California Resources (CRC) today announced a joint venture partnership ("JV") with a subsidiary of Colony Capital (CLNY) (“Colony”) under which Colony commits to fund $320M for the development of CRC’s flagship Elk Hills field, located in the San Joaquin Basin. Here’s a snapshot of the Form 8-K release:
Implications
We believe the JV deal significantly raises the possibility that CRC plans to enter into an overriding royalty interest (“ORRI”) as part of a broader plan to deleverage its capital structure. As background, an ORRI deal would presumably involve CRC selling a royalty interest (worth ~$50M/annually)