CRC, Colony Capital enter JV to develop Elk Hills field

California Resources Corp. (CRC) and Colony Capital Inc.—through its energy investment management arm Colony HB2 Energy—have formed a joint venture in which Colony has committed to fund $320 million for the development of CRC’s Elk Hills field in the San Joaquin basin. The total investment may be increased to $500 million.

Initial capital will be invested over 3 years in accordance with a preapproved development plan consisting of 275 wells. Colony will fund 100% of the development wells and will earn a 90% working interest. CRC’s working interest will revert to 82.5% from 10% upon Colony achieving an agreed upon return. Colony also will receive warrants to purchase as much as 1.25 million shares of common stock with a $40 strike price upon funding their capital obligations.

Following the April 2018 deal with Chevron Corp. to acquire the remaining working, surface, and mineral interests in the 47,000-acre field, CRC now holds 100% working interest and 100% net revenue interest, as well as all surface lands in Elk Hills field. The field has an estimated 8.5 billion boe of original oil in place and 32 major producing zones currently identified.