California Resources Corp. (CRC) and Colony Capital, through its energy investment management arm, Colony HB2 Energy, have formed a strategic joint venture in which Colony has committed to fund $320 million for the development of CRC’s flagship Elk Hills field, located in the San Joaquin Basin. Subject to the mutual agreement of the parties, the total investment may be increased to $500 million.
The initial investment commitment will cover multiple development opportunities throughout the Elk Hills field and is intended to be invested over approximately three years in accordance with a pre-approved development plan consisting of approximately 275 wells. Colony will fund 100 percent of the development wells and will earn a 90 percent working interest. CRC’s working interest will revert from 10 percent to 82.5 percent upon Colony achieving an agreed upon return. Colony will also receive warrants to purchase up to 1.25 million shares of common stock with a $40 strike price upon funding their capital obligations.
This is the largest joint venture capital commitment to date for CRC.
