California Resources Corporation Announces New Midstream Joint Venture and Equity Investment

Source Press Release
Company California Resources CorporationAres Management Corporation 
Tags Asset Deals, Deals, Renewable Energy, Power, LNG & Gas Storage/Processing
Date February 07, 2018

California Resources Corporation (NYSE: CRC) announced today that it entered into a midstream joint venture with a portfolio company of the Private Equity Group of Ares Management, L.P. The Ares portfolio company invested $750 million for certain common and preferred equity interests in the venture. In addition, the Ares-led investor group purchased approximately 2.34 million shares of common stock of CRC in a private placement for an aggregate purchase price of $50 million in cash, or $21.33 per share based on a recent volume-weighted average price.

The joint venture owns the Elk Hills power plant, a 550 MW natural gas fired power plant, and a 200 million cubic foot per day cryogenic gas processing plant located outside of Bakersfield, California. Under a new long-term commercial agreement, CRC will purchase power and gas processing from the joint venture. CRC has the option to redeem the common and preferred equity interests held by the Ares portfolio company at any point during the first seven and one-half years of the joint venture.

Joint ventures provide an opportunity for CRC to prudently build on its solid track record of performance and accelerate sustainably profitable initiatives. CRC will continue to identify opportunities to invest in high-return projects while also continuing to strengthen its balance sheet.

Todd Stevens, President and CEO of CRC, said, “We are proud to have Ares as a strategic partner in our midstream joint venture at Elk Hills, and believe their equity investment validates the strong positioning of our world-class assets and flexible business model. With our ongoing focus on value creation, we intend to deploy transaction proceeds toward the best available alternatives to drive shareholder returns over the long term.”

Approximately $297 million of the transaction proceeds is being used to repay the Company’s outstanding bank revolver balance. CRC will continue to allocate capital to its project inventory using its disciplined value creation index (“VCI”) investment methodology, which has generated VCIs of greater than 1.7x over the last two years that are significantly above the Company’s cost of capital.

Additional information regarding the transactions described above is available on the “Earnings and Presentations” page in the Investor Relations section on the Company’s website at .

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