California Resources’ debt
On September 30, 2016, California Resources’ (CRC) total debt stood at ~$5.3 billion. With only ~$10 million in cash and cash equivalents, CRC’s net debt was ~$5.2 billion at the end of 3Q16.
California Resources’ net debt-to-adjusted EBITDA
Net debt-to-adjusted EBITDA is a debt ratio that shows how many years it would take for a company to pay back its debt under its current situation. As seen in the above chart, as of 3Q16, CRC’s net debt-to-adjusted EBITDA was high at ~6.9x. Even compared to its own net debt-to-adjusted EBITDA historical average of ~5.9x, CRC’s current net debt-to-adjusted EBITDA is high.
In the last five quarters, from 2Q15 to 3Q16, California Resources’ net debt-to-adjusted EBITDA ratio has risen from ~4.3x to ~6.9x. Though CRC’s net debt has fallen from ~$6.5 billion to ~$5.2 billion from 2Q15 to 3Q16, its trailing-12-month adjusted EBITDA has fallen ~50%, from ~$1.5 billion to ~$762 million, during the same period.
Other upstream companies Diamondback Energy (FANG), CONSOL Energy (CNX), and EOG Resources (EOG) have net debt-to-adjusted EBITDA ratios of ~1x, ~5x, and ~3x, respectively. The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas–related equities from the S&P 500.
California Resources’ adjusted EBITDA
In 4Q14 and 4Q15, CRC reported significant before-tax, non-cash charges of ~$3.4 billion and ~$4.9 billion, respectively, related to the impairment of its proved reserves.
These impairment charges and other quarterly one-time charges were excluded from the calculation of CRC’s quarterly adjusted EBITDA. The above chart shows the company’s net debt-to-adjusted EBITDA ratio using adjusted EBITDAs in trailing-12-month EBITDA calculations.