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Debt Weighs Down California Resources’ Stock

In the last three months, Chatsworth oil producer California Resources Corp.’s stock has lost 58 percent of its value. While the volatility of oil prices isn’t news, the company’s stock price has dropped significantly more than its peers. In comparison, Chevron Corp. and BP’s stock prices have fallen about 20 percent, while Exxon Mobil Corp.’s stock has declined 13 percent – all a fraction of California Resources’ drop. Its shares closed Sept. 30 at $2.60. One reason the market has punished California Resources is its large debt load. According to its latest quarterly report, the company has $6.5 billion in long-term debt, requiring a quarterly interest payment of $83 million. The company reported a net loss of $68 million for the quarter. Less than a year ago, the company was a subsidiary of Occidental Petroleum Corp. in Westwood. In December, Occidental completed its spin-off of California Resources, which inherited Oxy’s properties in California. The global slump in oil prices last year has left companies such as California Resources with less cash for interest payments. They are focusing on lowering costs and increasing efficiency to weather the price dip. “Companies have reduced their workforces and scaled back operations around the world and in California,” Tupper Hull, vice president at Western States Petroleum Association in Sacramento, said. On the plus side, California Resources has producing wells in the Lost Hills and Elk Hills oil fields in Kern County, which provide a steady income stream to sustain the company. “Given the diversity of our operations, we have projects which are economic even at lower commodity prices,” Richard Venn, the company’s director of communications, said in an email to the Business Journal. “We are funding our capital budget internally with operating cash flow and are committed to living within our means.” David Meats, an analyst at Morningstar Inc. in Chicago, noted in an August report that the main reason for spinning off California Resources was to allow it to reinvest cash flow to explore undeveloped oil fields. The global price decline has delayed those plans, but he still believes the company has value. “The timing (of the spin-off) wasn’t ideal, and lower oil prices don’t provide the same incentive to develop this potential,” Meats wrote. “However, investors should remember that low-risk conventional assets are the core of California Resources’ business. … There’s still ample inventory to drive future production and returns.”

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