What: Shares of California Resources Corporation (NYSE:CRC) have declined as much as 13% today at the time of this writing, following its earnings release after the market closed yesterday.

So what: California Resources' net income loss of $0.18 per share came in a little below analyst expectations of a $0.14-per-share loss. As expected, the culprit here is the combination of a rapid decline in oil prices and an extremely levered balance sheet. Even as the company has cut its capital expenditures to a paltry $129 million for the quarter, it still can't generate enough cash from operations to cover those obligations.

What is even more troubling about this is that the company has a pretty bloated balance sheet that needs to be fixed, but it doesn't really have the cash to fix it right now. On the conference call, management noted that it was looking to do some sort of moves with its assets to deleverage the company in some way, but that isn't exactly encouraging considering that the company was spun off from Occidental Petroleum less than a year ago in order for investors to realize the value of its California operations. 

Now what: California Resources is doing what it can to control costs and mitigate the pain of declining oil prices, but even the things that it is doing today aren't enough to make up for the rough market environment and its high debt load. Today's drop might just be a knee-jerk reaction to earnings that may or may not have any long-term impact on the company, but it did bring some of the risks for the company to the forefront that probably mean you should sit this one out.