Please ensure Javascript is enabled for purposes of website accessibility

Why California Resources Corporation Stock Dropped 29.5% Today

By Rich Smith – Sep 19, 2019 at 5:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Rumors of a restructuring spooked afternoon investors.

What happened

Shares of oil and natural gas exploration-and-production company California Resources Corporation (CRC) closed down 29.5% Thursday.

Surprisingly, up until about 2 p.m. EST, the stock was doing just fine. But it suddenly fell off a cliff after reports began showing up on Bloomberg and debt-market reporter Debtwire to the effect that the company has recently "met with restructuring advisors, gauged sale prospects," according to

Cartoon characters are surprised by a falling stock chart.

Image source: Getty Images.

So what

With no further details immediately available, it's hard to gauge precisely how serious this situation is -- or even whether the reports are accurate at all. That being said, California Resources Corporation is a company with more than $5 billion in debt and only $27 million in the bank, according to data from S&P Global Market Intelligence.

Now what

Even in the capital intensive oil business, that's rather a lot of debt. Worse, also according to S&P Global data, California Resources hasn't generated a penny of positive free cash flow since 2016.

If California Resources can't figure out a way to generate some cash from its business, maybe a "restructuring" isn't such a bad idea after all.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

California Resources Corporation Stock Quote
California Resources Corporation

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.