CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

For the three and sixmonths ended June 30, 2019

(in millions)


	Three months ended June 30, 2019
	Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Equity Attributable to Common Stock		Equity Attributable to Noncontrolling Interests		Total Equity
Balance, March 31, 2019	$	4,989	$	(5,409)	$	(6)	$	(426)	$	137	$	(289)
Net loss	—		12		—		12		—		12
Contributions from noncontrolling interest holders, net	—		—		—		—		—		—
Distributions to noncontrolling interest holders	—		—		—		—		(8)		(8)
Issuance of common stock	—		—		—		—		—		—
Other comprehensive income			—		1		1		—		1
Share-based compensation, net	5		—		—		5		—		5



Balance, June 30, 2019	$	4,994	$	(5,397)	$	(5)	$	(408)	$	129	$	(279)


	Six months ended June 30, 2019
	Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Equity Attributable to Common Stock		Equity Attributable to Noncontrolling Interests		Total Equity
Balance, December 31, 2018	$	4,987	$	(5,342)	$	(6)	$	(361)	$	114	$	(247)
Net loss	—		(55)		—		(55)		(5)		(60)
Contributions from noncontrolling interest holders, net	—		—		—		—		49		49
Distributions to noncontrolling interest holders	—		—		—		—		(29)		(29)

Other comprehensive income	—		—		1		1		—		1
Share-based compensation, net	7		—		—		7		—		7

Balance, June 30, 2019	$	4,994	$	(5,397)	$	(5)	$	(408)	$	129	$	(279)

Note: The above tables exclude amounts related to redeemable noncontrolling interests reported in mezzanine equity. See Note 6Joint Ventures for more information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2020 and 2019

(in millions)


	Six months ended June 30,
	2020		2019
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$	(1,992)	$	(3)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	207		239
Asset impairments	1,736		—
Net derivative (gain) loss from commodity contracts	(75)		68
Net proceeds from settled commodity derivatives	103		28
Net gain on early extinguishment of debt	(5)		(26)
Amortization of deferred gain	(33)		(36)

Dry hole expenses	—		7
Other non-cash charges to income, net	22		47
Changes in operating assets and liabilities, net	130		(52)
Net cash provided by operating activities	93		272

CASH FLOW FROM INVESTING ACTIVITIES
Capital investments	(33)		(271)
Changes in capital investment accruals	(28)		(57)
Asset divestitures	41		165
Acquisitions	—		(2)
Other	(7)		(5)
Net cash used in investing activities	(27)		(170)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from 2014 Revolving Credit Facility	795		1,274
Repayments of 2014 Revolving Credit Facility	(582)		(1,289)
Debt repurchases	(3)		(59)

2020 Senior Notes payment	(100)		—
Contributions from noncontrolling interest holders, net	2		49
Distributions paid to noncontrolling interest holders	(68)		(65)
Issuance of common stock	—		1
Shares canceled for taxes	(1)		(3)
Net cash provided by (used in) financing activities	43		(92)
Increase in cash	109		10
Cash—beginning of period	17		17
Cash—end of period	$	126	$	27

The accompanying notes are an integral part of these condensed consolidated financial statements.

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

June 30, ~~2019~~2020

NOTE 1 ~~THE SPIN-OFF AND~~ BASIS OF PRESENTATION

~~The Separation and Spin-off~~

We are an independent oil and natural gas exploration and production company operating properties exclusively within California. We were incorporated in Delaware asand became a ~~wholly owned subsidiary of Occidental Petroleum Corporation (Occidental) on April 23, 2014, and we became an independent,~~ publicly traded company on December 1, 2014.

Except when the context otherwise requires or where otherwise indicated, all references to ‘‘CRC,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to California Resources Corporation and its subsidiaries.

Voluntary Petitions for Relief Under Chapter 11 of the Bankruptcy Code

On July 15, 2020, we filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (Bankruptcy Court). The Chapter 11 cases filed by us (Chapter 11 Cases) are being jointly administered under the caption In re California Resources Corporation, et al., Case No. 20-33568 (DRJ). On July 24, 2020, we filed a Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court.

We continue to operate our business as “debtors-in-possession” (DIP) under the jurisdiction of the Bankruptcy Court and in accordance with the Bankruptcy Code. To ensure our ability to continue operating in the ordinary course of business and to minimize the effect of the Chapter 11 Cases on our employees, vendors and customers, we filed motions for customary “first day” relief with the Bankruptcy Court. On July 17, 2020, the Bankruptcy Court entered interim or final orders that included authorizing payments of pre-petition liabilities with respect to certain employee compensation and benefits, taxes, royalties, certain essential vendor payments and insurance and surety obligations. On July 21, 2020, the Bankruptcy Court approved on a final basis an order designed to assist us in preserving certain tax attributes. This order established the procedures that certain stockholders and potential stockholders will be required to comply with regarding transfers of, or declarations of worthlessness with respect to, our common stock as well as certain notice obligations. On July 22, 2020, the Bankruptcy Court approved on an interim basis a motion authorizing us to enter into DIP financing.

The commencement of the Chapter 11 Cases constitutes an event of default that accelerated our obligations under the following agreements: (i) Credit Agreement, dated as of September 24, 2014, among JPMorgan Chase Bank, N.A., as administrative agent, and the lenders that are party thereto (2014 Revolving Credit Facility), (ii) Credit Agreement, dated as of August 12, 2016, among The Bank of New York Mellon Trust Company, N.A., as collateral and administrative agent, and the lenders that are party thereto (2016 Credit Agreement), (iii) Credit Agreement, dated as of November 17, 2017, among The Bank of America Mellon Trust Company, N.A., as administrative agent, and the lenders that are party thereto (2017 Credit Agreement), and (iv) the indentures governing our 8% Senior Secured Second Lien Notes due 2022 (Second Lien Notes), 5.5% Senior Notes due 2021 (2021 Notes) and 6% Senior Notes due 2024 (2024 Notes). Additionally, other events of default, including cross-defaults, are present under these debt agreements. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against us, including exercising remedies as a result of any event of default. See Note 5 Debt for additional details about our debt.

Restructuring Support Agreement

On July 15, 2020, we entered into a Restructuring Support Agreement which was subsequently amended on July 24, 2020 (RSA). This RSA contemplates a restructuring plan that establishes a reorganized company with a new capital structure. The transactions contemplated by the RSA plan include (i) entering into a senior secured superpriority DIP credit facility (Senior DIP Facility) in an aggregate principal amount of up to approximately $483 million, (ii) entering into a junior secured superpriority DIP term loan facility in an aggregate amount of $650 million, (iii) the implementation of financing upon emergence from bankruptcy, (iv) the issuance of new common stock, and (v) a $450 million equity rights offering, backstopped by certain parties to the RSA.

The following creditors have entered into the RSA: (i) lenders holding approximately 85% of the outstanding principal amount of loans under the 2017 Credit Agreement, (ii) creditors holding approximately 68% of the aggregate claims arising under the 2016 Credit Agreement, the Second Lien Notes, the 2021 Notes and the 2024 Notes, and (iii) one or more funds, investment vehicles and/or accounts managed or advised by Ares Management LLC (Ares) or its affiliates, including ECR Corporate Holdings L.P. (ECR).

The transactions contemplated by the RSA, if approved, will result in current holders of our common stock receiving no distribution on account of their claims or interests. No assurance can be given that the Bankruptcy Court will approve the terms proposed under the RSA.

Debtor-in-Possession Credit Agreements

On July 23, 2020, we entered into (1) a Senior Secured Superpriority DIP Credit Agreement with JP Morgan, as administrative agent, and certain other lenders (Senior DIP Credit Agreement) and (2) a Junior Secured Superpriority DIP Credit Agreement with Alter Domus, as administrative agent, and certain lenders (Junior DIP Credit Agreement). For more information on our debtor-in-possession credit agreements, see Note 5 Debt.

Ares JV Settlement Agreement

On July 15, 2020, prior to the commencement of the Chapter 11 Cases, we and certain affiliates of Ares, including ECR, entered into a settlement and assumption agreement (Settlement Agreement). On July 17, 2020, the Bankruptcy Court entered an order approving the Settlement Agreement on an interim basis pending a final hearing. Upon entry of a final order by the Bankruptcy Court, we will be granted the right to acquire all of the equity interests of the Ares JV owned by ECR in exchange for secured notes, cash and common stock upon emergence from bankruptcy. We have also agreed to certain covenants and amendments to the Ares JV limited liability company agreement. The Settlement Agreement may be terminated in certain limited circumstances. For more information on the Ares JV, see Note 6 Joint Ventures.

Ability to Continue as a Going Concern

Our spin–off from Occidental Petroleum Corporation (Occidental) on November 30, 2014 burdened us with significant debt which was used to pay a $6.0 billion cash dividend to Occidental. Together with the activity level and payables that we assumed from Occidental and due to Occidental's retention of the vast majority of our receivables, our debt peaked at approximately $6.8 billion in May 2015. Since then, we have engaged in a series of assets sales, joint ventures, debt exchanges, tenders and repurchases and other financing transactions to reduce our overall debt and improve our balance sheet. As of June 30, 2020, we had reduced our outstanding debt to approximately $5.1 billion, a substantial portion of which would have matured in 2021.

We currently expect that our cash flows, cash on hand and financing available through our DIP credit agreements should provide sufficient liquidity during the pendency of the Chapter 11 Cases. However, for the duration of the Chapter 11 Cases, our operations and our ability to develop and execute our business plan are subject to a high degree of risks and uncertainty associated with the Chapter 11 proceedings. The outcome of the Chapter 11 Cases is also subject to a high degree of uncertainty and is dependent upon factors that are outside of our control, including actions of the Bankruptcy Court, our creditors, and Ares. There can be no assurance that we will confirm and consummate the plan under the RSA or complete another plan of reorganization with respect to the Chapter 11 proceedings. There is substantial doubt that we can continue as a going concern if we are not able to complete the plan of reorganization contemplated by the RSA or another plan of reorganization as part of the Chapter 11 Cases.

For the duration of the Chapter 11 Cases, our operations and ability to develop and execute our business plan are subject to the risks and uncertainties associated with the Chapter 11 Cases. See Part II, Item 1A – Risk Factors, below for further discussion of these risks and risks related to our ability to continue as a going concern.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of our going concern uncertainty or the Chapter 11 Cases. Further, the Chapter 11 Cases could result in a change in the basis of our accounting, which may have a material effect on the carrying value of certain assets and liabilities.

In the opinion of our management, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present our financial position as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and the statements of operations, comprehensive income (loss), equity and cash flows ~~and equity~~ for the three and six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, as applicable. We have eliminated all significant intercompany transactions and accounts. We account for our share of oil and natural gas exploration and development ventures, in which we have a direct working interest, by reporting our proportionate share of assets, liabilities, revenues, costs and cash flows within the relevant lines on our condensed consolidated balance sheets, statements of operations, equity and cash flows.

We have prepared this report in accordance with generally accepted accounting principles in the United States ~~(U.S.)~~ and the rules and regulations of the U.S. Securities and Exchange Commission applicable to interim financial information, which permit the omission of certain disclosures to the extent they have not changed materially since the latest annual financial statements. We believe our disclosures are adequate to make the information not misleading. This Form 10-Q should be read in conjunction with the condensed consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.


~~NOTE 2~~	~~ACCOUNTING AND DISCLOSURE CHANGES~~

NOTE 2 ACCOUNTING AND DISCLOSURE CHANGES

Recently Adopted Accounting and Disclosure Changes

We adopted the Financial Accounting Standards Board's new ~~lease accounting~~ rules ~~(ASC 842), as of~~on current expected credit losses on January 1, ~~2019,~~2020, using ~~the~~a modified retrospective approach ~~where~~to the first period in which the guidance is effective. The new ~~lease standard is not applied to prior comparative periods, which continue to be presented under accounting standards in effect~~rules change the measurement of credit losses for ~~those prior periods. Under the modified retrospective approach, we recognized right-of-use (ROU)~~financial assets and ~~lease liabilities~~certain other instruments, including trade and other receivables with a right to receive cash, and require the use of ~~$66 million as~~a new forward-looking expected loss model that will result in the earlier recognition of ~~the adoption date.~~an allowance for losses. The adoption of ~~the~~these new ~~lease accounting~~ rules did not ~~materially~~have a significant impact to our condensed consolidated results of operations and had no impact on cash flows or beginning retained earnings. The new lease standard does not affect our liquidity and has no impact on our debt-covenant calculations under our 2014 Revolving Credit Facility, 2016 Credit Agreement and 2017 Credit Agreement. See financial statements.

~~Note 12 Leases~~ ~~for more information.~~

These rules apply to our trade receivables and joint interest billings to third-party customers. Credit exposure for each customer is monitored for outstanding balances and current activity. We actively manage our credit risk by selecting counterparties that we believe to be financially sound and continue to monitor their financial health. Concentration of credit risk is regularly reviewed to ensure that counterparty credit risk is adequately diversified. We believe exposure to counterparty credit-related losses at June 30, 2020 was not material and losses associated with counterparty credit risk have been insignificant for all periods presented.


~~NOTE 3~~	NOTE 3 OTHER INFORMATION

Restricted cash — Cash at June 30, ~~2019 and December 31, 2018~~2020 included ~~$12~~$21 million ~~and $2 million, respectively, that~~which was restricted under agreements to fund operating expenses at one of our joint ventures and hold for ~~capital investments and~~ distributions to a joint venture (JV) partner. Cash at December 31, 2019 included $3 million, which was restricted for distributions to a JV partner.

Other current assets, net — Other current assets, net as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following:


	June 30,		December 31,
	2020		2019
	(in millions)
Net amounts due from joint interest partners^(a)	$	50	$	70
Derivative assets^(b)	7		39
Prepaid expenses	27		19
Other	—		2
Other current assets, net	$	84	$	130

June 30, December 31,
2019 2018
(in millions)
Derivative assets $ 92
$ 168
Amounts due from joint interest partners 66
68
Prepaid expenses 23
16
Other 10
3
Other current assets, net $ 191
$ 255
(a)Both June 30, 2020 and December 31, 2019 balances included $19 million in an allowance for credit losses against the receivables from our joint interest partners.

(b)Derivative assets at June 30, 2020 included only commodity contracts held by the Benefit Street Partners joint venture (BSP JV). Derivative assets at December 31, 2019 included commodity contracts for our hedge positions and those held by the BSP JV.

Accrued liabilities — Accrued liabilities as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following:


	June 30,		December 31,
	2020		2019
	(in millions)
Accrued employee-related costs^(a)	$	48	$	116
Accrued taxes other than on income^(b)	94		57
Accrued interest^(c)	154		13
Lease liability	15		28
Asset retirement obligations	28		28
Other^(d)	16		71
Accrued liabilities	$	355	$	313

June 30, December 31,
2019 2018
(in millions)
Accrued employee-related costs $ 77
$ 109
Accrued taxes other than on income 33
38
Asset retirement obligation 31
31
Operating lease liability 29
—
Accrued interest 15
15
Other 35
24
Accrued liabilities $ 220
$ 217
(a)As of June 30, 2020, accrued employee-related costs declined $68 million primarily due to bonus, long term incentive and severance payments made to employees and former employees.

(b)Accrued taxes other than income increased $37 million as of June 30, 2020 primarily due to missed property tax payments in April 2020 as a result of the economic impact of Coronavirus Disease 2019 (COVID-19).

(c)Accrued interest increased $141 million as of June 30, 2020 primarily due to missed interest payments as described in Note 5 Debt.

(d)Other accrued liabilities declined $55 million as of June 30, 2020 primarily due to the timing of payments with joint interest partners and settlement payments.

Other long-term liabilities — Other long-term liabilities included asset retirement obligations of ~~$479~~$499 million and ~~$402~~$489 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The remainder of the balance for each year consisted primarily of postretirement and pension benefit obligations, liabilities related to deferred compensation arrangements and lease liabilities.

Supplemental Cash Flow Information

We did 0t make U.S. federal and state income tax payments during the six months ended June 30, 2020 and 2019. Interest paid, net of capitalized amounts, totaled $51 million and $219 million for the six months ended June 30, 2020 and 2019, respectively.

~~Non-cash financing activities in 2018 included 2.85 million shares of common stock (valued at $51 million) issued in connection with an acquisition.~~

Fair Value of Financial Instruments

The carrying amounts of cash and other on-balance sheet financial instruments, other than debt, approximate fair value.

~~Supplemental Cash Flow Information~~

We did not make U.S. federal and state income tax payments during the six months ended June 30, 2019 and 2018. Interest paid, net of capitalized amounts, totaled $219 million and $212 million for the six months ended June 30, 2019 and 2018, respectively.

NOTE 4 INVENTORIES

Materials and supplies are valued at weighted-average cost and are reviewed periodically for obsolescence. Finished goods predominantly comprise oil and natural gas liquids (NGLs), which are valued at the lower of cost and net realizable value. Inventories as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following:


	June 30,		December 31,
	2020		2019
	(in millions)
Materials and supplies	$	59	$	64
Finished goods	2		3
Total	$	61	$	67

June 30, December 31,
2019 2018
(in millions)
Materials and supplies $ 68
$ 65
Finished goods 2
4
Total $ 70
$ 69

The following tables set forth the average realized prices and price realizations as a percentage of average Brent, WTI and NYMEX for our products for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Three months ended June 30,
	2020					2019
	Price		Realization	Price		Realization
Oil ($ per Bbl)
Brent	$	33.27		$	68.32

Realized price without hedge	$	30.27	91%	$	68.77	101%
Settled hedges	0.55			1.89
Realized price with hedge	$	30.82	93%	$	70.66	103%

WTI	$	27.85		$	59.82
Realized price without hedge	$	30.27	109%	$	68.77	115%
Realized price with hedge	$	30.82	111%	$	70.66	118%

NGLs ($ per Bbl)
Realized price (% of Brent)	$	21.05	63%	$	27.82	41%
Realized price (% of WTI)	$	21.05	76%	$	27.82	47%

Natural gas
NYMEX ($/MMBtu)	$	1.77		$	2.66

Realized price without hedge ($/Mcf)	$	1.65	93%	$	2.33	88%
Settled hedges	0.08			0.03
Realized price with hedge ($/Mcf)	$	1.73	98%	$	2.36	89%


	Six months ended June 30, 2020
	2020					2019
	Price		Realization	Price		Realization
Oil ($ per Bbl)
Brent	$	42.12		$	66.11

Realized price without hedge	$	41.02	97%	$	65.97	100%
Settled hedges	2.74			1.93
Realized price with hedge^(a)	$	43.76	104%	$	67.90	103%

WTI	$	37.01		$	57.36
Realized price without hedge	$	41.02	111%	$	65.97	115%
Realized price with hedge	$	43.76	118%	$	67.90	118%

NGLs ($ per Bbl)
Realized price (% of Brent)	$	25.18	60%	$	34.97	53%
Realized price (% of WTI)	$	25.18	68%	$	34.97	61%

Natural gas
NYMEX ($/MMBtu)	$	1.91		$	2.95

Realized price without hedge ($/Mcf)	$	1.96	103%	$	2.87	97%
Settled hedges	0.09			(0.01)
Realized price with hedge ($/Mcf)	$	2.05	107%	$	2.86	97%

(a) Prices for the first six months of 2020 exclude the effect of $63 million of proceeds received in the first quarter of 2020 from settling derivative contracts with counterparties prior to maturity.

Three months ended June 30,
2019 2018
Price Realization Price Realization
Oil ($ per Bbl)
Brent $ 68.32
$ 74.90

Realized price, without hedge $ 68.77
101% $ 73.19
98%
Settled hedges 1.89
(9.08 )
Realized price, with hedge $ 70.66
103% $ 64.11
86%

WTI $ 59.82
$ 67.88

Realized price, without hedge $ 68.77
115% $ 73.19
108%
Realized price, with hedge $ 70.66
118% $ 64.11
94%

NGLs ($ per Bbl)
Realized price (% of Brent) $ 27.82
41% $ 42.13
56%
Realized price (% of WTI) $ 27.82
47% $ 42.13
62%

Natural gas
NYMEX ($/MMBTU) $ 2.66
$ 2.75

Realized price, w/out hedge ($/Mcf) $ 2.33
88% $ 2.25
82%
Settled hedges 0.03
0.01

Realized price, with hedge ($/Mcf) $ 2.36
89% $ 2.26
82%

Six months ended June 30,
2019 2018
Price Realization Price Realization
Oil ($ per Bbl)
Brent $ 66.11
$ 71.04

Realized price, without hedge $ 65.97
100% $ 70.35
99%
Settled hedges 1.93
(6.88 )
Realized price, with hedge $ 67.90
103% $ 63.47
89%

WTI $ 57.36
$ 65.37

Realized price, without hedge $ 65.97
115% $ 70.35
108%
Realized price, with hedge $ 67.90
118% $ 63.47
97%

NGLs ($ per Bbl)
Realized price (% of Brent) $ 34.97
53% $ 42.63
60%
Realized price (% of WTI) $ 34.97
61% $ 42.63
65%

Natural gas
NYMEX ($/MMBTU) $ 2.95
$ 2.81

Realized price, w/out hedge ($/Mcf) $ 2.87
97% $ 2.51
90%
Settled hedges (0.01 ) 0.01

Realized price, with hedge ($/Mcf) $ 2.86
97% $ 2.52
89%

Oil — Brent index and realized prices were lower in both the three and six months ended June 30, ~~2019~~2020 compared to the same prior-year ~~periods. Favorable~~period due to the combination of the supply increase caused by the Saudi-Russia price war and the severe demand decline caused by COVID-19. Further, our realizations without hedge ~~settlements in 2019 compared to hedge payments made in 2018, along with higher realizations, resulted in a higher 2019 Brent realized price, with hedge settlements.~~

~~Prices for NGLs decreased~~were significantly ~~from the prior-year periods. In the second quarter of 2019, realized NGL prices declined as local and national markets experienced excess supply from Canadian imports coupled with weaker demand.~~

~~On average, our natural gas realized prices were higher~~affected in the ~~second quarter~~three months ended June 30, 2020, and to a lesser extent in the six months ended June 30, ~~2019~~2020, primarily due to the unprecedented global oversupply of oil and Saudi Arabia's price cuts for oil to the U.S. and other markets in April 2020. These two events led to lower crude realizations for foreign oil imported into California and depressed prices for native California crude.

NGLs — Prices for NGLs decreased from the same prior-year period as supply associated with high gas-producing basins outpaced steady demand, causing lower domestic NGL prices in the three and six months ended June 30, 2020. We continue to receive premium prices for NGLs relative to national hub prices.

Natural Gas — Our natural gas realized prices were lower in both the three and six months ended June 30, 2020 than the comparable periods of ~~2018 largely~~2019. The decrease was due to ~~stronger California demand.~~

increased nationwide natural gas production and lower demand resulting from the shelter-in-place orders related to COVID-19 that began in March 2020. Prices were also negatively impacted by lower supply constraints on the SoCalGas system in 2020 compared to the same period in the prior year.

Balance Sheet Analysis

The following table sets forth changes in our balance sheet between June 30, ~~2019~~2020 and December 31, ~~2018 are discussed below:~~2019:

June 30, December 31,
2019 2018
(in millions)
Cash $ 27
$ 17
Trade receivables $ 234
$ 299
Inventories $ 70
$ 69
Other current assets, net $ 191
$ 255
Property, plant and equipment, net $ 6,409
$ 6,455
Other assets $ 101
$ 63
Current maturities of long-term debt $ 100
$ —
Accounts payable $ 290
$ 390
Accrued liabilities $ 220
$ 217
Long-term debt $ 5,060
$ 5,251
Deferred gain and issuance costs, net $ 185
$ 216
Other long-term liabilities $ 679
$ 575
Mezzanine equity $ 777
$ 756
Equity attributable to common stock $ (408 ) $ (361 )
Equity attributable to noncontrolling interests $ 129
$ 114


	June 30,		December 31,
	2020		2019
	(in millions)
Cash	$	126	$	17
Trade receivables	$	132	$	277
Inventories	$	61	$	67
Other current assets, net	$	84	$	130
Property, plant and equipment, net	$	4,449	$	6,352
Other assets	$	78	$	115
Current portion of long-term debt	$	5,083	$	100
Current deferred gain and issuance costs, net	$	125	$	—
Accounts payable	$	196	$	296
Accrued liabilities	$	355	$	313
Long-term debt	$	—	$	4,877
Deferred gain and issuance costs, net	$	—	$	146
Other long-term liabilities	$	719	$	720
Mezzanine equity	$	828	$	802
Equity attributable to common stock	$	(2,452)	$	(389)
Equity attributable to noncontrolling interests	$	76	$	93

Cash — Cash at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 included ~~approximately $12~~restricted cash of $21 million and $2$3 million, ~~respectively, which is restricted for capital investments and distributions to a JV partner.~~respectively. See Liquidity and Capital Resources for our cash flow analysis.

Trade receivables — The decrease in trade receivables was largely ~~due to our gas trading activities that were higher~~driven by lower realized product prices and lower production volumes in ~~the fourth quarter of 2018~~June 2020 compared to ~~the second quarter of~~December 2019.

Other current assets, net — The decrease in other current assets, net was primarily due to the sale of our crude oil hedge positions resulting in a decrease in the fair value of the current portion of our derivative assets. Additionally, in March 2020, we recorded an $11 million impairment on capital investments to be recovered from our joint interest partners solely from production.

Property, plant and equipment, net — The decrease in property, plant and equipment, net primarily reflected the $1.7 billion impairment of certain of our ~~Lost Hills divestiture~~proved and unproved properties recorded in the first quarter of 2020, depreciation, depletion, and amortization (DD&A) and to a lesser extent sales of certain royalty interests and non-core assets in the first quarter of 2020. The decrease was partially offset by capital investments including the planned major maintenance at our Elk Hills power plant. For further detail about the asset impairment, see Part I, Item 1 – Financial Statements, Note 14 Asset Impairments.

Other assets — Other assets decreased primarily due to utilizing parts for the planned major maintenance of our Elk Hills power plant as well as a decrease in ~~the first half of 2019 and changes~~operating lease assets due to ~~our asset retirement obligations (ARO) resulting from idle well regulations enacted~~releasing drilling rigs in the first quarter of ~~2019.~~2020.

~~Other assets increased~~Current portion of long-term debt — The increase in the current portion of long-term debt was a result of the reclassification of our long-term debt to current as described in Part I, Item 1 – Financial Statements, Note 5 Debt.

Current portion of deferred gain and issuance costs, net — The increase in the current portion of deferred gain and issuance costs, net was primarily a result of reclassifying capitalized costs associated with our long-term debt to current.

Accounts payable — The decrease in accounts payable was due to ~~recording a right-of-use asset for operating leases~~lower amounts payable to vendors following the reduction of our capital plan in the second quarter of 2020 compared to the fourth quarter of 2019.

Accrued liabilities — The increase in accrued liabilities primarily related to an increase in accrued interest as a result of ~~adopting new accounting rules on January 1, 2019 that impact~~our failure to make certain interest payments and property tax payments during the ~~current period but not the prior period. This increase was partially offset by a decrease in the fair value~~second quarter of ~~our long-term derivative assets.~~

~~Current maturities~~2020 compared to balances due as of ~~long-term debt reflected $100 million for our 5% senior notes due in January 2020.~~

~~The reduction in accounts payable for the quarter ended June 30, 2019 reflected lower capital investments and gas trading activities, which were higher in~~ the fourth quarter of ~~2018 compared~~2019. These amounts were partially offset by the bonus payments to employees made in the ~~second~~first quarter of ~~2019.~~2020 with respect to 2019 performance as well as a decrease in activities of the Alpine JV following their suspension of further capital funding due to low commodity prices.

Long-term debt — The decrease in long-term debt ~~reflected a~~resulted from the reclassification ~~of $100 million of our senior notes to current maturities~~ of long-term debt to current as of June 30, 2020.

Deferred gain and ~~the proceeds~~issuance costs, net — The decrease in deferred gain and issuance costs, net resulted from the ~~Lost Hills divestiture that were used~~reclassification of costs associated with our long-term debt to ~~pay down debt.~~current as of June 30, 2020.

~~Other long-term liabilities reflected~~Mezzanine equity — The increase in mezzanine equity primarily resulted from the ~~increases in ARO primarily due~~preferred return to the new idle well regulations and long-term operating lease liabilities due to the adoption of new lease accounting rules. The annual incremental cash expenditures for ARO resulting from the new idle well regulations are not expected to be material.

~~Mezzanine equity reflected the carrying amount of the Class A common and~~ Class B ~~preferred~~ interests held by the noncontrolling interest partner in our ~~midstream~~Ares JV.

Equity attributable to common stock — Equity attributable to common stock decreased primarily as a result of the net loss ~~for~~in the ~~period.~~

six months ended June 30, 2020.

Statements of Operations Analysis

Results of Oil and Gas Operations

The following represents key operating data for our oil and gas operations, excluding certain corporate items, on a per Boe ~~basis:~~basis for the three and six months ended June 30, 2020 and 2019:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Production costs	$	12.42	$	19.62	$	14.99	$	19.54
Production costs, excluding effects of PSC-type contracts^(a)	$	12.00	$	17.98	$	14.33	$	17.99
Field general and administrative expenses^(b)	$	1.17	$	1.28	$	1.08	$	1.27
Field depreciation, depletion and amortization^(b)	$	7.82	$	9.55	$	8.98	$	9.47
Field taxes other than on income^(b)	$	2.84	$	2.39	$	2.96	$	2.53

(a)As described in the Operations section, the reporting of our PSC-type contracts creates a difference between reported production costs, which are for the full field, and reported volumes, which are only our net share, inflating the per barrel production costs. These amounts represent our production costs after adjusting for this difference.

(b)Excludes corporate expenses.

Three months ended
June 30, Six months ended
June 30,
2019 2018 2019 2018
Production costs $ 19.62
$ 18.93
$ 19.54
$ 19.01
Production costs, excluding effects of PSC-type contracts^(a)
$ 17.98
$ 17.41
$ 17.99
$ 17.44
Field general and administrative expenses^(b)
$ 1.28
$ 1.07
$ 1.27
$ 0.90
Field depreciation, depletion and amortization^(b)
$ 9.55
$ 9.67
$ 9.41
$ 9.78
Field taxes other than on income^(b)
$ 2.39
$ 2.38
$ 2.53
$ 2.53


~~(a)~~	~~As described in the~~ ~~Operations~~ section, the reporting of our PSC-type contracts creates a difference between reported production costs, which are for the full field, and reported volumes, which are only our net share, inflating the per barrel production costs. These amounts represent our production costs after adjusting for this difference.


~~(b)~~	~~Excludes corporate expenses.~~

Consolidated Results of Operations

The following represents key operating data for our consolidated operations for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:

Three months ended
June 30, Six months ended
June 30,
2019 2018 2019 2018
(in millions)
Oil and gas sales $ 578
$ 657
$ 1,179
$ 1,232
Net derivative gain (loss) from commodity contracts 21
(167 ) (68 ) (205 )
Other revenue 54
59
232
131
Production costs (230 ) (231 ) (463 ) (443 )
General and administrative expenses (79 ) (90 ) (162 ) (153 )
Depreciation, depletion and amortization (121 ) (125 ) (239 ) (244 )
Taxes other than on income (36 ) (37 ) (77 ) (75 )
Exploration expense (10 ) (6 ) (20 ) (14 )
Other expenses, net (55 ) (49 ) (203 ) (110 )
Interest and debt expense, net (98 ) (94 ) (198 ) (186 )
Net gain on early extinguishment of debt 20
24
26
24
Gain on asset divestitures —
1
—
1
Other non-operating expenses (3 ) (5 ) (10 ) (12 )
Income (loss) before income taxes 41
(63 ) (3 ) (54 )
Income tax —
—
—
—
Net income (loss) 41
(63 ) (3 ) (54 )
Net income attributable to noncontrolling interests (29 ) (19 ) (52 ) (30 )
Net Income (loss) attributable to common stock $ 12
$ (82 ) $ (55 ) $ (84 )

Adjusted net (loss) income $ (14 ) $ (14 ) $ 17
$ (6 )
Adjusted EBITDAX $ 255
$ 245
$ 556
$ 495
Effective tax rate — % — % — % — %


	Three months ended June 30,									Six months ended June 30,
	2020			2019			2020			2019
	(in millions)
Oil and natural gas sales	$	245		$	578		$	675		$	1,179
Net derivative (loss) gain from commodity contracts	(4)			21			75			(68)
Other revenue	35			54			99			232
Production costs	(127)			(230)			(319)			(463)
General and administrative expenses	(69)			(79)			(129)			(162)
Depreciation, depletion and amortization	(88)			(121)			(207)			(239)
Asset impairments	—			—			(1,736)			—
Taxes other than on income	(38)			(36)			(79)			(77)
Exploration expense	(2)			(10)			(7)			(20)
Other expenses, net	(67)			(55)			(136)			(203)
Interest and debt expense, net	(85)			(98)			(172)			(198)
Net gain on early extinguishment of debt	—			20			5			26

Other non-operating expenses	(47)			(3)			(61)			(10)
(Loss) income before income taxes	(247)			41			(1,992)			(3)
Income tax	—			—			—			—
Net (loss) income	(247)			41			(1,992)			(3)
Net income attributable to noncontrolling interests	(24)			(29)			(75)			(52)
Net (loss) income attributable to common stock	$	(271)		$	12		$	(2,067)		$	(55)

Adjusted net (loss) income^(a)	$	(202)		$	(14)		$	(210)		$	17
Adjusted EBITDAX^(a)	$	19		$	255		$	270		$	556
Effective tax rate	—		%	—		%	—		%	—		%

(a)Adjusted net (loss) income and adjusted EBITDAX are non-GAAP measures. See the Non-GAAP Financial Measures section below for reconciliations to their nearest U.S. GAAP equivalent.

Three months ended June 30, ~~2019~~2020 vs. ~~2018~~2019

Oil and natural gas sales -— Oil and natural gas sales ~~excluding the impact of settled hedges,~~ decreased ~~12%~~58%, or ~~$79~~$333 million, for the three months ended June 30, ~~2019~~2020 compared to the same period of ~~2018~~2019 due to ~~changes in~~lower realized prices and production as reflected in the following table:

Oil NGLs Natural Gas Total
(in millions)
Three months ended June 30, 2018 $ 553
$ 61
$ 43
$ 657
Changes in realized prices (33 ) (22 ) 2
(53 )
Changes in production (24 ) —
(2 ) (26 )
Three months ended June 30, 2019 $ 496
$ 39
$ 43
$ 578


	Oil		NGLs		Natural Gas		Total
	(in millions)
Three months ended June 30, 2019	$	496	$	39	$	43	$	578
Changes in realized prices	(279)		(10)		(13)		(302)
Changes in production	(24)		(3)		(4)		(31)
Three months ended June 30, 2020	$	193	$	26	$	26	$	245

Note: See Production and Prices for index prices, realizations and ~~production.~~production volumes for comparative periods.

The effect of settled hedges ~~are~~is not included in the table above. ~~Proceeds~~Net proceeds from settled hedges ~~on oil~~ were ~~$14~~$5 million for the three months ended June 30, ~~2019~~2020 compared to ~~payments~~net proceeds of ~~$68~~$14 million for the ~~three months ended June 30, 2018,~~same period of 2019, which had a ~~positive~~negative impact of ~~$82~~$9 million on our ~~realized price for oil.~~total revenue between periods. Including the effect of settled hedges, our oil and natural gas revenue ~~was slightly higher~~decreased by $342 million or 58% compared to the same prior-year period.

Net derivative ~~gain~~ (loss) ~~from commodity contracts -~~ ~~Net derivative~~ gain from commodity contracts —Net derivative loss from commodity contracts was ~~$21~~$4 million for the three months ended June 30, ~~2019~~2020 compared to a ~~loss~~gain of ~~$167~~$21 million in the same period of ~~2018,~~2019, representing an overall change of ~~$188~~$25 million as reflected in the following table. Non-cash changes in the fair value of our outstanding derivatives resulted from the positions held at the end of each period as well as the relationship between contract prices, volatility, time to expiration and the associated forward curves.


	Three months ended June 30,
	2020		2019
	(in millions)
Non-cash derivative (loss) gain, excluding noncontrolling interest	$	—	$	4
Non-cash derivative (loss) gain, noncontrolling interest	(9)		3
Total non-cash changes	(9)		7
Net proceeds on settled commodity derivatives	5		14

Net derivative (loss) gain	$	(4)	$	21

Three months ended
June 30,
2019 2018
(in millions)
Non-cash derivative gain (loss), excluding noncontrolling interest $ 4
$ (92 )
Non-cash derivative gain (loss), noncontrolling interest 3
(7 )
     Total non-cash changes 7
(99 )
     Net proceeds (payments) on settled commodity derivatives 14
(68 )
     Net derivative gain (loss) $ 21
$ (167 )

Other revenue — The decrease in other revenue of $19 million to $35 million for the three months ended June 30, 2020 compared to $54 million in the same period of 2019 was primarily due to lower natural gas trading activity.

Production costs — Production costs for the three months ended June 30, 2020 decreased $103 million to $127 million compared to $230 million for the same period of 2019, resulting in a 45% decrease. The decrease was primarily attributable to efficiencies and streamlining of our operations, along with our October 2019 workforce reduction and reduced work schedules during the months of April and May 2020. The operating costs of shut in wells, as well as lower activity levels in response to the current environment, such as downhole maintenance, also contributed to the decrease.

General and administrative expenses -— Our general and administrative (G&A) expenses decreased ~~$11~~$10 million to ~~$79~~$69 million for the three months ended June 30, ~~2019~~2020 compared to $79 million for the same period of ~~2018 predominantly~~2019, primarily due to ~~expenses related to our~~lower cash-settled ~~equity awards,~~stock-based compensation expense resulting from the adjustment of the obligation to our stock price at the end of each quarter. Our stock price decreased by approximately $10.00 from the beginning to the end of the second quarter of 2019 compared to an increase of approximately $30.00a decline in our stock price ~~from the beginning~~between comparative periods. Additionally, G&A expenses were lower in 2020 as a result of cost savings attributable to our October 2019 workforce reduction and reduced work hours and reduced management salaries in response to the ~~end of~~industry downturn and the ~~second quarter of 2018. This had the effect of lower non-cash stock-based compensation expense for cash-settled equity awards~~COVID-19 pandemic in the second quarter of ~~2019~~2020 partially offset by additional compensation expense related to the modification of our 2020 variable compensation programs in May 2020. See Part I, Item 1 – Financial Statements, Note 15 Compensation Plans for more information.

Depreciation, depletion and amortization — The decrease in depreciation, depletion, and amortization of $33 million to $88 million in the second quarter of 2020 compared to $121 million in 2019 was predominately due to a decrease in our depletable basis as a result of our asset impairment recorded in the ~~same prior-year period. Additionally, the stock price~~first quarter of 2020.

Other expenses, net — The increase in other expenses of $12 million to $67 million for ~~the cash-settled equity awards that vested during~~ the three months ended June 30, ~~2019 were paid at a lower stock price~~2020 compared to $55 million for the ~~cash-settled equity awards that vested~~same period of 2019 was largely the result of a one-time payment of $20 million made in April 2020 in connection with an expiring pipeline delivery contract partially offset by a decrease in natural gas trading purchases.

Interest and debt expense, net — Interest and debt expense, net decreased $13 million to $85 million in the second quarter of 2020 compared to $98 million in the same ~~prior-year period.~~period of 2019 due to the repayment of the 2020 Senior Notes in January 2020, the 2019 repurchases of our Second Lien Notes and lower variable interest rates on our borrowings under the 2016 Credit Agreement and 2017 Credit Agreement.

Net gain on early extinguishment of debt — We did not have a net gain on early extinguishment of debt for the three months ended June 30, 2020, which is a decrease of $20 million from the same period in 2019. The decrease was due to a lack of open market purchases in ~~stock-based compensation expense was partially offset by higher overhead in 2019.~~the second quarter of 2020.

Other non-operating expense — Other non-operating expense increased $44 million to $47 million for the three months ended June 30, 2020 compared to $3 million in the same period for 2019. The increase was primarily a result of professional fees and costs associated with the preparation of the Chapter 11 Cases.

Six months ended June 30, 2020 vs 2019 ~~vs. 2018~~

Oil and natural gas sales -— Oil and natural gas sales ~~excluding the impact of settled hedges,~~ decreased 4%43%, or ~~$53~~$504 million, for the six months ended June 30, ~~2019~~2020 compared to the same period of ~~2018~~2019 due to ~~changes in~~lower realized prices and production as reflected in the following table:

Oil NGLs Natural Gas Total
(in millions)
Six months ended June 30, 2018 $ 1,019
$ 124
$ 89
$ 1,232
Changes in realized prices (64 ) (23 ) 13
(74 )
Changes in production 21
(3 ) 3
21
Six months ended June 30, 2019 $ 976
$ 98
$ 105
$ 1,179


	Oil		NGLs		Natural Gas		Total
	(in millions)
Six months ended June 30, 2019	$	976	$	98	$	105	$	1,179
Changes in realized prices	(371)		(27)		(33)		(431)
Changes in production	(56)		(9)		(8)		(73)
Six months ended June 30, 2020	$	549	$	62	$	64	$	675

Note: See Production and Prices for index prices, realizations and ~~production.~~production volumes for comparative periods.

The effect of settled hedges ~~are~~is not included in the table above. ~~Proceeds~~Net proceeds from ~~settlements on our oil contracts~~settled hedges were ~~$28~~$40 million for the six months ended June 30, ~~2019~~2020, excluding the effect of our derivative contracts sold prior to maturity in the first quarter of 2020, compared to ~~payments~~net proceeds of ~~$99~~$28 million for the same period of 2019, which had a positive impact of $12 million on our total revenue between periods. Including the effect of settled hedges and proceeds from derivative contracts sold in the first quarter of 2020, our oil and natural gas revenue decreased by $429 million or 36% compared to the same prior-year period.

Net derivative gain (loss) from commodity contracts —Net derivative gain from commodity contracts was $75 million for the six months ended June 30, ~~2018, which had a positive impact of $127 million on our realized price for oil. Including the effect of settled hedges, our oil and gas revenue was higher~~2020 compared to ~~the same prior-year period.~~

~~Net derivative gain (loss) from commodity contracts -~~ ~~Net derivative~~a loss ~~from commodity contracts was~~of $68 ~~million for the six months ended June 30, 2019 compared to $205~~ million in the same period of ~~2018,~~2019, representing an overall change of ~~$137~~$143 million as reflected in the following table. Non-cash changes in the fair value of our outstanding derivatives resulted from the positions held at the end of each period as well as the relationship between contract prices, volatility, time to expiration and the associated forward curves.


	Six months ended June 30,
	2020		2019
	(in millions)
Non-cash derivative (loss) gain, excluding noncontrolling interest	$	(35)	$	(93)
Non-cash derivative gain (loss), noncontrolling interest	7		(3)
Total non-cash changes	(28)		(96)
Net proceeds on settled commodity derivatives	40		28
Net proceeds on derivative sales prior to maturity	63		—
Net derivative gain (loss)	$	75	$	(68)

Six months ended
June 30,
2019 2018
(in millions)
Non-cash derivative gain (loss), excluding noncontrolling interest $ (93 ) $ (99 )
Non-cash derivative gain (loss), noncontrolling interest (3 ) (7 )
     Total non-cash changes (96 ) (106 )
     Net proceeds (payments) on settled commodity derivatives 28
(99 )
     Net derivative gain (loss) from commodity contracts $ (68 ) $ (205 )

Other revenue -— The ~~increase~~decrease in other revenue of ~~$101~~$133 million to ~~$232~~$99 million for the six months ended June 30, ~~2019~~2020 compared to ~~$131~~$232 million in the same period of ~~2018,~~2019 was ~~largely the result of higher~~due to lower natural gas trading activity and lower electricity sales due to a planned major maintenance at the Elk Hills power plant in ~~2019.~~2020.

Production costs -— Production costs for the six months ended June 30, ~~2019 increased $20~~2020 decreased $144 million to ~~$463~~$319 million compared to ~~$443~~$463 million for the same period of ~~2018,~~2019, resulting in a ~~5% increase.~~31% decrease. The ~~increase is~~decrease was primarily attributable to efficiencies and streamlining of our operations, along with our October 2019 workforce reduction and reduced work schedules during the ~~Elk Hills transaction that closed at the beginning~~months of April ~~2018, higher surface operations~~ and ~~maintenance~~May 2020. The operating costs ~~and other items, partially offset by~~of shut in wells, as well as lower activity levels in response to the current environment, such as downhole maintenance, ~~activity and lower costs resulting from~~also contributed to the ~~Lost Hills divestiture.~~decrease.

General and administrative expenses -— Our ~~G&A~~general and administrative (G&A) expenses ~~increased $9~~decreased $33 million to ~~$162~~$129 million for the six months ended June 30, ~~2019~~2020 compared to $162 million for the same period of ~~2018 predominantly~~2019, primarily due to ~~higher expenses across a number of functions, partially offset by~~ lower cash-settled stock-based compensation ~~expense. Our stock price was relatively flat~~expense resulting from ~~the beginning to the end of the six months ended June 30, 2019 compared to an increase of approximately $25.00~~a decline in our stock price ~~from the beginning~~between comparative periods. Additionally, G&A expenses were lower in 2020 as a result of cost savings attributable to our October 2019 workforce reduction and reduced work hours and reduced management salaries in response to the ~~end~~industry downturn and the COVID-19 pandemic in the second quarter of ~~the six months ended June 30, 2018. This had the effect of lower non-cash stock-based~~2020 partially offset by an increase in compensation expense ~~for cash-settled awards~~due to changes to our 2020 compensation program.

Depreciation, depletion and amortization — The decrease in depreciation, depletion, and amortization of $32 million to $207 million in the first half of ~~2019~~2020 compared to $239 million in 2019 was predominately due to the ~~same prior-year period.~~asset impairment recorded in the first quarter of 2020.

Asset impairments — In the first quarter of 2020, we recorded an impairment charge of $1.7 billion, of which $1.5 billion related to certain of our proved properties and $228 million related to unproved acreage that we no longer intend to pursue. No asset impairments were recorded in the second quarter of 2020. For further detail about the asset impairment, see Part I, Item 1 – Financial Statements, Note 14 Asset Impairments.

Other expenses, net -— The ~~increase~~decrease in other expenses of ~~$93~~$67 million to ~~$203~~$136 million for the six months ended June 30, ~~2019~~2020 compared to ~~$110~~$203 million for the same period of ~~2018,~~2019 was largely the result of ~~higher~~lower natural gas trading activity, partially offset by a one-time deficiency payment of $20 million made in ~~2019.~~April 2020 in connection with an expiring pipeline delivery contract.

Interest and debt expense, net -— Interest and debt expense, net ~~increased $12~~decreased $26 million to $172 million in the first half of 2020 compared to $198 million in the same period of 2019 due to the repayment of the 2020 Senior Notes in January 2020, reduction in the outstanding balance of the Second Lien Notes due to open market purchases and a reduction in the interest rates in our 2016 Credit Agreement and 2017 Credit Agreement.

Net gain on early extinguishment of debt — The net gain on early extinguishment of debt for the six months ended June 30, 2020 was $5 million, which is a decrease of $21 million from $26 million during the same period in 2019. The decrease was due to lower debt repurchase activity in 2020.

Other non-operating expense — Other non-operating expense increased $51 million to $61 million for the six months ended June 30, ~~2019~~2020 compared to ~~$186~~$10 million ~~for~~in the same period ~~of 2018,~~for 2019. The increase was primarily ~~due to higher balances and interest rates on our variable-rate debt, partially offset by a lower outstanding balance on our Second Lien Notes as~~ a result of ~~repurchases.~~professional fees and costs associated with the preparation of the Chapter 11 Cases.

~~Net income attributable to noncontrolling interests -~~ The increase in net income attributable to noncontrolling interests of $22 million reflected both changes in the fair value of derivative instruments held by the BSP JV and additional income allocated to our noncontrolling interest holders in 2019 since the Ares JV was entered into during the first quarter of 2018.

Stock-Based Compensation

Our consolidated results of operations for the three and six months ended June 30, ~~2019~~2020 and ~~2018~~2019 include the effects of long-term stock-based compensation plans under which awards are granted annually to executives, non-executive employees and non-employee directors that are either settled with shares of our common stock or cash. Our equity-settled awards granted to executives include stock options, restricted stock units and performance stock units that either cliff vest at the end of a three-year period or vest ratably over a three-year period, some of which are partially settled in cash. Our equity-settled awards granted to non-employee directors are stock grants that vest immediately or restricted stock units that cliff vest after one year. Our cash-settled awards granted to non-executive employees vest ratably over a three-year period.

Changes in our stock price introduce volatility in our results of operations because we pay cash-settled awards based on our stock price on the vesting date and accounting rules require that we adjust our obligation for unvested awards to the amount that would be paid using our stock price at the end of each reporting period. Cash-settled awards, including executive awards partially settled in cash, account for approximately ~~50%~~40% of our total outstanding awards. ~~Equity-settled~~Our obligations for equity-settled awards are not similarly adjusted for changes in our stock price.

Stock-based compensation is included in both ~~G&A expenses~~general and administrative (G&A) expense and production costs as shown in the table below:


	Three months ended June 30,										Six months ended June 30,
	2020		2019		Variance		2020		2019		Variance
	(in millions, except per Boe amounts)
G&A expense
Cash-settled awards	$	—	$	3	$	(3)	$	(2)	$	13	$	(15)
Equity-settled awards	1		4		(3)		4		7		(3)
Total in G&A	$	1	$	7	$	(6)	$	2	$	20	$	(18)
Total in G&A per Boe	$	0.10	$	0.60	$	(0.50)	$	0.10	$	0.84	$	(0.74)

Production costs
Cash-settled awards	$	—	$	1	$	(1)	$	(1)	$	4	$	(5)
Equity-settled awards	—		1		(1)		—		2		(2)
Total in production costs	$	—	$	2	$	(2)	$	(1)	$	6	$	(7)
Total in production costs per Boe	$	—	$	0.17	$	(0.17)	$	(0.05)	$	0.25	$	(0.30)

Total stock-based compensation expense	$	1	$	9	$	(8)	$	1	$	26	$	(25)
Total stock-based compensation expense per Boe	$	0.10	$	0.77	$	(0.67)	$	0.05	$	1.09	$	(1.04)

Three months ended
June 30, Six months ended
June 30,
2019 2018 Variance 2019 2018 Variance
(in millions, except per Boe amounts)
G&A expenses
Cash-settled awards $ 3
$ 19
$ (16 ) $ 13
$ 22
$ (9 )
Equity-settled awards 4
4
—
7
7
—
   Total in G&A $ 7
$ 23
$ (16 ) $ 20
$ 29
$ (9 )
   Total in G&A per Boe $ 0.60
$ 1.89
$ (1.29 ) $ 0.84
$ 1.24
$ (0.40 )

Production costs
Cash-settled awards $ 1
$ 5
$ (4 ) $ 4
$ 6
$ (2 )
Equity-settled awards 1
1
—
2
2
—
Total in production costs $ 2
$ 6
$ (4 ) $ 6
$ 8
$ (2 )
   Total in production costs per Boe $ 0.17
$ 0.49
$ (0.32 ) $ 0.25
$ 0.34
$ (0.09 )

Total company $ 9
$ 29
$ (20 ) $ 26
$ 37
$ (11 )
Total company per Boe $ 0.77
$ 2.38
$ (1.61 ) $ 1.09
$ 1.58
$ (0.49 )

Changes to the 2020 Compensation Program

In connection with the unprecedented circumstances affecting the industry and market volatility resulting from the recent industry downturn, we reviewed our incentive programs for the entire workforce to determine whether those programs appropriately align compensation opportunities with our 2020 goals and ensure the stability of our workforce. Following this review, effective May 19, 2020, our Board of Directors approved changes in the variable compensation programs for all participating employees. The previously established target amounts of 2020 variable compensation programs did not change; however, all amounts that vest will be settled in cash and the replacement awards are no longer stock-based compensation. As a condition to receiving any award, participants waived participation in our 2020 annual incentive program and forfeited all stock-based compensation awards previously granted in 2020. There were no changes to stock-based compensation awards granted prior to February 2020. Changes to the variable compensation programs will have the effect of accelerating the associated payments into 2020 from future periods. However, the total amount of compensation to be paid under the variable compensation programs at target for 2020 remains largely the same as the amounts that would have been paid at target prior to the changes. Our second quarter 2020 results included an additional $4 million expense related to modifying our 2020 compensation program. See Non-GAAP Financial Measures below for a reconciliation of G&A to adjusted G&A.

Non-GAAP Financial Measures

Adjusted net (loss) income — Our results of operations, which are presented in accordance with U.S. generally accepted accounting principles (GAAP), can include the effects of unusual, out-of-period and infrequent transactions and events affecting earnings that vary widely and unpredictably (in particular certain non-cash items such as derivative gains and losses) in nature, timing, amount and frequency. Therefore, management uses a measure called adjusted net income (loss) that excludes those items. This measure is not meant to disassociate these items from management's performance but rather is meant to provide useful information to investors interested in comparing our performance between periods. Reported earnings are considered representative of management's performance over the long term. Adjusted net income (loss) is not considered to be an alternative to net income (loss) reported in accordance with GAAP.

~~Adjusted net (loss) income~~

The following table presents a reconciliation of the GAAP financial measure of net (loss) income ~~(loss)~~ to the non-GAAP financial measure of adjusted net (loss) income and presents the GAAP financial measure of net (loss) income ~~(loss)~~ attributable to common stock per diluted share and the non-GAAP financial measure of adjusted net (loss) income per diluted share:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in millions, except share data)
Net (loss) income	$	(247)	$	41	$	(1,992)	$	(3)
Net income attributable to noncontrolling interests	(24)		(29)		(75)		(52)
Net (loss) income attributable to common stock	(271)		12		(2,067)		(55)
Unusual, infrequent and other items:
Asset impairment	—		—		1,736		—
Non-cash derivative (loss) gain from commodities, excluding noncontrolling interest	—		(4)		35		93

Severance costs	—		2		—		2
Incentive and retention award modification	4		—		4		—
Net gain on early extinguishment of debt	—		(20)		(5)		(26)

Professional fees and costs related to our Chapter 11 Cases	42		—		49		—
Deficiency payment on a pipeline delivery contract	20		—		20		—
Other, net	3		(4)		18		3
Total unusual, infrequent and other items	69		(26)		1,857		72
Adjusted net (loss) income	$	(202)	$	(14)	$	(210)	$	17

Net (loss) income attributable to common stock per diluted share	$	(5.47)	$	0.24	$	(41.84)	$	(1.13)
Adjusted net (loss) income per diluted share	$	(4.08)	$	(0.29)	$	(4.25)	$	0.35

Three months ended
June 30, Six months ended
June 30,
2019 2018 2019 2018
(in millions, except share data)
Net income (loss) $ 41
$ (63 ) $ (3 ) $ (54 )
Net income attributable to noncontrolling interests (29 ) (19 ) (52 ) (30 )
Net income (loss) attributable to common stock 12
(82 ) (55 ) (84 )
Unusual, infrequent and other items:
Non-cash derivative (gain) loss from commodities, excluding noncontrolling interest (4 ) 92
93
99
Early retirement and severance costs 2
2
2
4
Net gain on early extinguishment of debt (20 ) (24 ) (26 ) (24 )
Other, net (4 ) (2 ) 3
(1 )
Total unusual, infrequent and other items (26 ) 68
72
78
Adjusted net (loss) income $ (14 ) $ (14 ) $ 17
$ (6 )

Net income (loss) attributable to common stock per diluted share $ 0.24
$ (1.70 ) $ (1.13 ) $ (1.81 )
Adjusted net (loss) income per diluted share $ (0.29 ) $ (0.29 ) $ 0.35
$ (0.13 )

Adjusted EBITDAX -— We define adjusted EBITDAX as earnings before interest expense; income taxes; depreciation, depletion and amortization; exploration expense; other unusual, out-of-period and infrequent items; and other non-cash items. We believe this measure provides useful information in assessing our financial condition, results of operations and cash flows and is widely used by the industry, the investment community and our lenders. Although this is a non-GAAP measure, the amounts included in the calculation were computed in accordance with GAAP. Certain items excluded from this non-GAAP measure are significant components in understanding and assessing our financial performance, such as our cost of capital and tax structure, as well as the historic cost of depreciable and depletable assets. This measure should be read in conjunction with the information contained in our financial statements prepared in accordance with GAAP. A version of adjusted EBITDAX is a material component of certain of our financial covenants under our 2014 Revolving Credit Facility and is provided in addition to, and not as an alternative for, income and liquidity measures calculated in accordance with GAAP.

The following table presents a reconciliation of the GAAP financial measure of net (loss) income ~~(loss)~~ to the non-GAAP financial measure of adjusted EBITDAX:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in millions)
Net (loss) income	$	(247)	$	41	$	(1,992)	$	(3)
Interest and debt expense, net	85		98		172		198
Depreciation, depletion and amortization	88		121		207		239
Exploration expense	2		10		7		20
Unusual, infrequent and other items	69		(26)		1,857		72
Other non-cash items	22		11		19		30
Adjusted EBITDAX	$	19	$	255	$	270	$	556

Three months ended
June 30, Six months ended
June 30,
2019 2018 2019 2018
(in millions)
Net income (loss) $ 41
$ (63 ) $ (3 ) $ (54 )
Interest and debt expense, net 98
94
198
186
Depreciation, depletion and amortization 121
125
239
244
Exploration expense 10
6
20
14
Unusual, infrequent and other items (26 ) 68
72
78
Other non-cash items 11
15
30
27
Adjusted EBITDAX $ 255
$ 245
$ 556
$ 495

The following table sets forth a reconciliation of the GAAP measure of net cash provided by operating activities to the non-GAAP financial measure of adjusted EBITDAX:

Six months ended
June 30,
2019 2018
(in millions)
Net cash provided by operating activities $ 272
$ 234
Cash interest 225
215
Exploration expenditures 10
10
Working capital changes 49
37
Other, net —
(1 )
Adjusted EBITDAX $ 556
$ 495

Adjusted EBITDAX increased by $61 million primarily due to higher oil and natural gas production, higher realized oil prices with hedges and higher trading income, partially offset by higher production costs.


	Six months ended June 30,
	2020		2019
	(in millions)
Net cash provided by operating activities	$	93	$	272
Cash interest	59		225
Exploration expenditures	7		10
Working capital changes	111		49

Adjusted EBITDAX	$	270	$	556

Adjusted G&A — Management uses a measure called adjusted general and administrative (adjusted G&A) expense to provide useful information to investors interested in comparing our costs between periods and performance to our peers. We define adjusted G&A expenses as general and administrative expenses excluding severance and other non-recurring costs.

The following table presents the reconciliation of our consolidated general and administrative expenses to the non-GAAP measure of adjusted G&A:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in millions)						(in millions)
General and administrative expenses	$	69	$	79	$	129	$	162
Incentive and retention award modification	(4)		—		(4)		—
Severance costs	—		(1)		—		(1)
Office consolidation	—		(1)		—		(1)
Adjusted G&A	$	65	$	77	$	125	$	160

Liquidity and Capital Resources

Cash Flow Analysis


	Six months ended June 30,
	2020		2019
	(in millions)
Cash flow from operating activities	$	93	$	272
Cash flow from investing activities:
Capital investments	$	(33)	$	(271)
Changes in capital investment accruals	$	(28)	$	(57)
Acquisitions, divestitures and other	$	34	$	158
Cash flow from financing activities:
Net debt transactions	$	110	$	(74)
Net distributions to noncontrolling interest holders	$	(66)	$	(16)
Issuance of common stock and other	$	(1)	$	(2)

Six months ended
June 30,
2019 2018
(in millions)
Net cash provided by operating activities $ 272
$ 234
Net cash used in investing activities:
Capital investments $ (271 ) $ (327 )
Changes in capital investment accruals $ (57 ) $ 22
Acquisitions, divestitures and other $ 158
$ (502 )
Net cash (used) provided by financing activities:
   Debt transactions $ (74 ) $ (205 )
   Contributions (distributions) with noncontrolling interest holders $ (16 ) $ 755
   Issuance of common stock and other $ (2 ) $ 45

Cash flows from operating activities — Our net cash provided by operating activities is sensitive to many variables, including changes in commodity prices. Commodity price movements may also lead to changes in other variables in our business, including adjustments to our capital program. Our operating cash flow ~~increased 16%~~decreased 66%, or ~~$38~~$179 million, to ~~$272~~$93 million for the six months ended June 30, ~~2019~~2020 from ~~$234~~$272 million in the same period of ~~2018. The increase was~~2019. Changes in operating assets and liabilities, net in the six months ended June 30, 2020 increased our operating cash flow by $130 million compared to a reduction of $52 million in the comparable six months of 2019. This positive change primarily resulted from a decrease in accounts receivable due to ~~higher realized~~lower commodity prices ~~including hedge settlements,~~between periods partially offset by lower trade payables as a result of our reduced capital plan and ~~higher volumes~~cost saving initiatives. Operating cash flow in the first six months of 2020 also reflected the positive contribution of the $63 million of proceeds from the early settlement of derivative contracts.

Cash flows from investing activities — Our net cash used in investing activities of $27 million for the six months ended June 30, 2020 primarily reflected $33 million of capital investments (excluding $28 million in capital-related accrual changes). Investing activities also included proceeds of $41 million related to a sale of royalty interests and a non-core asset in the first half of ~~2019. These increases were partially offset by changes in operating assets and liabilities related to higher interest payments on variable-rate debt that reduced~~2020. For the six months ended June 30, 2019, our ~~operating cash flow by $52 million in 2019 compared to $42 million in 2018. We expect our cash provided by operating activities to fully fund our internally funded capital program in 2019.~~

~~Our~~ net cash used in investing activities of $170 million ~~for the six months ended June 30, 2019~~ primarily ~~reflected~~included approximately $271 million of capital investments (excluding $57 million in capital-related accrual changes), of which $43 million was funded by ~~BSP. Cash used in investing activities also included proceeds of~~BSP, partially offset by $165 million of proceeds related to ~~the~~our Lost Hills ~~divestiture.~~sale.

Cash flows from financing activities — Our net cash provided by financing activities of $43 million for the six months ended June 30, 2020 primarily included $213 million in net proceeds on our 2014 Revolving Credit Facility partially offset by $100 million for the repayment of the 2020 Senior Notes at maturity, $68 million of distributions to our noncontrolling interest holders and $3 million for debt repurchases of our Second Lien Notes. We also had an additional $2 million in contributions from a noncontrolling interest holder. For the six months ended June 30, ~~2018,~~2019, our net cash used in investing activities of $807 million primarily included approximately $512 million of acquisition costs related to the Elk Hills transaction and a building in Bakersfield and $327 million of capital investments (excluding $22 million in capital-related accrual changes), of which $18 million was funded by BSP.

~~The amounts in the table below reflect our capital investment, excluding changes in capital investment accruals, for the six months ended June 30, 2019 and 2018:~~

Six months ended
June 30,
2019 2018
(in millions)
Oil and gas $ 212
$ 296
Exploration 9
10
Corporate and other 7
3
Total internally funded capital 228
309
BSP funded capital 43
18
Total capital $ 271
$ 327

~~Our~~ net cash used in financing activities of $92 million ~~for the six months ended June 30, 2019~~was primarily comprised of $59 million used for debt repurchases of our Senior Notes, $65 million of distributions paid to our ~~noncontrolling~~non-controlling interest holders, ~~$59~~and $15 million of ~~debt repurchases on our Second Lien Notes and~~ net ~~payments~~repayments on our 2014 Revolving Credit Facility ~~of $15 million,~~ partially offset by ~~contributions~~$49 million in a net contribution from ~~BSP~~a noncontrolling interest holder.

Liquidity

Our spin–off from Occidental on November 30, 2014 burdened us with significant debt which was used to pay a $6.0 billion cash dividend to Occidental. Together with the activity level and payables that we assumed from Occidental and due to Occidental's retention of ~~$49 million. For~~ the ~~six months ended~~vast majority of our receivables, our debt peaked at approximately $6.8 billion in May 2015. Since then, we have engaged in a series of assets sales, joint ventures, debt exchanges, tenders and repurchases and other financing transactions to reduce our overall debt and improve our balance sheet. As of June 30, ~~2018,~~2020, we had reduced our ~~net~~outstanding debt to approximately $5.1 billion, a substantial portion of which would have matured in 2021.

The commencement of the Chapter 11 Cases constituted an immediate event of default that automatically accelerated our obligations under the 2014 Revolving Credit Facility and our other debt agreements. Any efforts to enforce payment obligations related to the acceleration of our obligations under these debt agreements were automatically stayed immediately upon filing the Chapter 11 Cases, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.

As of June 30, 2020, we had available cash ~~provided by financing activities~~ of ~~$595~~$105 million ~~primarily comprised $796 million in net contributions from our noncontrolling interest holders~~ and ~~$50 million from the issuance of common stock~~no ability to ~~an Ares-led investor group in connection with the Ares JV, partially offset by $119 million used for debt repurchases on our senior notes, $86 million of net payments on~~borrow under our 2014 Revolving Credit Facility due to the missed interest payments and ~~$41 million of distributions paid to our noncontrolling interest holders.~~

~~Liquidity~~

Our primary sources of liquidity and capital resources are cash flow from operations and available borrowing capacity under our 2014 Revolving Credit Facility. We also rely on other sources such as JVs to supplement our capital program, fund acquisitions and for other corporate purposes. We expect that the combination of these sources of funds will be adequate for our 2019 capital program, debt service and operating needs.

forbearance described below. As of June 30, ~~2019, our long-term debt consisted of the following credit agreements, second lien notes and senior notes:~~

Outstanding Principal Interest Rate Maturity Security
Credit Agreements (in millions)
2014 Revolving Credit Facility $ 525
LIBOR plus 3.25%-4.00%
ABR plus 2.25%-3.00% June 30, 2021 Shared First-Priority Lien
2017 Credit Agreement 1,300
LIBOR plus 4.75%
ABR plus 3.75%
December 31, 2022^(a)
Shared First-Priority Lien
2016 Credit Agreement 1,000
LIBOR plus 10.375%
ABR plus 9.375% December 31, 2021 First-Priority Lien
Second Lien Notes
Second Lien Notes 1,991
8%
December 15, 2022^(b)
Second-Priority Lien
Senior Notes
5% Senior Notes due 2020 100
5% January 15, 2020 Unsecured
5½% Senior Notes due 2021 100
5.5% September 15, 2021 Unsecured
6% Senior Notes due 2024 144
6% November 15, 2024 Unsecured
Total 5,160

Less: Current Maturities (100 )
Long-Term Debt $ 5,060


~~Note:~~	~~For a detailed description of our credit agreements, second lien notes and senior notes, please see our most recent Form 10-K for the year ended December 31, 2018.~~


~~(a)~~	The 2017 Credit Agreement is subject to a springing maturity of 91 days prior to the maturity of our 2016 Credit Agreement if more than $100 million in principal of the 2016 Credit Agreement is outstanding at that time.


~~(b)~~	~~The Second Lien Notes require principal repayments of $315 million in June 2021, $63 million in December 2021, $65 million in June 2022 and $1,548 million in December 2022.~~

~~2014 Revolving Credit Facility~~

As of June 30, 2019, we had $309 million of available borrowing capacity under our $1 billion revolving credit facility (2014 Revolving Credit Facility), before a $150 million month-end minimum liquidity requirement. Effective May 1, 2019, the borrowing base under this facility was reaffirmed at $2.3 billion. Our 2014 Revolving Credit Facility also includes a sub-limit of $400 million for the issuance of letters of credit. As of June 30, 20192020 and December 31, ~~2018,~~2019, we had letters of credit outstanding of ~~$166~~$152 million and ~~$162~~$165 million, respectively. These letters of credit were issued to support ordinary course marketing, insurance, regulatory and other matters.

For more information on our debt, see Part I, Item 1 – Financial Statements, Note ~~Repurchases~~5 Debt and for more information on the Chapter 11 Cases, see Part I, Item 1 – Financial Statements, Note 1 Basis of Presentation.

Debtor-in-Possession Credit Agreements

On July 23, 2020, we entered into the ~~first quarter~~Senior DIP Credit Agreement which provides for a Senior DIP Facility in an aggregate principal amount of ~~2019,~~up to approximately $483 million. The Senior DIP Facility includes a $250 million revolving facility which will be primarily used by us to (i) fund working capital needs and capital expenditures and additional letters of credit during the pendency of the Chapter 11 Cases and (ii) pay certain costs, fees and expenses related to the Chapter 11 Cases and the Senior DIP Facility. Until the Bankruptcy Court enters a final order with respect to our DIP credit agreements, only $85 million of revolving borrowings are available. If the Bankruptcy Court enters a final order approving the Senior DIP Facility in its current form following a hearing on August 14, 2020, we ~~repurchased $18~~expect the full remaining amount of the $250 million ~~in face value~~revolving facility to become available.The Senior DIP Facility also includes (a) a $150 million letter of ~~our 8% senior secured second lien notes due December 15, 2022 (Second Lien Notes) for $14 million in cash resulting in a pre-tax gain~~credit facility which was used to deem letters of ~~$6 million, including~~credit outstanding under the effect of unamortized deferred gain and issuance costs. In the second quarter of 2019, we repurchased $58 million in face value of our Second Lien Notes for $45 million in cash resulting in a pre-tax gain of $20 million, including the effect of unamortized deferred gain and issuance costs.

~~Other~~

~~At June 30, 2019, we were in compliance with all financial and other debt covenants.~~

~~All obligations under our~~ 2014 Revolving Credit Facility as issued under the Senior DIP Facility, and (b) $83 million of term loans borrowings which were used to repay a portion of the 2014 Revolving Credit Facility.

On July 23, 2020, we also entered into a Junior DIP Credit Agreement which provides for a Junior DIP Facility in an aggregate principal amount of $650 million. The proceeds of the Junior DIP Facility were used to (i) refinance in full all remaining obligations under the 2014 Revolving Credit Facility and (ii) pay certain costs, fees and expenses related to the Chapter 11 Cases and the Junior DIP Facility.

The Senior DIP Credit Agreement and Junior DIP Credit Agreement include conditions precedent, representations and warranties, affirmative and negative covenants and events of default customary for financings of their type and size. The Senior DIP Facility and the Junior DIP Facility both mature on January 15, 2021. See Part I, Item 1 – Financial Statements,Note 5 Debt for additional details about our DIP credit agreements.

Missed Interest Payments and Forbearance

On May 15, 2020, we did not make an interest payment of approximately $4 million on our 2024 Notes. The indenture governing our 2024 Notes provides for a 30-day grace period and the payment was subsequently made on June 12, 2020.

On May 29, 2020, we did not pay approximately $51 million in the aggregate interest due under the 2017 Credit Agreement and the 2016 Credit Agreement. Our failure to make those interest payments constituted events of default under the 2017 Credit Agreement, 2016 Credit Agreement ~~(collectively,~~and, as a result of cross default, under the 2014 Revolving Credit ~~Facilities) as well as~~Facility.

On June 2, 2020, we entered into Forbearance Agreements with (i) certain lenders of a majority of the outstanding principal amount of the loans under the 2014 Revolving Credit Facility, (ii) certain lenders of a majority of the outstanding principal amount of the loans under the 2016 Credit Agreement, and (iii) certain lenders of a majority of the outstanding principal amount of the loans under the 2017 Credit Agreement. Pursuant to the Forbearance Agreements, the lenders who are parties to the Forbearance Agreements agreed to forbear from exercising any remedies under the 2014 Revolving Credit Facility, 2016 Credit Agreement and 2017 Credit Agreement with respect to our failure to make the aforementioned interest payments, initially through June 14, 2020 and subsequently through July 15, 2020.

On June 15, 2020, we did not make an interest payment of approximately $72 million on our Second Lien Notes. The indenture governing the Second Lien Notes ~~and Senior Notes are guaranteed both fully and unconditionally and jointly and severally by all of our material wholly owned subsidiaries.~~provides for a 30-day grace period, which expired on July 15, 2020.

A one-eighth percent change in the variable interest rates on the borrowings under our Credit Facilities on June 30, 2019 would result in a $4 million change in annual interest expense before the impact of interest-rate contracts.

Derivatives

Significant changes in oil and natural gas prices may have a material impact on our liquidity. Declining commodity prices negatively affect our operating cash flow, and the inverse applies during periods of rising commodity prices. To mitigate some of the risk inherent in the downward movement in oil prices, we ~~have utilized~~may enter into various derivative instruments to hedge commodity price risk.

Commodity Contracts

~~Our strategy~~In early March 2020, in response to the rapid fall in commodity prices, we monetized all of our crude oil hedges in place for ~~protecting~~April 2020 forward with our ~~cash flow, operating margin and capital program, while maintaining adequate liquidity, includes~~counterparties, except for certain hedges held by our BSP JV, for approximately $63 million to enhance our liquidity. As of June 30, 2020, we did not have any commodity hedges covering our share of production.

The Senior DIP Credit Agreement requires us to enter into hedging arrangements covering at least 25% of our share of expected crude oil production for the next twelve months. On July 24, 2020, we entered into various derivative instruments through July 2021 to satisfy this requirement. Unless otherwise indicated, we use the term "hedge" to describe derivative instruments that are designed to achieve our hedging ~~program.~~ program goals, even though they are not accounted for as cash-flow or fair-value hedges.

We currently have the following Brent-based crude oil ~~contracts, as of August 1, 2019:~~contracts:


											August-September 2020		Q4 2020		Q1 2021		Q2 2021		July 2021
Sold Calls:										Sold Calls:
Barrels per day										Barrels per day	4,950		4,800		4,500		4,500		4,200
Weighted-average price per barrel										Weighted-average price per barrel	$	48.05	$	48.05	$	48.05	$	48.05	$	48.05


	Q3 2019		Q4 2019		Q1 2020		Q2 2020
Purchased Puts:										Purchased Puts:
Barrels per day	40,000		35,000		25,000		10,000			Barrels per day	9,900		9,600		9,000		9,000		8,400
Weighted-average price per barrel	$	73.13	$	75.71	$	72.00	$	70.00		Weighted-average price per barrel	$	40.00	$	40.00	$	40.00	$	40.00	$	40.00

Sold Puts:										Sold Puts:
Barrels per day	40,000		35,000		25,000		10,000			Barrels per day	4,950		4,800		4,500		4,500		4,200
Weighted-average price per barrel	$	57.50	$	60.00	$	57.00	$	55.00		Weighted-average price per barrel	$	30.00	$	30.00	$	30.00	$	30.00	$	30.00

Swaps:										Swaps:
Barrels per day	—		—		—		5,000		^(a)	Barrels per day	6,600		6,400		6,000		6,000		5,600
Weighted-average price per barrel	$	—	$	—	$	—	$	70.05		Weighted-average price per barrel	$	44.75	$	44.75	$	44.75	$	44.75	$	44.75


~~(a)~~	~~Counterparties have the option to increase swap volumes by up to 5,000 barrels per day at a weighted-average Brent price of $70.05 for the second quarter of 2020.~~

The ~~BSP JV entered into~~outcomes of the derivative positions are as follows:

•Sold calls – we make settlement payments for prices above the indicated weighted-average price per barrel.

•Purchased puts – we receive settlement payments for prices below the indicated weighted-average price per barrel.

•Sold puts – we make settlement payments for prices below the indicated weighted-average price per barrel.

We also currently have Brent-based crude oil ~~derivatives~~contracts for insignificant volumes through May 2021 ~~that~~which were entered into by our BSP JV and are included in our consolidated results but not in the above table. The BSP JV also entered into natural gas swaps for insignificant volumes for periods through May 2021. The hedges entered into by the BSP JV could affect the timing of the redemption of the JVBSP preferred interest.

~~Interest-Rate Contracts~~

In May 2018, we entered into derivative contracts that limit our interest rate exposure with respect to $1.3 billion of our variable-rate indebtedness. The interest rate contracts reset monthly and require the counterparties to pay any excess interest owed on such amount in the event the one-month LIBOR exceeds 2.75% for any monthly period prior to May 2021.

2020 Capital Program

~~2019 Capital Program~~

We ~~expect our 2019~~entered 2020 with an internally funded capital program ~~to be in the range~~ of ~~$350~~$100 million to ~~$385~~$300 million. In March 2020, we reduced our capital investment to a level that maintains the mechanical integrity of our facilities to operate in a safe and environmentally responsible manner in response to the collapse in crude oil prices. We made $33 million of ~~which $228 million has been invested~~internally funded capital investments in the first half of ~~2019. We have front-loaded our~~2020 and expect to invest up to an additional $20 million through the end of 2020. In order to meet this level of investment, we suspended all internally funded drilling and capital ~~investments~~workovers for ~~2019. With additional investment from new~~the second quarter and ~~existing~~significantly reduced other activities.

Our JV partners ~~we anticipate JV investment of $175~~invested $98 million ~~to $225 million, of which $50 million has been invested~~ in the first half of ~~2019,~~2020. On March 27, 2020, Alpine elected to suspend its funding obligations under the Alpine JV. For further information, regarding the Alpine JV and its funding obligations, see the Development Joint Ventures section above.

The amounts in the table below reflect our consolidated capital investment, excluding changes in capital investment accruals, for the six months ended June 30, 2020 and 2019:


	Six months ended June 30,
	2020		2019
	(in millions)
Oil and natural gas	$	32	$	212
Exploration	—		9
Corporate and other	1		7
Total internally funded capital	33		228
BSP funded capital	—		43
Total consolidated capital investment	$	33	$	271

The curtailment of the development of our properties will lead to a ~~total 2019 capital program~~decline in our production and may lower our reserves. A continued decline in our production and reserves would negatively impact our cash flow from operations and the value of ~~$525 million to $610 million.~~our assets.

Seasonality

While certain aspects of our operations are ~~focusing our 2019 capital on oil projects. Our capital program will be largely directed to short payout projects,~~affected by seasonal factors, such as ~~primary drilling~~energy costs, seasonality has not been a material driver of both vertical and lateral wells and capital workovers, and low-risk projects including waterflood and steamflood investments that maintain base production. We will continue to focus on our core fields: Elk Hills, Buena Vista, Wilmington, Kern Front and Mt. Poso.

We plan to use approximately 70% of our capital program on drilling and development of conventional and unconventional resources. The depth of our conventional wells is expected to range from 2,000 to 15,000 feet. Our conventional program largely consists of waterfloods and steamfloods along with some primary drilling. We also intend to drill unconventional wells in the Buena Vista area. With continued focus on cost savings and efficiencies, many of our deep conventional and unconventional wells have become more competitive.

~~We also plan to use approximately 12% of our 2019 capital program for capital workovers on existing well bores. Capital workovers are some of the highest Value Creation Index projects~~changes in our ~~portfolio and generally include well deepenings, recompletions, changes of lift methods and other activities designed to add incremental productive intervals and reserves.~~

Further, approximately 12% of our 2019 capital program is intended for facilities development for our newer projects, including pipeline and gathering line interconnections, gas compression and water management systems, and for mechanical integrity, safety and environmental projects. About 6% is intended to be used for exploration and other corporate uses.

Efficiency gains in our capital costs have enabled us to maintain a robust capital program even in light of lower commodity prices in 2019. We will continue to build our inventory of available projects, which will position us to accelerate value by utilizing third-party capital and taking advantage of potential future commodity price increases.

quarterly results.

Lawsuits, Claims, Commitments and Contingencies

We are involved, in the normal course of business, in lawsuits, environmental and other claims and other contingencies that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties, or injunctive or declaratory relief.

We accrue reserves for currently outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Reserve balances at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were not material to our condensed consolidated balance sheets as of such dates. We also evaluate the amount of reasonably possible losses that we could incur as a result of these matters. We believe that reasonably possible losses that we could incur in excess of reserves accrued would not be material to our consolidated financial position or results of operations.

Subject to certain exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed, among other things, the continuation of most judicial or administrative proceedings or the filing of other actions against or on behalf of us or our property to recover on, collect or secure a claim arising prior to July 15, 2020 or to exercise control over property of our bankruptcy estates, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such action, or judicial or administrative proceeding. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under regulatory powers.

Significant Accounting and Disclosure Changes

See Part I, Item 1, Note 2 Accounting and Disclosure Changes in the Notes to the Condensed Consolidated Financial Statements ~~included in Part I~~ of this Form 10-Q for a discussion of new accounting matters.

•legislative or regulatory changes, including those related to drilling, completion, well stimulation, operation, maintenance or abandonment of wells or facilities, managing energy, water, land, greenhouse gases or other emissions, protection of health, safety and the environment, or transportation, marketing and sale of our products

•joint ventures and acquisitions and our ability to achieve expected synergies

•the recoverability of resources ~~and~~

•unexpected geologic conditions

•incorrect estimates of reserves and related future cash flows and the inability to replace reserves

•changes in business strategy

•PSC effects on production and unit production costs

•effect of stock price on costs associated with incentive compensation

~~insufficient capital, including as a result of lender restrictions, unavailability of capital markets or inability to attract potential investors~~

•effects of hedging transactions

•equipment, service or labor price inflation or unavailability

•availability or timing of, or conditions imposed on, permits and approvals

•lower-than-expected production, reserves or resources from development projects, joint ventures or acquisitions, or higher-than-expected decline rates

•disruptions due to accidents, mechanical failures, power outages, transportation or storage constraints, natural disasters, labor difficulties, ~~cyber attacks~~cyber-attacks or other catastrophic events


•	•pandemics, epidemics, outbreaks, or other public health events, such as the COVID-19 pandemic •factors discussed in Item 1A, Risk Factors in CRC's Annual Report on Form 10-K available at www.crc.com. ~~Item 1A – Risk Factors~~ ~~of our Form 10-K for the year ended December 31, 2018.~~

Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "target, "will" or "would" and similar words that reflect the prospective nature of events or outcomes typically identify forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.


~~Item 3.~~	Item 3Quantitative and Qualitative Disclosures About Market Risk

For the three and six months ended June 30, ~~2019,~~2020, there were no material changes to commodity price risk, interest rate risk or counterparty credit risk from the information provided under Item 305 of Regulation S-K included under the caption Management's Discussion and Analysis of Financial Condition and Results of Operations (Incorporating Item 7A) – Quantitative and Qualitative Disclosures About Market Risk in the ~~2018~~2019 Form 10-K, except as discussed below.

Commodity Price Risk

For the third and fourth quarters of 2019, we protected our downside risk on 40,000 and 35,000 barrels per day at approximately $73 Brent and $76 Brent, respectively. These put spreads provide full upside to oil price movements and downside price protection until Brent prices drop below approximately $58 and $60 per barrel in the third and fourth quarters, respectively, at which point we receive Brent plus $15 per barrel.

~~For the first and second quarters of~~In March 2020, we ~~protected~~monetized crude oil hedge positions in place for April 2020 forward with our ~~downside risk~~counterparties, except for certain hedges held by our BSP JV, for approximately $63 million. We recognized the proceeds received in net derivative gain (loss) from commodity contracts on ~~25,000 and 10,000 barrels per day at $72 Brent and $70 Brent, respectively. These put spreads provide downside price protection until Brent prices drop below $57 and $55 per barrel~~our condensed consolidated statements of operations in the first quarter of 2020. As of June 30, 2020, we did not have any commodity hedges covering our share of production.

The Senior DIP Credit Agreement requires us to enter into hedging arrangements covering at least 25% of our share of expected crude oil production for the next twelve months. On July 24, 2020, we entered into various derivative instruments through July 2021 to satisfy this requirement. Unless otherwise indicated, we use the term "hedge" to describe derivative instruments that are designed to achieve our hedging program goals, even though they are not accounted for as cash-flow or fair-value hedges.

Our current oil hedge positions provide for the following expected outcomes:

August-September 2020

Q4
2020

Q1
2021

Q2
2021

July 2021

Barrels per day

4,950

4,800

4,500

4,200

Receive Brent if Brent > $40

Receive $40 if Brent between $30 and $40

Receive Brent +$10 if Brent <$30

Barrels per day

4,950

4,800

4,500

4,200

Ceiling price of $48.05 Brent

Receive Brent between $40 and $48.05

Floor price of $40 Brent

Barrels per day

6,600

6,400

6,000

5,600

Receive $44.75 Brent at all prices

We also currently have Brent-based crude oil contracts for insignificant volumes through May 2021 which were entered into by our BSP JV and ~~second quarters, respectively, at which point we receive Brent plus $15 per barrel. We~~are included in our consolidated results but not in the above table. The BSP JV also entered into ~~a swap~~natural gas swaps for ~~5,000 barrels per day in~~insignificant volumes for periods through May 2021. The hedges entered into by the ~~second quarter of 2020 at approximately $70 Brent, which is subject to another 5,000 barrels per day at~~BSP JV could affect the ~~same price at the option~~timing of the ~~counterparties.~~redemption of the BSP preferred interest.

~~See additional hedging information in~~
~~Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.~~

Counterparty Credit Risk

Our credit risk relates primarily to trade receivables and derivative financial instruments. Credit exposure for each customer is monitored for outstanding balances and current activity. For derivative instruments entered into as part of our hedging program, we are subject to counterparty credit risk to the extent the counterparty is unable to meet its settlement commitments. We actively manage this credit risk by selecting counterparties that we believe to be financially strong and continuing to monitor their financial health. Concentration of credit risk is regularly reviewed to ensure that counterparty credit risk is adequately diversified.

As of June 30, ~~2019,~~2020, the substantial majority of the credit exposures related to our business was with investment-grade counterparties. We believe exposure to counterparty credit-related losses related to our business at June 30, ~~2019~~2020 was not material and losses associated with counterparty credit risk have been insignificant for all periods presented.

Interest-Rate Risk

~~Item 4.~~

As of June 30, 2020, we had borrowings of $1.3 billion outstanding under our 2017 Credit Agreement, $1 billion outstanding under our 2016 Credit Agreement and $731 million outstanding under our 2014 Revolving Credit Facility, all of which carry variable interest rates. On July 15, 2020, we filed for relief under Chapter 11 of the Bankruptcy Code and as a result interest on our pre-petition debt is limited to what is determined by the Bankruptcy Court to be an allowed claim. On July 23, 2020, we entered into debtor-in-possession credit agreements, which carry variable interest rates, as further described in Part I, Item 1 – Financial Statements, Note 5 Debt.

In March 2018, we entered into derivative contracts that limit our interest-rate exposure with respect to $1.3 billion of our variable-rate indebtedness. The interest-rate contracts reset monthly and require the counterparties to pay any excess interest owed on such amount in the event the one-month LIBOR exceeds 2.75% for any monthly period prior to May 4, 2021. We did not report any gains or losses on these contracts for the three months ended June 30, 2020 or the three months ended June 30, 2019 in other non-operating expense on our condensed consolidated statements of operations. No settlement payments were received in either 2020 or 2019.

Item 4 Controls and Procedures

~~Controls and Procedures~~

Our President and Chief Executive Officer and our Senior Executive Vice President and Chief Financial Officer supervised and participated in our evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and our Senior Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, ~~2019.~~2020.

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the three months ended June 30, ~~2019~~2020 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

~~Ventura County and other local authorities are conducting a civil investigation~~Item 1Legal Proceedings

On the July 15, 2020, we filed voluntary petitions for relief under Chapter 11 of the ~~characterization~~Bankruptcy Code in the Bankruptcy Court. The Chapter 11 Cases filed by us are being jointly administered under the caption In re California Resources Corporation, et al., Case No. 20-33568 (DRJ). See Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, Business Environment and Industry Outlook, Voluntary Petitions for Relief Under Chapter 11 of the Bankruptcy Code for more information.

Subject to certain ~~waste sent off-site for treatment~~exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed, among other things, the continuation of most judicial or ~~disposal at~~administrative proceedings or the filing of other actions against or on behalf of us or our property to recover on, collect or secure a ~~licensed third-party facility. We do not expect~~claim arising prior to July 15, 2020 or to exercise control over property of our bankruptcy estates, unless and until the ~~result~~Bankruptcy Court modifies or lifts the automatic stay as to any such action, or judicial or administrative proceeding. Notwithstanding the general application of ~~this investigation~~the automatic stay described above, governmental authorities may determine to ~~have a material adverse effect on our condensed consolidated financial statements.~~ continue actions brought under regulatory powers.

For additional information regarding legal proceedings, see Item 1 – Financial Statements, Note 87 Lawsuits, Claims, Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements included in Part I of this Form 10-Q, Part I, Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations, Lawsuits, Claims, Commitments and Contingencies in this Form 10-Q, and Part I, Item 3, Legal Proceedings in ~~the~~our Form 10-K for the year ended December 31, ~~2018.~~2019.


~~Item 1.A.~~	Item 1A Risk Factors

We are subject to various risks and uncertainties in the course of our business. A discussion of such risks and uncertainties may be found under the heading Risk Factors in our Form 10-K for the year ended December 31, ~~2018.~~2019. Other than as provided below, there were no material changes to those risk factors during the six months ended June 30, 2020.

We are subject to the risks and uncertainties associated with the Chapter 11 Cases.

On July 15, 2020, we filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. For the duration of the Chapter 11 Cases, our operations and our ability to develop and execute our business plan, as well as our continuation as a going concern, are subject to the risks and uncertainties associated with bankruptcy. These risks include the following:

•our ability to confirm and consummate the plan of reorganization contemplated by the RSA (the RSA Plan), or develop, negotiate, confirm and consummate an alternative plan;

•our ability to obtain court approval with respect to motions filed in the Chapter 11 Cases from time to time;

•our ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties;

•our ability to maintain contracts that are critical to our operations;

•our ability to execute our business plan;

•the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;

•our ability to obtain Bankruptcy Court approval of the various motions and other requests, including with respect to our Senior DIP Credit Agreement and the Junior DIP Credit Agreement (together, the DIP facilities);

•the ability of third parties to seek and obtain court approval to terminate or shorten the exclusivity period for us to propose and confirm a plan of reorganization, to appoint a Chapter 11 trustee, or to convert the Chapter 11 Cases to a Chapter 7 proceeding;

•the high costs of bankruptcy proceedings and related fees; and

•the actions and decisions of our creditors and other third parties who have interests in the Chapter 11 Cases that may be inconsistent with our plans.

These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with the Chapter 11 Cases could adversely affect our relationships with our suppliers, service providers, customers, employees, and other third parties, which in turn could adversely affect our operations and financial condition. Also, prior approval of the Bankruptcy Court is required to enter into transactions outside the ordinary course of business, which may limit our ability to respond to certain events or take advantage of certain opportunities. In addition, certain of our creditors and other stakeholders may bring litigation against us during the course of the Chapter 11 Cases. Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact of events that will occur during the Chapter 11 Cases that may be inconsistent with our plans.

Operating during the Chapter 11 Cases for a long period of time may harm our business.

Our future results are dependent upon the successful confirmation and implementation of a plan of reorganization. A long period of operating under Chapter 11 of the Bankruptcy Code and subject to Bankruptcy Court supervision may have a material adverse effect on our business, financial condition, results of operations and liquidity. So long as the Chapter 11 Cases continue, our senior management may be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing exclusively on our business operations. A prolonged period of operating under Chapter 11 of the Bankruptcy Code also may make it more difficult to retain management and other key personnel necessary to the success and growth of our business. In addition, the longer the Chapter 11 Cases continue, the more likely it is that our customers and suppliers may lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships.

Furthermore, we cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to a plan of reorganization. Even once a plan of reorganization is approved and implemented, our operating results may be adversely affected by the possible reluctance of prospective lenders and other counterparties to do business with a company that recently reorganized under Chapter 11 of the Bankruptcy Code.

The RSA is subject to significant conditions and milestones that may be beyond our control and may be difficult for us to satisfy. If the RSA is terminated, our ability to confirm a plan of reorganization and consummate a restructuring of our debt could be materially and adversely affected.

The RSA sets forth certain conditions we must satisfy during the Chapter 11 Cases, including the timely satisfaction of certain milestones to consummate a plan of reorganization (the RSA Plan). Our ability to timely satisfy such conditions and milestones is subject to risks and uncertainties that are beyond our control. The parties to the RSA may terminate the RSA under certain circumstances, such as our failure to fulfill certain conditions or reach certain milestones. A termination of the RSA may result in, among other things, the loss of support for the RSA Plan, which could adversely affect our ability to confirm and consummate the RSA Plan and our ability to emerge from Chapter 11. If the RSA Plan is not consummated, there can be no assurance that any new plan of reorganization would provide the same treatment to holders of claims or interests as those proposed under the RSA Plan, and our Chapter 11 proceedings may become protracted, which could significantly and detrimentally impact our relationships with regulators, government agencies, vendors, suppliers, employees and major customers.

There can be no assurance that the solicited classes of claims will vote to accept the RSA Plan.

There can be no assurance that the RSA Plan will receive the necessary level of support to be implemented or will be approved by the Bankruptcy Court. The success of the restructuring transactions will depend on the willingness of certain existing creditors to agree to the exchange or modification of their claims and approval by the Bankruptcy Court, and there can be no certainty of success with respect to those matters. Holders of certain claims that are impaired under the RSA Plan are entitled to vote to accept or reject the RSA Plan. Although certain parties are bound to vote for the RSA Plan, if the RSA is terminated they will not be so bound and any vote or consent given by such parties prior to such termination may be revoked.

We may receive objections to the terms of the RSA, including official objections to confirmation of the RSA Plan from the various stakeholders in the Chapter 11 Cases. We cannot predict the impact that any objection or third party motion may have on the Bankruptcy Court’s decision to confirm the RSA Plan or our ability to complete an in-court restructuring as contemplated by the RSA or otherwise. Any objection may cause us to devote significant resources in response which could materially and adversely affect our business, financial condition and results of operations.

If we do not receive sufficient support for the RSA Plan, or if the RSA Plan is not confirmed by the Bankruptcy Court, it is unclear what, if any, distributions holders of claims against us may ultimately receive with respect to their claims and interests. There can be no assurance as to whether or when we will emerge from Chapter 11. If no plan of reorganization can be confirmed, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of claims and interests, the Chapter 11 Cases may be converted to a case under Chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code.

We may not be able to obtain confirmation of the RSA Plan or another Chapter 11 plan of reorganization.

Even if the RSA Plan is approved by the creditors entitled to vote thereon, the Bankruptcy Court, as a court of equity, may exercise substantial discretion and may choose not to confirm the RSA Plan. Section 1129 of the Bankruptcy Code requires, among other things, a showing that confirmation of a plan of reorganization will not be followed by liquidation or the need for further financial reorganization, and that the value of distributions to dissenting holders of claims and interests will not be less than the value such holders would receive if we liquidated under Chapter 7. Although we believe that the RSA Plan will satisfy such tests, there can be no assurance that the Bankruptcy Court will reach the same conclusion.

Confirmation of the RSA Plan will also be subject to certain conditions. These conditions may not be met and there can be no assurance that a sufficient number of creditors will agree to modify or waive such conditions to the extent required by the RSA or RSA Plan, as applicable. Further, changed circumstances may necessitate changes to the RSA Plan. Any such modifications may result in less favorable treatment than the treatment currently anticipated to be included in the RSA Plan based upon the agreed terms of the RSA. Such less favorable treatment may include a distribution of property (including the new common stock that would be issued upon our emergence from bankruptcy) to the class affected by the modification of a lesser value than currently anticipated to be included in the RSA Plan or no distribution of property whatsoever under the RSA Plan. Changes to the RSA Plan may also delay the confirmation of the RSA Plan and our emergence from bankruptcy, which could result in, among other things, increased costs and expenses to the estates of the debtors and could prevent us from exercising our right to acquire ECR’s equity interests in the Ares JV. The conversion right granted to us under the Ares JV Settlement Agreement is only exercisable by us prior to December 31, 2021, and subject to confirmation of the RSA Plan and certain other conditions described in the Settlement Agreement. If these conditions are not met, we will not be able to exercise the conversion right and ECR will continue as our partner in the Ares JV.

The RSA Plan or other plan of reorganization that we may implement will be based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution. Even if the RSA Plan or other plan of reorganization is consummated, we may not be able to achieve our stated goals and continue as a going concern.

The RSA or other plan of reorganization that we may implement could affect both our capital structure and the ownership, structure and operation of our business and will reflect assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. In addition, the RSA Plan or other plan of reorganization will rely upon financial projections, including with respect to revenues, capital expenditures, debt service and cash flow. Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts may not be accurate. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, including but not limited to (i) our ability to substantially change our capital structure, (ii) our ability to obtain adequate liquidity and financing sources, (iii) our ability to maintain customers’ confidence in our viability as a continuing entity and to attract and retain sufficient business from them, (iv) our ability to retain key employees, and (v) the overall strength and stability of general economic conditions of the financial markets and oil and gas industry, both in the U.S. and in global markets. The failure of any of these factors could materially adversely affect the successful reorganization of our business. Consequently, there can be no assurance that the results or developments contemplated by the RSA Plan or any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our business or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful execution of the RSA Plan or plan of reorganization.

Even if the RSA Plan or other plan of reorganization is consummated, we will continue to face a number of risks, including further deterioration in commodity prices or other changes in economic conditions, changes in our industry, changes in market demand and increasing expenses. Accordingly, we cannot provide any assurance that the RSA Plan or other plan of reorganization will achieve our stated goals.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital. As a result, we cannot give any assurance of our ability to continue as a going concern, even if the RSA Plan or other plan of reorganization is confirmed.

We may have insufficient liquidity for our business operations during the Chapter 11 Cases.

Although we have been able to lower our cost structure and create efficiencies, our business remains capital intensive. In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other costs in connection with the Chapter 11 Cases and expect that we will continue to incur significant professional fees and costs throughout the Chapter 11 Cases. Although we believe that we will have sufficient liquidity to operate our business during the pendency of the Chapter 11 Cases, there can be no assurance that the cash made available to us under the DIP facilities or otherwise in our restructuring process and revenue generated by our business operations will be sufficient to fund our operations. In the event that revenue flows and other available cash are not sufficient to meet our liquidity requirements, we may be required to seek additional financing. There can be no assurance that such additional financing would be available or, if available, offered on terms that are acceptable.

Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to comply with the terms and conditions of the DIP facilities, (ii) our ability to comply with the terms and conditions of any order governing the use of our cash collateral that may be entered by the Bankruptcy Court in connection with the Chapter 11 Cases, (iii) our ability to maintain adequate cash on hand, (iv) our ability to generate cash flow from operations, (v) our ability to develop, confirm and consummate a plan of reorganization or other alternative restructuring transaction, and (vi) the cost, duration and outcome of the Chapter 11 Cases.

Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.

We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, access to additional financing beyond the DIP facilities. In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other costs in connection with our evaluation of strategic alternatives and preparation for the Chapter 11 Cases and expect that we will continue to incur significant professional fees and costs throughout the Chapter 11 Cases. We cannot assure you that cash on hand, cash flow from operations, the DIP facilities and any financing we are able to obtain in connection with our emergence from the Chapter 11 Cases will be sufficient to continue to fund our operations and allow us to satisfy our obligations related to the Chapter 11 Cases until we emerge from the Chapter 11 Cases.

We may be unable to comply with restrictions or with budget, liquidity, or other covenants imposed by the agreements governing the DIP facilities. Such non-compliance could result in an event of default under the terms of the DIP facilities that, if not cured or waived, may have a material adverse effect on our business, financial condition and results of operations.

The DIP facilities require that we comply with general affirmative and negative covenants such as prohibiting us from incurring or permitting debt, investments, liens or dispositions unless specifically permitted. Our ability to comply with these provisions may be affected by events beyond our control and our failure to comply, or obtain a waiver in the event we cannot comply with a covenant, may result in an event of default under the DIP facilities and permit the lenders thereunder to accelerate the loans and otherwise exercise remedies allowable by the agreements governing the DIP facilities.

As a result of the Chapter 11 Cases, our financial results may be volatile and may not reflect historical trends.

During the pendency of the Chapter 11 Cases, we expect our financial results to continue to be volatile and restructuring activities and expenses, claims assessments and continued commodity price volatility to significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filing. In addition, if we emerge from the Chapter 11 Cases, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization. We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Our financial results after the application of fresh start accounting also may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which may have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation. With few exceptions, all claims that arose prior to confirmation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the terms of the plan of reorganization. Any claims not ultimately discharged through the plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post-reorganization basis. Certain claims against the debtor arising after July 15, 2020 may be entitled to priority under the Bankruptcy Code along with other claims which may not be subject to discharge by the Bankruptcy Court. These claims may have an adverse effect on our results of operations and cash flow.

The pursuit of the restructuring transactions under the RSA will consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.

Although the RSA and RSA Plan are designed to minimize the length of our Chapter 11 proceedings, it is impossible to predict with certainty the amount of time and resources necessary to successfully implement the restructuring transactions contemplated by the RSA. Compliance with the terms of the RSA will involve additional expense and our management will be required to spend a significant amount of time and effort focusing on the proposed transactions. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, our financial condition and results of operations, particularly if the Chapter 11 proceedings are protracted.

As a result of the Chapter 11 Cases, we may experience increased levels of employee attrition, and our employees likely will face considerable distraction and uncertainty. A loss of key personnel or material erosion of our employee morale could adversely affect our business and results of operations.

The implementation of a plan of reorganization is expected to reduce or eliminate our federal and state income tax net operating loss carryforwards and may impair our ability to utilize any remaining net operating loss carryforwards and certain other tax attributes during the current year and in future years. Moreover, subsequent transfers of our equity, or issuances of equity, may further impair our ability to utilize our tax attributes.

Under U.S. federal income tax law, a corporation is generally permitted to offset net taxable income in a given year with net operating losses (NOLs) carried forward from prior years. As of December 31, 2019, we had U.S. federal NOL carryforwards and California NOL carryforwards of approximately $1 billion and $2 billion, respectively. In connection with the restructuring process, our NOL carryforwards and certain other tax attributes are expected to be reduced by the amount of discharge of indebtedness we recognize upon the implementation of a plan of reorganization under Section 108 of the Internal Revenue Code of 1986, as amended (the Code). Further, our ability to utilize any remaining NOL carryforwards to offset future taxable income and to reduce U.S. federal and state income tax liabilities is subject to certain requirements and restrictions. If we experience an "ownership change" during or in connection with the restructuring process, as defined in Section 382 of the Code, then our ability to use our NOL carryforwards and certain other tax attributes may also be impaired.

A corporation generally will experience an ownership change if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of the corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Under Section 382 and Section 383 of the Code, absent an applicable exception, if a corporation undergoes an ownership change, the amount of its NOLs and other tax attributes that may be used to reduce future U.S. federal and state income tax obligations generally is subject to an annual limitation.

The Bankruptcy Court approved restrictions on certain transfers of our stock to limit the risk of an ownership change prior to our emergence from the Chapter 11 Cases. However, we anticipate that the implementation of a plan of reorganization will result in an ownership change and our ability to utilize our NOL carryforwards and certain other tax attributes may be materially restricted by the resulting annual limitation.

Although an exception to the imposition of an annual limitation can apply in certain Chapter 11 cases under Section 382(l)(5) of the Code, it is currently unknown if a plan of reorganization, once implemented, will meet the requirements of such section or if we will elect out of the application of such section. Moreover, if we apply Section 382(l)(5) of the Code and experience a subsequent ownership change within two years, any remaining net operating losses and certain other tax attributes may be subject to further and more severe limitations.

We have concluded there is substantial doubt about our ability to continue as a going concern if we are not able to complete the plan of reorganization contemplated by the RSA or another plan of reorganization as part of the Chapter 11 Cases. There can be no assurance that we will be able to successfully restructure our indebtedness and any restructuring could result in holders of certain liabilities and/or securities, including our common stock, receiving no distributions on account of their claims or interests.

Our significant indebtedness, the unprecedented impact to our financial position resulting from the sharp decrease in commodity prices as a result of the COVID-19 pandemic and the actions of foreign producers, and the continued challenging conditions in the credit and capital markets raise substantial doubt regarding our ability to continue as a going concern. As of June 30, 2020, we had approximately $5.1 billion of debt outstanding, and we had cash on hand of approximately $126 million, of which $21 million was restricted.

We believe the Chapter 11 Cases provide the most expeditious manner in which to deleverage our current capital structure. However, the outcome of the Chapter 11 Cases is subject to uncertainty and is dependent upon factors that are outside of our control, including actions of the Bankruptcy Court and our creditors. There can be no assurance that we will be able to reorganize our capital structure on the terms set forth in the RSA or on other terms acceptable to us, our creditors or other stakeholders, or at all.

Priorities among various constituencies of creditors are dictated by the Bankruptcy Code. Unless creditors agree otherwise, pre-petition liabilities and post-petition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a plan of reorganization. The RSA Plan, if approved, will result in holders of common stock receiving no distribution on account of their claims or interests. However, the ultimate recovery to creditors and/or stockholders, if any, will not be determined until the Bankruptcy Court confirms a plan of reorganization. No assurance can be given that the Bankruptcy Court will approve the RSA Plan or what values, if any, will be ascribed to each of our securities or what type or amounts of distributions, if any, our various stakeholders would receive in any restructuring.

Our common stock is quoted on the OTC Pink Market, and thus may have a limited market and lack of liquidity.

Effective July 17, 2020, our common stock began to be quoted on the OTC Pink Market under the ticker symbol "CRCQQ", which may have an unfavorable impact on our stock price and liquidity. The OTC Pink Marketplace is a significantly more limited market than the New York Stock Exchange or the Nasdaq Stock Market. There is no guarantee that active trading in our common stock will develop on the OTC Pink Market. The quotation of our shares on such marketplace may result in a less liquid market available for existing and potential stockholders to trade.

Item 5 Other Disclosures

None.

Item 6 Exhibits


~~Item 5.~~3.1			~~Other Disclosures~~

~~None.~~


~~Item 6.~~	~~Exhibits~~



~~3.1~~	Amended and Restated Certificate of Incorporation of California Resources Corporation (filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed June 3, 2016 and incorporated herein by reference).

3.2		Amended and Restated Bylaws of California Resources Corporation (filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed November 10, 2015 and incorporated herein by reference).

10.1		~~Purchase Warrant for Common Stock~~Second Amendment to Forbearance Agreement, dated as of June 30, 2020, by and among the Company, the subsidiary guarantors party thereto, certain Lenders identified therein, JPMorgan Chase Bank, N.A., as Administrative Agent, a Lender and a Letter of Credit Issuer, and Bank of America, N.A., a Lender and a Letter of Credit Issuer (filed as Exhibit ~~4.1~~10.1 to Registrant’s Current Report on Form 8-K ~~Filed July 22, 2019~~filed J uly 2 , 2020 and incorporated herein by reference).

10.2		~~California Resources Corporation Long-Term Incentive Plan,~~Second Amendment to Forbearance Agreement, dated as ~~amended~~of June 30, 2020, by and ~~restated, effective May 8, 2019~~among the Company, as the Borrower, the subsidiary guarantors party thereto,the various Lenders identified therein and The Bank of New York Mellon Trust Company,N.A.,as Administrative Agent (filed as Exhibit ~~4.3~~10.2 to Registrant’s ~~Registration Statement~~Current Report on Form ~~S-8~~8-K filed ~~May 9, 2019~~July 2 , 2020 and incorporated herein by reference).

31.1*10.3		Second Amendment to Forbearance Agreement, dated as of June 30, 2020, by and among the Company, as the Borrower, the subsidiary guarantors party thereto, the various Lenders identified therein and The Bank of New York Mellon Trust Company, N.A., as Administrative Agent (filed as Exhibit 10.3 to Registrant's Current Report on Form 8-K filed Ju ly 2 , 2020 and incorporated herein by reference).

10.4		Restructuring Support Agreement, dated as of July 15, 2020, by and among the Company and the other parties named therein (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 16, 2020).

10.5		Senior Secured Superpriority Debtor-in-Possession Revolving Credit Facility Commitment Letter, dated as of July 15, 2020, by and among California Resources Corporation, certain of its subsidiaries and JPMorgan Chase Bank, N.A. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed July 16, 2020).

10.6		Settlement and Assumption Agreement, dated as of July 15, 2020, by and among the Company, California Resources Elk Hills, LLC, Elk Hills Power, LLC, ECR Corporate Holdings GP LLC, ECR I, L.P., SSF IV Energy I AIV 1, L.P., SSF IV Energy I AIV 2, L.P., AEOF ECR Holdings, L.P., and ECR Corporate Holdings, L.P. (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed July 16, 2020).

10.7		Backstop Commitment Agreement, dated as of July 15, 2020, among California Resources Corporation and the Backstop Parties hereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 1 7 , 2020).

10.8		Senior Secured Superpriority Debtor-in-Possession Credit Agreement dated as of July 23, 2020, among California Resources Corporation, as the Borrower, the several lenders from time to time parties hereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and as Sole Lead Arranger and Bookrunner (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 24, 2020).

10.9		Junior Secured Superpriority Debtor-in-Possession Credit Agreement dated as of July 2 3 , 2020, among California Resources Corporation, as the Borrower, the several lenders from time to time parties hereto, and Alter Domus Products Corp., as Administrative Agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed July 2 4 , 2020).

10.10		Amended and Restated Restructuring Support Agreement, dated as of July 24, 2020, by and among California Resources Corporation, certain of its subsidiaries and the Consenting Parties (as defined therein)(filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed July 2 4 , 2020).

10.11		Amended and Restated Backstop Commitment Agreement, dated as of July 24, 2020, by and among California Resources Corporation, certain of its subsidiaries and the Backstop Parties (as defined therein)(filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed July 2 4 , 2020).











31.1*		Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certifications of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


101.INS*			Inline XBRL Instance Document.

101.SCH*			Inline XBRL Taxonomy Extension Schema Document.

101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document.

104			Cover Page Interactive Data File (formatted in inline XBRL and contained in Exhibits 101).

* - Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	~~CALIFORNIA RESOURCES CORPORATION~~



~~DATE:~~			CALIFORNIA RESOURCES CORPORATION


DATE:	August ~~1, 2019~~6, 2020	/s/ Roy M. Pineci
		Roy M. Pineci
		Executive Vice President - Finance
		(Principal Accounting Officer)



Delaware		46-5670947
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~27200 Tourney Road~~
~~Suite 315~~
~~Santa Clarita~~
~~California~~	~~91355~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	~~CRC~~CRCQQ*	~~New York Stock Exchange~~N/A*



	June 30, 2019
Operating Leases
ROU asset obtained in exchange for lease obligations (in millions)	$	52
Weighted-average remaining lease term (in years)	2.74
Weighted-average discount rate	11.5		%

Finance Leases
ROU asset obtained in exchange for lease obligations (in millions)	$	2
Weighted-average remaining lease term (in years)	2.83
Weighted-average discount rate	8.5		%



Shares of common stock outstanding as of June 30, ~~2019~~2020			~~49,004,413~~49,453,297



		Page
Part I
Item 1		Financial Statements (unaudited)		2
		Condensed Consolidated Balance Sheets		2
		Condensed Consolidated Statements of Operations		3
		Condensed Consolidated Statements of Comprehensive Income (Loss)		4
		Condensed Consolidated Statements of Equity		5
		Condensed Consolidated Statements of Cash Flows		57
		~~Condensed Consolidated Statements of Equity~~	6
	Notes to the Condensed Consolidated Financial Statements		8
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations		2326
		General		2326
		Business Environment and Industry Outlook		2326
		~~Seasonality~~Operations		2529
		~~Recent Developments~~	25
	Development Joint Ventures		2531
		~~Operations~~	24
	Fixed and Variable Costs		2432
		Production and Prices		2633
		Balance Sheet Analysis		2835
		Statements of Operations Analysis		2936
		Liquidity and Capital Resources		3543
		~~2019~~2020 Capital Program		3847
		Seasonality		47
		Lawsuits, Claims, Commitments and Contingencies		3847
		Significant Accounting and Disclosure Changes		3848
		Forward-Looking Statements		3949
Item 3		Quantitative and Qualitative Disclosures About Market Risk		4051
Item 4		Controls and Procedures		4052

Part II
Item 1		Legal Proceedings		4153
Item 1A		Risk Factors		4153
Item 5		Other Disclosures		4159
Item 6		Exhibits		4260


CURRENT LIABILITIES							CURRENT LIABILITIES
Current maturities of long-term debt	100			—
Current portion of long-term debt							Current portion of long-term debt	5,083		100
Current portion of deferred gain and issuance costs, net							Current portion of deferred gain and issuance costs, net	125		—
Accounts payable	290			390			Accounts payable	196		296
Accrued liabilities	220			217			Accrued liabilities	355		313
Total current liabilities	610			607			Total current liabilities	5,759		709
LONG-TERM DEBT	5,060			5,251			LONG-TERM DEBT	—		4,877
DEFERRED GAIN AND ISSUANCE COSTS, NET	185			216			DEFERRED GAIN AND ISSUANCE COSTS, NET	—		146
OTHER LONG-TERM LIABILITIES	679			575			OTHER LONG-TERM LIABILITIES	719		720
MEZZANINE EQUITY							MEZZANINE EQUITY
Redeemable noncontrolling interests	777			756			Redeemable noncontrolling interests	828		802
EQUITY							EQUITY
Preferred stock (20 million shares authorized at $0.01 par value) no shares outstanding at June 30, 2019 and December 31, 2018	—			—
Common stock (200 million shares authorized at $0.01 par value) outstanding shares (June 30, 2019 - 49,004,413 and December 31, 2018 - 48,650,420)	—			—
Preferred stock (20 million shares authorized at $0.01 par value) 0 shares outstanding at June 30, 2020 and December 31, 2019							Preferred stock (20 million shares authorized at $0.01 par value) 0 shares outstanding at June 30, 2020 and December 31, 2019	—		—
Common stock (200 million shares authorized at $0.01 par value) outstanding shares (June 30, 2020 - 49,453,297 and December 31, 2019 - 49,175,843)							Common stock (200 million shares authorized at $0.01 par value) outstanding shares (June 30, 2020 - 49,453,297 and December 31, 2019 - 49,175,843)	—		—
Additional paid-in capital	4,994			4,987			Additional paid-in capital	5,008		5,004
Accumulated deficit	(5,397		)	(5,342		)	Accumulated deficit	(7,437)		(5,370)
Accumulated other comprehensive loss	(5		)	(6		)	Accumulated other comprehensive loss	(23)		(23)
Total equity attributable to common stock	(408		)	(361		)	Total equity attributable to common stock	(2,452)		(389)
Equity attributable to noncontrolling interests	129			114			Equity attributable to noncontrolling interests	76		93
Total equity	(279		)	(247		)	Total equity	(2,376)		(296)
TOTAL LIABILITIES AND EQUITY	$	7,032		$	7,158		TOTAL LIABILITIES AND EQUITY	$	4,930	$	6,958


~~(a)~~	~~No associated tax for the three and six months ended June 30, 2019 and 2018. See~~ ~~Note 10 Pension and Postretirement Benefit Plans~~ ~~for additional information.~~



	Six months ended June 30,
	2019			2018
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$	(3	)	$	(54	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization	239			244
Net derivative loss from commodity contracts	68			205
Net proceeds (payments) on settled commodity derivatives	28			(99		)
Net gain on early extinguishment of debt	(26		)	(24		)
Amortization of deferred gain	(36		)	(38		)
Gain on asset divestiture	—			(1		)
Dry hole expenses	7			4
Other non-cash charges to income, net	47			39
Changes in operating assets and liabilities, net	(52		)	(42		)
Net cash provided by operating activities	272			234

CASH FLOW FROM INVESTING ACTIVITIES
Capital investments	(271		)	(327		)
Changes in capital investment accruals	(57		)	22
Asset divestitures	165			13
Acquisitions	(2		)	(512		)
Other	(5		)	(3		)
Net cash used in investing activities	(170		)	(807		)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from 2014 Revolving Credit Facility	1,274			1,150
Repayments of 2014 Revolving Credit Facility	(1,289		)	(1,236		)
Debt repurchases	(59		)	(119		)
Contributions from noncontrolling interest holders, net	49			796
Distributions paid to noncontrolling interest holders	(65		)	(41		)
Issuance of common stock	1			50
Shares canceled for taxes	(3		)	(5		)
Net cash (used) provided by financing activities	(92		)	595
Increase in cash	10			22
Cash—beginning of period	17			20
Cash—end of period	$	27		$	42



	Three months ended June 30, 2018
	Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Equity Attributable to Common Stock			Equity Attributable to Noncontrolling Interests			Total Equity
Balance, March 31, 2018	$	4,930	$	(5,672	)	$	(21	)	$	(763	)	$	109		$	(654	)
Net loss	—		(82		)	—			(82		)	(10		)	(92		)
Contribution from noncontrolling interest holders, net	—		—			—			—			49			49
Distributions to noncontrolling interest holders	—		—			—			—			(4		)	(4		)
Issuance of common stock	51		—			—			51			—			51
Other comprehensive income	—		—			1			1			—			1
Share-based compensation, net	4		—			—			4			—			4
Balance, June 30, 2018	$	4,985	$	(5,754	)	$	(20	)	$	(789	)	$	144		$	(645	)



	Six months ended June 30, 2018
	Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Equity Attributable to Common Stock			Equity Attributable to Noncontrolling Interests			Total Equity
Balance, December 31, 2017	$	4,879	$	(5,670	)	$	(23	)	$	(814	)	$	94		$	(720	)
Net loss	—		(84		)	—			(84		)	(13		)	(97		)
Contribution from noncontrolling interest holders, net	—		—			—			—			82			82
Distributions to noncontrolling interest holders	—		—			—			—			(19		)	(19		)
Issuance of common stock	101		—			—			101			—			101
Other comprehensive income	—		—			3			3			—			3
Share-based compensation, net	5		—			—			5			—			5
Balance, June 30, 2018	$	4,985	$	(5,754	)	$	(20	)	$	(789	)	$	144		$	(645	)


	Outstanding Principal					Interest Rate		Security
	June 30, 2020		December 31, 2019
Credit Agreements	($ in millions)
2014 Revolving Credit Facility	$	731	$	518	LIBOR plus 3.25%-4.00% ABR plus 2.25%-3.00%		Shared First-Priority Lien
2017 Credit Agreement	1,300		1,300		LIBOR plus 4.75% ABR plus 3.75%		Shared First-Priority Lien
2016 Credit Agreement	1,000		1,000		LIBOR plus 10.375% ABR plus 9.375%		First-Priority Lien
Second Lien Notes
Second Lien Notes	1,808		1,815		8%		Second-Priority Lien
Senior Notes
5% Senior Notes due 2020	—		100		5%		Unsecured
5.5% Senior Notes due 2021	100		100		5.5%		Unsecured
6% Senior Notes due 2024	144		144		6%		Unsecured
Total Debt	$	5,083	$	4,977
Less: Current Portion of Long-Term Debt	(5,083)		(100)
Total Long-Term Debt	$	—	$	4,877



	Outstanding Principal					Interest Rate	Maturity	Security
	June 30, 2019			December 31, 2018
Credit Agreements	(in millions)
2014 Revolving Credit Facility	$	525		$	540	LIBOR plus 3.25%-4.00% ABR plus 2.25%-3.00%	June 30, 2021	Shared First-Priority Lien
2017 Credit Agreement	1,300			1,300		LIBOR plus 4.75% ABR plus 3.75%	December 31, 2022^(a)	Shared First-Priority Lien
2016 Credit Agreement	1,000			1,000		LIBOR plus 10.375% ABR plus 9.375%	December 31, 2021	First-Priority Lien
Second Lien Notes
Second Lien Notes	1,991			2,067		8%	December 15, 2022^(b)	Second-Priority Lien
Senior Notes
5% Senior Notes due 2020	100			100		5%	January 15, 2020	Unsecured
5½% Senior Notes due 2021	100			100		5.5%	September 15, 2021	Unsecured
6% Senior Notes due 2024	144			144		6%	November 15, 2024	Unsecured
Total Debt	5,160			5,251
Less: Current Maturities	(100		)	—
Long-Term Debt	$	5,060		$	5,251


	June 30, 2020^(a)		December 31, 2019
	(in millions)
Deferred gain	$	176	$	211
Issuance costs and original issue discounts	(51)		(65)
Net deferred gain and issuance costs	$	125	$	146


~~NOTE 6~~	NOTE 6 JOINT VENTURES


	Equity Attributable to Noncontrolling Interest										Mezzanine Equity - Redeemable Noncontrolling Interests
	Ares JV		BSP JV		Total		Ares JV		Elk Hills Carbon JV		Total
	(in millions)
Balance, December 31, 2019	$	—	$	93	$	93	$	802	$	—	$	802
Net income (loss) attributable to noncontrolling interests	3		12		15		61		(1)		60
Contributions from noncontrolling interest holders, net	—		—		—		—		2		2

Distributions to noncontrolling interest holders	(3)		(29)		(32)		(36)		—		(36)
Balance, June 30, 2020	$	—	$	76	$	76	$	827	$	1	$	828

Balance, December 31, 2018	$	15	$	99	$	114	$	756	$	—	$	756
Net (loss) income attributable to noncontrolling interests	(6)		1		(5)		57		—		57
Contributions from noncontrolling interest holders, net	—		49		49		—		—		—

Distributions to noncontrolling interest holders	(4)		(25)		(29)		(36)		—		(36)
Balance, June 30, 2019	$	5	$	124	$	129	$	777	$	—	$	777


June 30, 2020
Balance Sheet Classification	Gross Amounts Recognized at Fair Value		Gross Amounts Offset in the Balance Sheet		Net Fair Value Presented in the Balance Sheet
Assets:	(in millions)
Other current assets, net	$	7	$	—	$	7
Other assets	—		—		—

Liabilities:
Accrued liabilities	—		—		—

Total derivatives	$	7	$	—	$	7


	Six months ended June 30,
	2020						2019
	Pension Benefit		Postretirement Benefit		Pension Benefit		Postretirement Benefit
	(in millions)
Service cost	$	1	$	2	$	—	$	2
Interest cost	1		2		1		3
Expected return on plan assets	—		—		(1)		(1)
Recognized actuarial loss	—		—		1		1
Settlement loss	—		—		1		—
Total	$	2	$	4	$	2	$	5



	Three months ended June 30, 2019		Six months ended June 30, 2019
	(in millions)
Operating lease cost	$	14	$	26
Short-term lease cost	18		38
Variable lease cost	3		8
Total operating lease costs	$	35	$	72



	Balance Sheet Location	June 30, 2020		December 31, 2019
		(in millions)		(in millions)
Right-of-Use Assets
Operating lease, net	Other assets	$	45	$	59
Finance lease, net	PP&E	1		2
Total right-of-use assets		$	46	$	61

Lease Liabilities
Current
Operating lease	Accrued liabilities	$	14	$	27
Finance lease	Accrued liabilities	1		1
Long-term
Operating lease	Other long-term liabilities	33		37
Finance lease	Other long-term liabilities	—		1
Total lease liabilities		$	48	$	66



	Operating			Finance
	Leases			Leases
	(in millions)
2019	$	19		$	—
2020	23			1
2021	7			1
2022	4			—
2023	2			—
Thereafter	6			—
Less: Interest	(9		)	—
Present value of lease liabilities	$	52		$	2


	Six months ended
	June 30, 2020
	(in millions)
Proved oil and natural gas properties	$	1,487
Unproved properties	228
Unrecovered capital costs	11
Inventory	7
Other	3
Total	$	1,736


Condensed Consolidating Balance Sheets
As of June 30, 2020 and December 31, 2019
(in millions)

	June 30, 2020
	Parent		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Total current assets	$	22	$	341	$	68	$	(28)	$	403
Investments in consolidated subsidiaries	3,156		(53)		—		(3,103)		—
Total property, plant and equipment, net	24		3,972		453		—		4,449
Other assets	1		64		13		—		78
TOTAL ASSETS	$	3,203	$	4,324	$	534	$	(3,131)	$	4,930

Total current liabilities	5,409		371		7		(28)		5,759


Other long-term liabilities	159		557		3		—		719
Amounts due to (from) affiliates	87		(88)		1		—		—
Mezzanine equity	—		—		828		—		828
Total equity	(2,452)		3,484		(305)		(3,103)		(2,376)
TOTAL LIABILITIES AND EQUITY	$	3,203	$	4,324	$	534	$	(3,131)	$	4,930



Condensed Consolidating Balance Sheets
As of June 30, 2019 and December 31, 2018
(in millions)

	As of June 30, 2019
	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total current assets	$	10		$	452		$	73		$	(13	)	$	522
Total property, plant and equipment, net	23			5,874			512			—			6,409
Investments in consolidated subsidiaries	5,684			130			—			(5,814		)	—
Other assets	2			71			28			—			101
TOTAL ASSETS	$	5,719		$	6,527		$	613		$	(5,827	)	$	7,032

Total current liabilities	210			404			9			(13		)	610
Long-term debt	5,060			—			—			—			5,060
Deferred gain and issuance costs, net	185			—			—			—			185
Other long-term liabilities	143			532			4			—			679
Amounts due to (from) affiliates	529			(529		)	—			—			—
Mezzanine equity	—			—			777			—			777
Total equity	(408		)	6,120			(177		)	(5,814		)	(279		)
TOTAL LIABILITIES AND EQUITY	$	5,719		$	6,527		$	613		$	(5,827	)	$	7,032


Condensed Consolidating Statements of Operations
For the three and six months ended June 30, 2020 and 2019
(in millions)

	Three months ended June 30, 2020
	Parent		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Total revenues	$	—	$	253	$	94	$	(71)	$	276
Total costs	55		357		50		(71)		391
Non-operating (loss) income	(135)		3		—		—		(132)
NET (LOSS) INCOME	(190)		(101)		44		—		(247)
Net income attributable to noncontrolling interests	—		—		(24)		—		(24)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCK	$	(190)	$	(101)	$	20	$	—	$	(271)



	As of December 31, 2018
	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total current assets	$	7		$	590		$	56		$	(13	)	$	640
Total property, plant and equipment, net	23			5,913			519			—			6,455
Investments in consolidated subsidiaries	5,440			96			—			(5,536		)	—
Other assets	4			32			27			—			63
TOTAL ASSETS	$	5,474		$	6,631		$	602		$	(5,549	)	$	7,158

Total current liabilities	143			465			12			(13		)	607
Long-term debt	5,251			—			—			—			5,251
Deferred gain and issuance costs, net	216			—			—			—			216
Other long-term liabilities	140			431			4			—			575
Amounts due to (from) affiliates	85			(86		)	1			—			—
Mezzanine equity	—			—			756			—			756
Total equity	(361		)	5,821			(171		)	(5,536		)	(247		)
TOTAL LIABILITIES AND EQUITY	$	5,474		$	6,631		$	602		$	(5,549	)	$	7,158


Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2020 and 2019
(in millions)

	Six months ended June 30, 2020
	Parent		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(338)	$	277	$	154	$	—	$	93
Net cash provided by (used in) investing activities	1		(28)		—		—		(27)
Net cash provided by (used in) financing activities	340		(153)		(144)		—		43
Increase in cash	3		96		10		—		109
Cash—beginning of period	—		6		11		—		17
Cash—end of period	$	3	$	102	$	21	$	—	$	126



	For the three months ended June 30, 2018
	Parent			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues and other	$	—		$	526	$	94		$	(71	)	$	549
Total costs and other	64			499		46			(71		)	538
Non-operating (loss) income	(74		)	—		—			—			(74		)
NET (LOSS) INCOME	(138		)	27		48			—			(63		)
Net income attributable to noncontrolling interest	—			—		(19		)	—			(19		)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCK	$	(138	)	$	27	$	29		$	—		$	(82	)



	For the six months ended June 30, 2019
	Parent			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues and other	$	—		$	1,255	$	235		$	(147	)	$	1,343
Total costs and other	106			1,074		131			(147		)	1,164
Non-operating (loss) income	(187		)	5		—			—			(182		)
NET INCOME (LOSS)	(293		)	186		104			—			(3		)
Net income attributable to noncontrolling interests	—			—		(52		)	—			(52		)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCK	$	(293	)	$	186	$	52		$	—		$	(55	)



	For the six months ended June 30, 2018
	Parent			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues and other	$	1		$	1,111	$	159		$	(113	)	$	1,158
Total costs and other	107			960		85			(113		)	1,039
Non-operating (loss) income	(173		)	—		—			—			(173		)
NET (LOSS) INCOME	(279		)	151		74			—			(54		)
Net income attributable to noncontrolling interest	—			—		(30		)	—			(30		)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCK	$	(279	)	$	151	$	44		$	—		$	(84	)



Condensed Consolidating Statements of Cash Flows
For the six months ended June 30, 2019 and 2018
(in millions)

	For the six months ended June 30, 2019
	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net cash (used) provided by operating activities	$	(348	)	$	303		$	317		$	—	$	272
Net cash used in investing activities	(5		)	(154		)	(11		)	—		(170		)
Net cash provided (used) by financing activities	353			(149		)	(296		)	—		(92		)
Increase in cash	—			—			10			—		10
Cash—beginning of period	—			7			10			—		17
Cash—end of period	$	—		$	7		$	20		$	—	$	27


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~


~~Note:~~	~~Bbl refers to a barrel; MMBTU refers to one million British Thermal Units.~~


	Cumulative Investment through
	June 30, 2020
	(in millions)
Alpine	$	231
Royale	17
MIRA	139
BSP	200
Total Capital Investment	$	587


~~Note:~~	MBbl/d refers to thousands of barrels per day; MMcf/d refers to millions of cubic feet per day; MBoe/d refers to thousands of barrels of oil equivalent (Boe) per day. Natural gas volumes have been converted to Boe based on the equivalence of energy content of six thousand cubic feet of natural gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence.