California Resources Corporation (CRC), a Santa Clarita-based oil and natural gas exploration and production company, announced Wednesday that the company has filed for Chapter 11 bankruptcy.

CRC, the largest oil and gas producer in California, is now struggling from lowered crude oil prices due to reduced demand amid the COVID-19 pandemic.

“We have consistently operated within cash flow, significantly reducing the outsized debt burden we inherited from Occidental Petroleum at our December 2014 spin-off,” said Todd A. Stevens, president and chief executive officer in a statement. “However, today’s unprecedented market conditions, including oversupply and reduced demand due to COVID-19, require that we further reduce our debt through a Chapter 11 process.”

The energy production organization employs about 3,000 people across California, according to the company.

CRC has entered into a Restructuring Support Agreement with holders of approximately 84 percent of the company’s 2017 term loans, 51 percent of their 2016 term loans and its Elk Hills midstream joint venture partner, Ares Management, according to the company.

To implement the terms of the RSA, the company and certain of its subsidiaries have filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas.

“CRC will emerge from Chapter 11 as a strong, healthy company committed to providing Californians with safe, affordable, reliable and locally produced energy, good-paying jobs and millions of dollars in annual government revenues for vital public services for many years to come,” Stevens said. “We take this role very seriously, and our commitment to ensuring a safe, diverse and resilient supply of energy from California resources will not change.”

Upon plan confirmation, the implementation of the RSA would reduce CRC’s debt substantially, enabling the Company to operate safely through the current downturn in commodity prices and establishing a solid financial foundation to enhance future value creation.

“I want to thank our talented and dedicated employees who have continued to go above and beyond, safely producing essential products that underpin our way of life despite COVID-19 and extreme and unprecedented economic and industry challenges,” Stevens said.

Ares has agreed to contribute its equity interests in Elk Hills Power, LLC, which is a joint venture between CRC and a portfolio company of Ares. At emergence, Ares would exchange its joint venture interests for equity and new CRC notes in the reorganized company subject to the terms and conditions of the RSA.

The joint venture’s cryogenic gas plant, 500-megawatt power plant and related assets will continue to operate in the ordinary course and upon emergence will be wholly-owned by CRC.

The company’s Chapter 11 cases have been filed in the Southern District of Texas Houston Division.

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