|
412
|
|
||
|
|
|
|
||||
CASH FLOW FROM INVESTING ACTIVITIES
|
|
|
|
||||
Capital investments
|
(45
|
)
|
|
(323
|
)
|
||
Changes in capital investment accruals
|
(5
|
)
|
|
(202
|
)
|
||
Asset divestitures
|
19
|
|
|
—
|
|
||
Acquisitions and other
|
—
|
|
|
(17
|
)
|
||
Net cash used by investing activities
|
(31
|
)
|
|
(542
|
)
|
||
|
|
|
|
||||
CASH FLOW FROM FINANCING ACTIVITIES
|
|
|
|
||||
Proceeds from revolving credit facility
|
1,761
|
|
|
1,345
|
|
||
Repayments of revolving credit facility
|
(1,728
|
)
|
|
(1,224
|
)
|
||
Issuance of term loan
|
990
|
|
|
—
|
|
||
Payments on long-term debt
|
(329
|
)
|
|
—
|
|
||
Debt repurchase and amendment costs
|
(814
|
)
|
|
—
|
|
||
Issuance of common stock
|
4
|
|
|
7
|
|
||
Cash dividends paid
|
—
|
|
|
(8
|
)
|
||
Net cash (used) provided by financing activities
|
(116
|
)
|
|
120
|
|
||
Decrease in cash and cash equivalents
|
(2
|
)
|
|
(10
|
)
|
||
Cash and cash equivalents—beginning of period
|
12
|
|
|
14
|
|
||
Cash and cash equivalents—end of period
|
$
|
10
|
|
|
$
|
4
|
|
NOTE 2
|
ACCOUNTING AND DISCLOSURE CHANGES
|
NOTE 3
|
OTHER INFORMATION
|
|
September 30,
2016
|
|
December 31,
2015
|
||||
|
(in millions)
|
||||||
Materials and supplies
|
$
|
57
|
|
|
$
|
55
|
|
Finished goods
|
4
|
|
|
3
|
|
||
Total
|
$
|
61
|
|
|
$
|
58
|
|
|
September 30,
2016
|
|
December 31,
2015
|
||||
|
(in millions)
|
||||||
2014 First Out Credit Facilities (Secured First Lien)
|
|
|
|
||||
Revolving Credit Facility
|
$
|
772
|
|
|
$
|
739
|
|
Term Loan Facility
|
671
|
|
|
1,000
|
|
||
2016 Second Out Credit Agreement (Secured First Lien)
|
1,000
|
|
|
—
|
|
||
Senior Notes (Secured Second Lien)
|
|
|
|
||||
8% Notes Due 2022
|
2,250
|
|
|
2,250
|
|
||
Senior Unsecured Notes
|
|
|
|
||||
5% Notes Due 2020
|
193
|
|
|
433
|
|
||
5 ½% Notes Due 2021
|
149
|
|
|
829
|
|
||
6% Notes Due 2024
|
212
|
|
|
892
|
|
||
Total Debt - Principal Amount
|
5,247
|
|
|
6,143
|
|
||
Less Current Maturities of Long-Term Debt
|
(74
|
)
|
|
(100
|
)
|
||
Long-Term Debt - Principal Amount
|
$
|
5,173
|
|
|
$
|
6,043
|
|
|
Q4 2016
|
|
FY 2017
|
|
FY 2018
|
||||||
Crude Oil
|
|
|
|
|
|
||||||
Calls:
|
|
|
|
|
|
||||||
Barrels per day
|
25,000
|
|
|
20,500
|
|
|
21,500
|
|
|||
Weighted-average price per barrel
|
$
|
53.62
|
|
|
$
|
53.11
|
|
|
$
|
58.21
|
|
|
|
|
|
|
|
||||||
Puts:
|
|
|
|
|
|
||||||
Barrels per day
|
3,000
|
|
|
14,300
|
|
|
—
|
|
|||
Weighted-average price per barrel
|
$
|
50.00
|
|
|
$
|
48.60
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Swaps:
|
|
|
|
|
|
||||||
Barrels per day
|
39,000
|
|
|
15,000
|
|
|
—
|
|
|||
Weighted-average price per barrel
|
$
|
49.71
|
|
|
$
|
53.64
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Gas
|
|
|
|
|
|
||||||
Swaps:
|
|
|
|
|
|
||||||
Millions British Thermal Units (MMBTU) per day
|
5,500
|
|
|
—
|
|
|
—
|
|
|||
Weighted-average price per MMBTU
|
$
|
3.50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Forward Contracts:
|
|
|
|
|
|
||||||
MMBTU per day
|
—
|
|
|
6,200
|
|
|
—
|
|
|||
Weighted-average price per MMBTU
|
$
|
—
|
|
|
$
|
3.53
|
|
|
$
|
—
|
|
|
September 30, 2016
|
||||||||||||
|
Balance Sheet Classification
|
|
Gross Amounts Recognized at Fair Value
|
|
Gross Amounts Offset in the Balance Sheet
|
|
Net Fair Value Presented in the Balance Sheet
|
||||||
Assets
|
|
|
|
|
|
|
|
||||||
Commodity Contracts
|
Other current assets
|
|
$
|
56
|
|
|
$
|
(31
|
)
|
|
$
|
25
|
|
Commodity Contracts
|
Other assets
|
|
21
|
|
|
(15
|
)
|
|
6
|
|
|||
|
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
|
||||||
Commodity Contracts
|
Accrued liabilities
|
|
(85
|
)
|
|
31
|
|
|
(54
|
)
|
|||
Commodity Contracts
|
Other long-term liabilities
|
|
(89
|
)
|
|
15
|
|
|
(74
|
)
|
|||
Total derivatives
|
|
|
$
|
(97
|
)
|
|
$
|
—
|
|
|
$
|
(97
|
)
|
|
December 31, 2015
|
||||||||||||
|
Balance Sheet Classification
|
|
Gross Amounts Recognized at Fair Value
|
|
Gross Amounts Offset in the Balance Sheet
|
|
Net Fair Value Presented in the Balance Sheet
|
||||||
Assets
|
|
|
|
|
|
|
|
||||||
Commodity Contracts
|
Other current assets
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
87
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
|
|
||||||
Commodity Contracts
|
Accrued liabilities
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Total derivatives
|
|
|
$
|
86
|
|
|
$
|
—
|
|
|
$
|
86
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions, except per-share amounts)
|
||||||||||||||
Basic EPS calculation
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
Net income (loss) allocated to participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss) available to common stockholders
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding - basic
|
40.6
|
|
|
38.3
|
|
|
39.7
|
|
|
38.3
|
|
||||
Basic EPS
|
$
|
13.45
|
|
|
$
|
(2.72
|
)
|
|
$
|
8.97
|
|
|
$
|
(7.10
|
)
|
|
|
|
|
|
|
|
|
||||||||
Diluted EPS calculation
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
Net income (loss) allocated to participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net loss available to common stockholders
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding - basic
|
40.6
|
|
|
38.3
|
|
|
39.7
|
|
|
38.3
|
|
||||
Dilutive effect of potentially dilutive securities
|
1.2
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
||||
Weighted-average common shares outstanding - diluted
|
41.8
|
|
|
38.3
|
|
|
40.5
|
|
|
38.3
|
|
||||
Diluted EPS
|
$
|
13.06
|
|
|
$
|
(2.72
|
)
|
|
$
|
8.79
|
|
|
$
|
(7.10
|
)
|
|
Three months ended September 30,
|
||||||||||||||
|
2016
|
|
2015
|
||||||||||||
|
Pension
Benefit |
|
Postretirement
Benefit |
|
Pension
Benefit |
|
Postretirement
Benefit |
||||||||
|
(in millions)
|
||||||||||||||
Service cost
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Expected return on plan assets
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Recognized actuarial loss
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Settlement loss
|
1
|
|
|
—
|
|
|
10
|
|
|
10
|
|
||||
Total
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
12
|
|
|
$
|
12
|
|
|
Nine months ended September 30,
|
||||||||||||||
|
2016
|
|
2015
|
||||||||||||
|
Pension
Benefit |
|
Postretirement
Benefit |
|
Pension
Benefit |
|
Postretirement
Benefit |
||||||||
|
(in millions)
|
||||||||||||||
Service cost
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
2
|
|
|
3
|
|
|
3
|
|
|
3
|
|
||||
Expected return on plan assets
|
(2
|
)
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
||||
Recognized actuarial loss
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Settlement loss
|
6
|
|
|
—
|
|
|
18
|
|
|
10
|
|
||||
Total
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
23
|
|
|
$
|
16
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Brent oil ($/Bbl)
|
$
|
46.98
|
|
|
$
|
51.17
|
|
|
$
|
43.01
|
|
|
$
|
56.61
|
|
WTI oil ($/Bbl)
|
$
|
44.94
|
|
|
$
|
46.43
|
|
|
$
|
41.33
|
|
|
$
|
51.00
|
|
NYMEX gas ($/Mcf)
|
$
|
2.70
|
|
|
$
|
2.78
|
|
|
$
|
2.24
|
|
|
$
|
2.86
|
|
•
|
Net income of $546 million reflected a net gain of $660 million on early extinguishment of debt.
|
•
|
Adjusted net loss decreased 17% from
$86 million
to $71 million.
|
•
|
Average daily oil and gas production volumes decreased 13% from 158,000 to 138,000 barrels of oil equivalent (Boe).
|
•
|
Realized crude oil prices, including the effect of cash received from settled hedges, decreased 10% from
$47.79
to $43.03 per barrel.
|
•
|
Production costs decreased 14% from
$246 million
to $211 million.
|
•
|
Net income of $356 million reflected a net gain of $793 million on early extinguishment of debt.
|
•
|
Adjusted net loss increased 4% from
$234 million
to $243 million.
|
•
|
Average daily oil and gas production volumes decreased 12% from 161,000 to 142,000 Boe.
|
•
|
Realized crude oil prices, including the effect of cash received from settled hedges, decreased 19% from
$50.28
to $40.91 per barrel.
|
•
|
Production costs decreased 20% from
$730 million
to $583 million.
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions)
|
||||||||||||||
Net income (loss)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
Non-cash, unusual and infrequent items:
|
|
|
|
|
|
|
|
||||||||
Non-cash derivative losses (gains)
|
25
|
|
|
(53
|
)
|
|
243
|
|
|
(33
|
)
|
||||
Severance and early retirement costs
|
1
|
|
|
62
|
|
|
19
|
|
|
72
|
|
||||
Plant turnaround, outage and other costs
|
5
|
|
|
3
|
|
|
14
|
|
|
6
|
|
||||
Net gain on early extinguishment of debt
|
(660
|
)
|
|
—
|
|
|
(793
|
)
|
|
—
|
|
||||
Gain from asset divestitures
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
—
|
|
||||
Adjusted income items before interest and taxes
|
(629
|
)
|
|
12
|
|
|
(548
|
)
|
|
45
|
|
||||
Deferred debt issuance costs write-off
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
||||
Valuation allowance for deferred tax assets
(a)
|
—
|
|
|
—
|
|
|
(63
|
)
|
|
—
|
|
||||
Tax effects of these items
|
—
|
|
|
6
|
|
|
—
|
|
|
(7
|
)
|
||||
Total
|
(617
|
)
|
|
18
|
|
|
(599
|
)
|
|
38
|
|
||||
Adjusted net loss
|
$
|
(71
|
)
|
|
$
|
(86
|
)
|
|
$
|
(243
|
)
|
|
$
|
(234
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per diluted share
|
$
|
13.06
|
|
|
$
|
(2.72
|
)
|
|
$
|
8.79
|
|
|
$
|
(7.10
|
)
|
Adjusted net loss per diluted share
|
$
|
(1.75
|
)
|
|
$
|
(2.25
|
)
|
|
$
|
(6.12
|
)
|
|
$
|
(6.11
|
)
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions)
|
||||||||||||||
Non-cash derivative losses (gains)
|
$
|
25
|
|
|
$
|
(53
|
)
|
|
$
|
243
|
|
|
$
|
(33
|
)
|
Proceeds from settled derivatives
|
(11
|
)
|
|
(15
|
)
|
|
(86
|
)
|
|
(17
|
)
|
||||
Net derivative losses (gains)
|
$
|
14
|
|
|
$
|
(68
|
)
|
|
$
|
157
|
|
|
$
|
(50
|
)
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions)
|
||||||||||||||
General and administrative expenses
|
$
|
58
|
|
|
$
|
129
|
|
|
$
|
186
|
|
|
$
|
290
|
|
Severance and early retirement costs
|
(1
|
)
|
|
(62
|
)
|
|
(19
|
)
|
|
(72
|
)
|
||||
Adjusted general and administrative expenses
|
$
|
57
|
|
|
$
|
67
|
|
|
$
|
167
|
|
|
$
|
218
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Oil prices with hedge ($ per Bbl)
|
$
|
43.03
|
|
|
$
|
47.79
|
|
|
$
|
40.91
|
|
|
$
|
50.28
|
|
|
|
|
|
|
|
|
|
||||||||
Oil prices without hedge ($ per Bbl)
|
$
|
41.73
|
|
|
$
|
46.10
|
|
|
$
|
37.54
|
|
|
$
|
49.70
|
|
NGLs prices ($ per Bbl)
|
$
|
22.45
|
|
|
$
|
16.92
|
|
|
$
|
20.36
|
|
|
$
|
19.64
|
|
Gas prices ($ per Mcf)
|
$
|
2.64
|
|
|
$
|
2.83
|
|
|
$
|
2.11
|
|
|
$
|
2.72
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Oil with hedge as a percentage of Brent
|
92
|
%
|
|
93
|
%
|
|
95
|
%
|
|
89
|
%
|
|
|
|
|
|
|
|
|
||||
Oil without hedge as a percentage of Brent
|
89
|
%
|
|
90
|
%
|
|
87
|
%
|
|
88
|
%
|
Oil without hedge as a percentage of WTI
|
93
|
%
|
|
99
|
%
|
|
91
|
%
|
|
97
|
%
|
Gas with hedge as a percentage of NYMEX
|
98
|
%
|
|
102
|
%
|
|
94
|
%
|
|
95
|
%
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Oil (MBbl/d)
|
|
|
|
|
|
|
|
||||
San Joaquin Basin
|
56
|
|
|
64
|
|
|
58
|
|
|
65
|
|
Los Angeles Basin
|
29
|
|
|
32
|
|
|
30
|
|
|
33
|
|
Ventura Basin
|
5
|
|
|
7
|
|
|
5
|
|
|
7
|
|
Sacramento Basin
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
90
|
|
|
103
|
|
|
93
|
|
|
105
|
|
|
|
|
|
|
|
|
|
||||
NGLs (MBbl/d)
|
|
|
|
|
|
|
|
||||
San Joaquin Basin
|
15
|
|
|
17
|
|
|
15
|
|
|
17
|
|
Los Angeles Basin
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Ventura Basin
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Sacramento Basin
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
16
|
|
|
18
|
|
|
16
|
|
|
18
|
|
|
|
|
|
|
|
|
|
||||
Natural gas (MMcf/d)
|
|
|
|
|
|
|
|
||||
San Joaquin Basin
|
149
|
|
|
172
|
|
|
150
|
|
|
175
|
|
Los Angeles Basin
|
2
|
|
|
1
|
|
|
3
|
|
|
3
|
|
Ventura Basin
|
8
|
|
|
11
|
|
|
8
|
|
|
11
|
|
Sacramento Basin
|
34
|
|
|
42
|
|
|
36
|
|
|
45
|
|
Total
|
193
|
|
|
226
|
|
|
197
|
|
|
234
|
|
|
|
|
|
|
|
|
|
||||
Total Production (MBoe/d)
(a)
|
138
|
|
|
158
|
|
|
142
|
|
|
161
|
|
Note:
|
MBbl/d refers to thousands of barrels per day; MMcf/d refers to millions of cubic feet per day; MBoe/d refers to thousands of barrels of oil equivalent per day.
|
(a)
|
Natural gas volumes have been converted to Boe based on the equivalence of energy content between six Mcf of natural gas and one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a barrel of oil equivalent basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, for the
nine
months ended
September 30, 2016
, the average prices of Brent oil and NYMEX natural gas were
$43.01
per barrel and
$2.24
per Mcf, respectively, resulting in an oil-to-gas ratio of approximately
19
to 1.
|
|
September 30,
2016
|
|
December 31,
2015
|
||||
|
(in millions)
|
||||||
|
|
|
|
||||
Cash and cash equivalents
|
$
|
10
|
|
|
$
|
12
|
|
Trade receivables, net
|
$
|
202
|
|
|
$
|
200
|
|
Inventories
|
$
|
61
|
|
|
$
|
58
|
|
Other current assets
|
$
|
83
|
|
|
$
|
168
|
|
Property, plant and equipment, net
|
$
|
5,953
|
|
|
$
|
6,312
|
|
Other assets
|
$
|
23
|
|
|
$
|
303
|
|
Current maturities of long-term debt
|
$
|
74
|
|
|
$
|
100
|
|
Accounts payable
|
$
|
205
|
|
|
$
|
257
|
|
Accrued liabilities
|
$
|
379
|
|
|
$
|
222
|
|
Current income taxes
|
$
|
—
|
|
|
$
|
26
|
|
Long-term debt - principal amount
|
$
|
5,173
|
|
|
$
|
6,043
|
|
Deferred gain and issuance costs, net
|
$
|
410
|
|
|
$
|
491
|
|
Other long-term liabilities
|
$
|
584
|
|
|
$
|
830
|
|
Equity
|
$
|
(493
|
)
|
|
$
|
(916
|
)
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions)
|
||||||||||||||
Oil and gas net sales
|
$
|
424
|
|
|
$
|
520
|
|
|
$
|
1,157
|
|
|
$
|
1,687
|
|
Net derivative (losses) gains
|
(14
|
)
|
|
68
|
|
|
(157
|
)
|
|
50
|
|
||||
Other revenue
|
46
|
|
|
38
|
|
|
95
|
|
|
100
|
|
||||
Production costs
|
(211
|
)
|
|
(246
|
)
|
|
(583
|
)
|
|
(730
|
)
|
||||
General and administrative expenses
|
(58
|
)
|
|
(129
|
)
|
|
(186
|
)
|
|
(290
|
)
|
||||
Depreciation, depletion and amortization
|
(137
|
)
|
|
(253
|
)
|
|
(422
|
)
|
|
(757
|
)
|
||||
Taxes other than on income
|
(37
|
)
|
|
(42
|
)
|
|
(118
|
)
|
|
(150
|
)
|
||||
Exploration expense
|
(3
|
)
|
|
(5
|
)
|
|
(13
|
)
|
|
(29
|
)
|
||||
Interest and debt expense, net
|
(95
|
)
|
|
(82
|
)
|
|
(243
|
)
|
|
(244
|
)
|
||||
Other expenses, net
|
(29
|
)
|
|
(23
|
)
|
|
(45
|
)
|
|
(74
|
)
|
||||
Net gain on early extinguishment of debt
|
660
|
|
|
—
|
|
|
793
|
|
|
—
|
|
||||
Income tax benefit
|
—
|
|
|
50
|
|
|
78
|
|
|
165
|
|
||||
Net income (loss)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
|
|
|
|
|
|
|
|
||||||||
Adjusted net income (loss)
(a)
|
$
|
(71
|
)
|
|
$
|
(86
|
)
|
|
$
|
(243
|
)
|
|
$
|
(234
|
)
|
Adjusted EBITDAX
(b)
|
$
|
164
|
|
|
$
|
212
|
|
|
$
|
448
|
|
|
$
|
680
|
|
|
|
|
|
|
|
|
|
||||||||
Effective tax rate
|
—
|
%
|
|
32
|
%
|
|
(28
|
)%
|
|
38
|
%
|
(a)
|
See "Financial and Operating Results" above for our Non-GAAP reconciliation.
|
(b)
|
We define adjusted EBITDAX consistent with our first lien, first out credit facilities as earnings before interest expense; income taxes; depreciation, depletion and amortization; exploration expense; and other non-cash, unusual and infrequent items. Our management believes adjusted EBITDAX provides useful information in assessing our financial condition, results of operations and cash flows, and it is widely used by the industry and investment community. The amounts included in the calculation of adjusted EBITDAX were computed in accordance with GAAP. This measure is a material component of our financial covenants under our first lien, first out credit facilities and is provided in addition to, and not as an alternative for, income and liquidity measures calculated in accordance with GAAP. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP.
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions)
|
||||||||||||||
Net income (loss)
|
$
|
546
|
|
|
$
|
(104
|
)
|
|
$
|
356
|
|
|
$
|
(272
|
)
|
Interest and debt expense
|
95
|
|
|
82
|
|
|
243
|
|
|
244
|
|
||||
Income tax benefit
|
—
|
|
|
(50
|
)
|
|
(78
|
)
|
|
(165
|
)
|
||||
Depreciation, depletion and amortization
|
137
|
|
|
253
|
|
|
422
|
|
|
757
|
|
||||
Exploration expense
|
3
|
|
|
5
|
|
|
13
|
|
|
29
|
|
||||
Adjusted income items before interest and taxes
(a)
|
(629
|
)
|
|
12
|
|
|
(548
|
)
|
|
45
|
|
||||
Other non-cash items
|
12
|
|
|
14
|
|
|
40
|
|
|
42
|
|
||||
Adjusted EBITDAX
|
$
|
164
|
|
|
$
|
212
|
|
|
$
|
448
|
|
|
$
|
680
|
|
(a)
|
See "Financial and Operating Results" for a table reconciling net income (loss) to adjusted net income (loss).
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Production costs
|
$
|
16.63
|
|
|
$
|
16.91
|
|
|
$
|
15.01
|
|
|
$
|
16.56
|
|
General and administrative expenses
|
$
|
0.63
|
|
|
$
|
1.10
|
|
|
$
|
0.69
|
|
|
$
|
1.00
|
|
Depreciation, depletion and amortization
|
$
|
10.15
|
|
|
$
|
16.92
|
|
|
$
|
10.24
|
|
|
$
|
16.71
|
|
Taxes other than on income
|
$
|
2.44
|
|
|
$
|
2.50
|
|
|
$
|
2.63
|
|
|
$
|
3.02
|
|
|
Q4 2016
|
|
FY 2017
|
|
FY 2018
|
||||||
Crude Oil
|
|
|
|
|
|
||||||
Calls:
|
|
|
|
|
|
||||||
Barrels per day
|
25,000
|
|
|
15,500
|
|
|
21,500
|
|
|||
Weighted-average price per barrel
|
$
|
53.62
|
|
|
$
|
54.17
|
|
|
$
|
58.21
|
|
|
|
|
|
|
|
||||||
Puts:
|
|
|
|
|
|
||||||
Barrels per day
|
3,000
|
|
|
14,300
|
|
|
—
|
|
|||
Weighted-average price per barrel
|
$
|
50.00
|
|
|
$
|
48.60
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Swaps:
|
|
|
|
|
|
||||||
Barrels per day
|
39,000
|
|
|
20,000
|
|
|
—
|
|
|||
Weighted-average price per barrel
|
$
|
49.71
|
|
|
$
|
53.98
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Gas
|
|
|
|
|
|
||||||
Swaps:
|
|
|
|
|
|
||||||
MMBTU per day
|
3,800
|
|
|
—
|
|
|
—
|
|
|||
Weighted-average price per MMBTU
|
$
|
3.49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Forward Contracts:
|
|
|
|
|
|
||||||
MMBTU per day
|
—
|
|
|
4,700
|
|
|
—
|
|
|||
Weighted-average price per MMBTU
|
$
|
—
|
|
|
$
|
3.53
|
|
|
$
|
—
|
|
|
|
Nine months ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Net cash flows provided by operating activities
|
|
$
|
145
|
|
|
$
|
412
|
|
Net cash flows used in investing activities
|
|
$
|
(31
|
)
|
|
$
|
(542
|
)
|
Net cash flows (used) provided by financing activities
|
|
$
|
(116
|
)
|
|
$
|
120
|
|
Adjusted EBITDAX
(a)
|
|
$
|
448
|
|
|
$
|
680
|
|
(a)
|
We define adjusted EBITDAX consistent with our first lien, first out credit facilities as earnings before interest expense; income taxes; depreciation, depletion and amortization; exploration expense; and other non-cash, unusual and infrequent items. Our management believes adjusted EBITDAX provides useful information in assessing our financial condition, results of operations and cash flows and it is widely used by the industry and investment community. The amounts included in the calculation of adjusted EBITDAX were computed in accordance with GAAP. This measure is a material component of our financial covenants under our first lien, first out credit facilities and is provided in addition to, and not as an alternative for, income and liquidity measures calculated in accordance with GAAP. Certain items excluded from adjusted EBITDAX are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. Adjusted EBITDAX should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP.
|
|
|
Nine months ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Net cash provided by operating activities
|
|
$
|
145
|
|
|
$
|
412
|
|
Cash interest
|
|
244
|
|
|
248
|
|
||
Exploration expenditures
|
|
13
|
|
|
20
|
|
||
Other changes in operating assets and liabilities
|
|
32
|
|
|
(6
|
)
|
||
Plant turnaround, outage and other costs
|
|
14
|
|
|
6
|
|
||
Adjusted EBITDAX
|
|
$
|
448
|
|
|
$
|
680
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1.A.
|
Risk Factors
|
Item 5.
|
Other Disclosures
|
Item 6.
|
Exhibits
|
|
10.1
|
Fifth Amendment to Credit Agreement, dated August 12, 2016, among California Resources Corporation, as the Borrowers and JP Morgan Chase Bank, N.A., as Administrative Agent, a Swingline Lender and a Letter of Credit Issuer and Bank of America, N.A., as Syndication Agent, a Swingline Lender and a Letter of Credit Issuer (incorporated by reference herein Exhibit 10.2 to the Registration’s Current Report on Form 8-K filed August 17, 2016).
|
|
|
|
|
10.2
|
Credit Agreement, dated August 12, 2016, among California Resources Corporation, as the Borrower, the several Lenders from time to time parties thereto, Goldman Sachs Bank USA, as Lead Arranger and Bookrunner, and The Bank of New York Mellon Trust Company, N.A., as Administrative Agent and Collateral Agent (incorporated by reference herein Exhibit 10.1 to the Registration’s Current Report on Form 8-K filed August 17 2016).
|
|
|
|
|
10.3*
|
Omnibus Amendment, dated September 12, 2016, among California Resources Corporation, the Guarantors party thereto, the Collateral Trustee and the other parity lien representatives party thereto.
|
|
|
|
|
10.4*
|
Intercreditor Agreement, dated December 15, 2015 between JP Morgan Chase Bank, N.A., as Priority Lien Agent and The Bank of New York Mellon trust Company, N.A., as Second Lien Collateral Agent for the Second Lien Secured Parties.
|
|
|
|
|
10.5*
|
Form of 2016 Nonstatutory Stock Option Award Terms and Conditions.
|
|
|
|
|
10.6*
|
Form of Performance Incentive Award Terms and Conditions.
|
|
|
|
|
12
|
Computation of Ratios of Earnings to Fixed Charges.
|
|
|
|
|
31.1
|
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
31.2
|
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.1
|
Certifications of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101.INS
|
XBRL Instance Document.
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
CALIFORNIA RESOURCES CORPORATION
|
|
DATE:
|
November 3, 2016
|
/s/ Roy Pineci
|
|
|
|
Roy Pineci
|
|
|
|
Executive Vice President - Finance
|
|
|
|
(Principal Accounting Officer)
|
|
|
10.1
|
Fifth Amendment to Credit Agreement, dated August 12, 2016, among California Resources Corporation, as the Borrowers and JP Morgan Chase Bank, N.A., as Administrative Agent, a Swingline Lender and a Letter of Credit Issuer and Bank of America, N.A., as Syndication Agent, a Swingline Lender and a Letter of Credit Issuer (incorporated by reference herein Exhibit 10.2 to the Registration’s Current Report on Form 8-K filed August 17, 2016).
|
|
|
|
|
10.2
|
Credit Agreement, dated August 12, 2016, among California Resources Corporation, as the Borrower, the several Lenders from time to time parties thereto, Goldman Sachs Bank USA, as Lead Arranger and Bookrunner, and The Bank of New York Mellon Trust Company, N.A., as Administrative Agent and Collateral Agent (incorporated by reference herein Exhibit 10.1 to the Registration’s Current Report on Form 8-K filed August 17 2016).
|
|
|
|
|
10.3*
|
Omnibus Amendment, dated September 12, 2016, among California Resources Corporation, the Guarantors party thereto, the Collateral Trustee and the other parity lien representatives party thereto.
|
|
|
|
|
10.4*
|
Intercreditor Agreement, dated December 15, 2015 between JP Morgan Chase Bank, N.A., as Priority Lien Agent and The Bank of New York Mellon trust Company, N.A., as Second Lien Collateral Agent for the Second Lien Secured Parties.
|
|
|
|
|
10.5*
|
Form of 2016 Nonstatutory Stock Option Award Terms and Conditions.
|
|
|
|
|
10.6*
|
Form of Performance Incentive Award Terms and Conditions.
|
|
|
|
|
12
|
Computation of Ratios of Earnings to Fixed Charges.
|
|
|
|
|
31.1
|
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
31.2
|
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
32.1
|
Certifications of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
101.INS
|
XBRL Instance Document.
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
COMPANY:
|
CALIFORNIA RESOURCES CORPORATION
|
|
|
By:
|
/s/ Marshall D. Smith
|
|
Name:
|
Marshall D. Smith
|
|
Title:
|
Senior Executive Vice President and Chief Financial Officer
|
GUARANTORS:
|
CALIFORNIA HEAVY OIL, INC.
CALIFORNIA RESOURCES LONG BEACH, INC. CALIFORNIA RESOURCES PETROLEUM CORPORATION CALIFORNIA RESOURCES PRODUCTION CORPORATION CALIFORNIA RESOURCES TIDELANDS, INC. SOUTHERN SAN JOAQUIN PRODUCTION, INC. THUMS LONG BEACH COMPANY |
|
|
|
|
|
By:
|
/s/ Marshall D. Smith
|
|
Name:
|
Marshall D. Smith
|
|
Title:
|
Senior Executive Vice President and Chief Financial Officer
|
|
CALIFORNIA RESOURCES ELK HILLS, LLC
CRC CONSTRUCTION SERVICES, LLC CRC SERVICES, LLC SOCAL HOLDING, LLC |
|
|
|
|
|
By:
|
/s/ Marshall D. Smith
|
|
Name:
|
Marshall D. Smith
|
|
Title:
|
Senior Executive Vice President and Chief Financial Officer of California Resources Corporation, its Sole Member
|
|
CALIFORNIA RESOURCES WILMINGTON , LLC
|
|
|
|
|
|
By:
|
/s/ Marshall D. Smith
|
|
Name:
|
Marshall D. Smith
|
|
Title:
|
Senior Executive Vice President and Chief Financial Officer of California Resources Corporation, its Sole Member
|
|
CRC MARKETING, INC.
|
|
|
|
|
|
By:
|
/s/ D. Adam Smith
|
|
Name:
|
D. Adam Smith
|
|
Title:
|
Assistant Secretary
|
|
ELK HILLS POWER, LLC
|
|
|
|
|
|
By:
|
/s/ Ivan Gaydarov
|
|
Name:
|
Ivan Gaydarov
|
|
Title:
|
Treasurer of California Resources Corporation, the Sole Member of California Resource Elk Hills, LLC, its Sole Member
|
|
TIDELANDS OIL PRODUCTION COMPANY
|
|
|
||
|
By:
|
/s/ Ivan Gaydarov
|
|
Name:
|
Ivan Gaydarov
|
|
Title:
|
Treasurer of California Resources Tidelands, Inc., its Managing Partner
|
|
CALIFORNIA RESOURCES COLES LEVEE, LLC
|
|
|
||
|
By:
|
/s/ Ivan Gaydarov
|
|
Name:
|
Ivan Gaydarov
|
|
Title:
|
Treasurer
|
|
CALIFORNIA RESOURCES COLES LEVEE, L.P.
|
|
|
||
|
By:
|
/s/ Ivan Gaydarov
|
|
Name:
|
Ivan Gaydarov
|
|
Title:
|
Treasurer of
California Resources Coles Levee, LLC, its General Partner
|
|
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
, as Collateral Trustee
|
|
|
||
|
By:
|
/s/ R. Tarnas
|
|
Name:
|
R. Tarnas
|
|
Title:
|
Vice President
|
|
The Bank of New York Mellon Trust Company, N.A.,
as New Representative
|
|
|
|
|
|
By:
|
/s/ Ann Cung
|
|
Name:
|
Ann Cung
|
|
Title:
|
Vice President
|
|
JPMorgan Chase Bank, N.A.,
as Priority Lien Agent
|
|
|
|
|
|
By:
|
/s/ Douglas A. Kravitz
|
|
Name:
|
Douglas A. Kravitz
|
|
Title:
|
Executive Director
|
|
The Bank of New York Mellon Trust Company, N.A.,
as Second Lien Collateral Agent
|
|
|
|
|
|
By:
|
/s/ Ann Cung
|
|
Name:
|
Ann Cung
|
|
Title:
|
Vice President
|
|
Acknowledged and Agreed to by:
|
|
|
|
|
|
CALIFORNIA RESOURCES CORPORATION
, as Borrower
|
|
|
|
|
|
By:
|
/s/ Marshall D. Smith
|
|
Name:
|
Marshall D. Smith
|
|
Title:
|
Senior Executive Vice President and Chief Financial Officer
|
DATE OF GRANT:
|
[●]
|
SUBJECT TO THIS OPTION:
|
See Morgan Stanley Stock Plan Connect “Stock Options /Granted”
|
VESTING SCHEDULE:
|
Zero prior to the day immediately preceding the first anniversary of the Date of Grant; ⅓ on the day immediately preceding the first anniversary of the Date of Grant; an additional ⅓ on the day immediately preceding the second anniversary of the Date of Grant; and an additional ⅓ on the day immediately preceding the third anniversary of the Date of Grant (each such day being a “
Vesting Date
”)
|
PURCHASE PRICE PER SHARE:
|
See Morgan Stanley Stock Plan Connect “Stock Options /Grant Price”
|
Date of Grant:
|
August 2, 2016
|
Target Incentive Amount:
|
See Fidelity NetBenefits “CRC Performance Incentive”
|
Vesting Date:
|
August 1, 2019
|
Change in CRC Cost per BOE
(1)
Minus
Change in Peer Group Cost per BOE (2) |
Cost per BOE Performance Factor
(3)
|
Less than or equal to -10%
|
200%
|
0%
|
100%
|
10%
|
75%
|
Greater than 10%
|
0%
|
Cumulative Value Creation Index
(1)
|
VCI Performance Factor
(2)
|
1.5 or greater
|
200%
|
1.3
|
100%
|
1.1
|
75%
|
Less than 1.1
|
0%
|
|
|
|
|
EXHIBIT 12
|
|
|
Nine months ended
September 30,
|
|
Year ended December 31,
|
||||||||||||||||||||||||
|
|
2016
|
|
2015
|
|
2015
|
|
2014
(a)
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||||
Income (loss) before income taxes
(b)(c)
|
|
$
|
278
|
|
|
$
|
(437
|
)
|
|
$
|
(5,476
|
)
|
|
$
|
(2,421
|
)
|
|
$
|
1,447
|
|
|
$
|
1,181
|
|
|
$
|
1,641
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest expense and amortization of debt issuance costs and deferred gain
|
|
243
|
|
|
244
|
|
|
326
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Portion of lease rentals representative of the interest factor
|
|
2
|
|
|
3
|
|
|
4
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|
3
|
|
|||||||
Earnings (loss) before fixed charges
|
|
$
|
523
|
|
|
$
|
(190
|
)
|
|
$
|
(5,146
|
)
|
|
$
|
(2,346
|
)
|
|
$
|
1,451
|
|
|
$
|
1,185
|
|
|
$
|
1,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest expense and amortization of debt issuance costs and deferred gain, including capitalized interest
|
|
$
|
246
|
|
|
$
|
252
|
|
|
$
|
335
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Portion of lease rentals representative of the interest factor
|
|
2
|
|
|
3
|
|
|
4
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|
3
|
|
|||||||
Total fixed charges
|
|
$
|
248
|
|
|
$
|
255
|
|
|
$
|
339
|
|
|
$
|
79
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Ratio of earnings to fixed charges
(d)
|
|
2
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
363
|
|
|
296
|
|
|
548
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Insufficient coverage
|
|
$
|
—
|
|
|
$
|
445
|
|
|
$
|
5,485
|
|
|
$
|
2,425
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(a)
|
Note: Had we been a stand-alone company for the full year 2014, and had the same level of debt throughout the year as we did on December 31, 2014, of approximately $6.4 billion, we would have incurred $314 million of pre-tax interest expense, on a pro-forma basis, for the year ended December 31, 2014, compared to the $72 million pre-tax interest expense reported on our statement of operations for the year then ended. Therefore, the insufficient coverage on a pro-forma basis would have been approximately $2,437 million.
|
(b)
|
The nine months ended September 30, 2016 amount includes non-cash, unusual and infrequent items consisting of $793 million of net gain on the early extinguishment of debt, $243 million of non-cash derivative losses on outstanding hedges, a $31 million gain from asset divestitures, a $12 million interest charge for the write-off of deferred debt costs and $33 million of other non-recurring charges. Excluding these items, our loss before income taxes for the nine months ended September 30, 2016 would have been approximately $258 million. Therefore, the insufficient coverage would have been approximately $261 million. The nine months ended September 30, 2015 amount includes non-cash, unusual and infrequent items consisting of $72 million of severance and early retirement costs, $33 million of non-cash derivative gains and $6 million of other non-recurring charges. Excluding these items, our loss before income taxes for the nine months ended September 30, 2015 would have been approximately $392 million. Therefore, the insufficient coverage would have been approximately $400 million.
|
(c)
|
The year ended December 31, 2015 amount includes non-cash, unusual and infrequent items consisting of $4.9 billion of asset impairments, $71 million of write-down of certain assets, $67 million of early retirement and severance costs, $11 million of rig termination and other costs and $8 million of debt transactions costs, partially offset by $52 million of non-cash derivative gains. Excluding these items, our loss before income taxes for the year ended December 31, 2015 would have been approximately $519 million. Therefore, the insufficient coverage would have been approximately $528 million. The December 31, 2014 amount includes non-cash, unusual and infrequent items consisting of $3.4 billion of asset impairments, $52 million of rig termination and other price-related costs, and $55 million of Spin-off and transition related costs. Excluding these items, our income before income taxes for the year ended December 31, 2014 would have been approximately $1.1 billion, and the ratio of earnings to fixed charges would have been 15.
|
(d)
|
The 2014 ratio takes into consideration interest on the debt associated with the Spin-off which we entered into during the last half of 2014.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of California Resources Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Todd A. Stevens
|
|
|
Todd A. Stevens
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of California Resources Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
|
|
/s/ Marshall D. Smith
|
|
|
|
|
Marshall D. Smith
|
|
|
|
|
Senior Executive Vice President and
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Todd A. Stevens
|
|
|
||
Name:
|
|
Todd A. Stevens
|
|
|
Title:
|
|
President and Chief Executive Officer
|
|
|
Date:
|
|
November 3, 2016
|
|
|
/s/ Marshall D. Smith
|
|
|
||
Name:
|
|
Marshall D. Smith
|
|
|
Title:
|
|
Senior Executive Vice President and Chief Financial Officer
|
|
|
Date:
|
|
November 3, 2016
|
|
|