Even as oil prices continue to recover from their sharp drop earlier this year, two local petroleum producers are wrestling with financial challenges relating to tough market conditions during the coronavirus crisis.
Chevron Corp. said by email Tuesday it's adjusting to lower activity levels by cutting its workforce by 10 percent to 15 percent across the company.
Meanwhile, another large producer active in Kern County, California Resources Corp., announced this week it missed interest payments that were due May 29, adding to concerns the company might be forced to seek bankruptcy protection.
Oil producers have been under pressure since barrel prices plummeted in late February. Demand for fuel collapsed during the quarantine and a price war between Russia and Saudi Arabia exacerbated a global oversupply.
Oil prices recently rebounded somewhat, offering hope the industry's crisis might soon abate.
The local price benchmark Midway Sunset was selling in the upper $30s per barrel this week, having climbed from about $31 per barrel in late May. Midway Sunset was in the low $20s a month ago, having fallen from the upper $60s in early January.
San Ramon-based Chevron said in its email the company has been taking action to address current market conditions and better position the company to compete in any business environment.
"This includes reducing our operating costs and capital investments, and streamlining our organizational structures to reflect workflow efficiencies and lower projected activity levels," it wrote. Impacts in each of its business segments will vary, it added.
CRC's disclosure Monday of missed debt payments came about a month after the Santa Clarita-based company, still facing several billion dollars in debt left over from its 2014 spinoff from Occidental Petroleum Corp., warned it might not survive the COVID-19 pandemic. It's already shut in oil production, cut paid hours for its local workforce and slashed capital investments.
The company has been trying to restructure its balance sheet after the cancellation in March of a deal that would have allowed it to rework its debt. It said at the time it was studying its options, which observers have interpreted as including the possibility of bankruptcy.
Monday's announcement, filed with the U.S. Securities and Exchange Commission, focused on a series of loan forbearance agreements it was able to reach with some of its major lenders.
Under the terms of those agreements, dated June 2, CRC has until Sunday night to make interest payments totaling tens of millions of dollars.
The Wall Street Journal, citing unidentified people familiar with the situation, reported this week that without an extension from its creditors the company will file for bankruptcy.
A company spokeswoman declined to respond to questions about the situation Tuesday, saying the company wouldn't comment on "market speculation."