SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-36478

_____________________

California Resources Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	46-5670947 (I.R.S. Employer Identification No.)
9200 Oakdale Avenue, Suite 900 Los Angeles, California (Address of principal executive offices)	91311 (Zip Code)

(888) 848-4754

(Registrant’s telephone number, including area code)

_____________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     þ Yes   ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    þ Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. (See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act):

Large Accelerated Filer	o	Accelerated Filer	þ	Non-Accelerated Filer	o
Smaller Reporting Company	o	Emerging Growth Company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    ¨ Yes   þ No

Shares of common stock outstanding as of June 30, 2018 48,352,957

California Resources Corporation and Subsidiaries

Table of Contents

	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	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Equity	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	General	25
	Business Environment and Industry Outlook	25
	Seasonality	26
	Joint Ventures	26
	Acquisitions and Divestitures	28
	Operations	28
	Fixed and Variable Costs	28
	Production and Prices	30
	Balance Sheet Analysis	31
	Statements of Operations Analysis	32
	Liquidity and Capital Resources	39
	2018 Capital Program	43
	Lawsuits, Claims, Contingencies and Commitments	43
	Significant Accounting and Disclosure Changes	44
	Safe Harbor Statement Regarding Outlook and Forward-Looking Information	44
Item 3	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4	Controls and Procedures	46
Part II
Item 1	Legal Proceedings	47
Item 1A	Risk Factors	47
Item 5	Other Disclosures	47
Item 6	Exhibits	48

1

PART I    FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

As of June 30, 2018 and December 31, 2017

(in millions, except share data)

	June 30,			December 31,
	2018			2017
CURRENT ASSETS
Cash	$	42		$	20
Trade receivables	282			277
Inventories	63			56
Other current assets, net	172			130
Total current assets	559			483
PROPERTY, PLANT AND EQUIPMENT	22,146			21,260
Accumulated depreciation, depletion and amortization	(15,812		)	(15,564		)
Total property, plant and equipment, net	6,334			5,696
OTHER ASSETS	47			28
TOTAL ASSETS	$	6,940		$	6,207

CURRENT LIABILITIES
Accounts payable	330			257
Accrued liabilities	563			475
Total current liabilities	893			732
LONG-TERM DEBT	5,075			5,306
DEFERRED GAIN AND ISSUANCE COSTS, NET	265			287
OTHER LONG-TERM LIABILITIES	617			602
MEZZANINE EQUITY
Redeemable noncontrolling interest	735			—
EQUITY
Preferred stock (20 million shares authorized at $0.01 par value) no shares outstanding at June 30, 2018 and December 31, 2017	—			—
Common stock (200 million shares authorized at $0.01 par value) outstanding shares (June 30, 2018 - 48,352,957 and December 31, 2017 - 42,901,946)	—			—
Additional paid-in capital	4,985			4,879
Accumulated deficit	(5,754		)	(5,670		)
Accumulated other comprehensive loss	(20		)	(23		)
Total equity attributable to common stock	(789		)	(814		)
Noncontrolling interests	144			94
Total equity	(645		)	(720		)
TOTAL LIABILITIES AND EQUITY	$	6,940		$	6,207

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

2

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

For the three and six months ended June 30, 2018 and 2017

(in millions, except share data)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
REVENUES AND OTHER
Oil and gas sales	$	657		$	439		$	1,232		$	926
Net derivative (loss) gain from commodity contracts	(167		)	43			(205		)	116
Other revenue	59			34			131			64
Total revenues and other	549			516			1,158			1,106
COSTS AND OTHER
Production costs	231			216			443			427
General and administrative expenses	90			59			153			122
Depreciation, depletion and amortization	125			138			244			278
Taxes other than on income	37			31			75			64
Exploration expense	6			6			14			12
Other expenses, net	49			25			110			47
Total costs and other	538			475			1,039			950
OPERATING INCOME	11			41			119			156
NON-OPERATING (LOSS) INCOME
Interest and debt expense, net	(94		)	(83		)	(186		)	(167		)
Net gain on early extinguishment of debt	24			—			24			4
Gain on asset divestitures	1			—			1			21
Other non-operating expenses	(5		)	(5		)	(12		)	(9		)
(LOSS) INCOME BEFORE INCOME TAXES	(63		)	(47		)	(54		)	5
Income tax	—			—			—			—
NET (LOSS) INCOME	(63		)	(47		)	(54		)	5
Net income attributable to noncontrolling interests	(19		)	(1		)	(30		)	—
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCK	$	(82	)	$	(48	)	$	(84	)	$	5
Net (loss) income attributable to common stock per share
Basic and diluted	$	(1.70	)	$	(1.13	)	$	(1.81	)	$	0.12

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

3

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

For the three and six months ended June 30, 2018 and 2017

(in millions)

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Net (loss) income	$	(63	)	$	(47	)	$	(54	)	$	5
Other comprehensive income items:
Reclassification of realized losses on pension and postretirement benefits to income(a)	1			—			3			3
Total other comprehensive income	1			—			3			3
Comprehensive income attributable to noncontrolling interests	(19		)	(1		)	$	(30	)	$	—
Comprehensive (loss) income attributable to common stock	$	(81	)	$	(48	)	$	(81	)	$	8

(a) No associated tax for the three and six months ended June 30, 2018 and 2017. See Note 11 Pension and Postretirement Benefit Plans, for additional information.

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

4

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2018 and 2017

(in millions)

	Six months ended June 30,
	2018			2017
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income	$	(54	)	$	5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	244			278
Net derivative loss (gain) from commodity contracts	205			(116		)
Net (payments) proceeds on settled commodity derivatives	(99		)	7
Net gain on early extinguishment of debt	(24		)	(4		)
Amortization of deferred gain	(38		)	(37		)
Gain on asset divestitures	(1		)	(21		)
Other non-cash charges to income, net	39			28
Dry hole expenses	4			1
Changes in operating assets and liabilities, net	(42		)	(21		)
Net cash provided by operating activities	234			120
CASH FLOW FROM INVESTING ACTIVITIES
Capital investments	(327		)	(132		)
Changes in capital investment accruals	22			26
Asset divestitures	13			33
Acquisitions	(512		)	—
Other	(3		)	(1		)
Net cash used in investing activities	(807		)	(74		)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from 2014 Revolving Credit Facility	1,150			728
Repayments of 2014 Revolving Credit Facility	(1,236		)	(733		)
Payments on 2014 Term Loan	—			(66		)
Debt repurchases	(119		)	(24		)
Debt transaction costs	—			(2		)
Contributions from noncontrolling interest holders, net	796			49
Distributions paid to noncontrolling interest holders	(41		)	(1		)
Issuance of common stock	50			1
Shares canceled for taxes	(5		)	(1		)
Net cash provided (used) by financing activities	595			(49		)
Increase (decrease) in cash	22			(3		)
Cash—beginning of period	20			12
Cash—end of period	$	42		$	9

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

5

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

For the six months ended June 30, 2018 and 2017

(in millions)

	Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Equity Attributable to Common Stock			Equity Attributable to Noncontrolling Interest			Total Equity
Balance, December 31, 2016	$	4,861	$	(5,404	)	$	(14	)	$	(557	)	$	—		$	(557	)
Net income	—		5			—			5			—			5
Contribution from noncontrolling interest holders, net	—		—			—			—			49			49
Distributions paid to noncontrolling interest holders	—		—			—			—			(1		)	(1		)
Other comprehensive income	—		—			3			3			—			3
Share-based compensation, net	10		—			—			10			—			10
Balance, June 30, 2017	$	4,871	$	(5,399	)	$	(11	)	$	(539	)	$	48		$	(491	)

	Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive (Loss) Income			Equity Attributable to Common Stock			Equity Attributable to Noncontrolling Interest			Total Equity(a)
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 paid to noncontrolling interest holders	—		—			—			—			(19		)	(19		)
Issuance of common stock(b)	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	)

(a) Excludes redeemable noncontrolling interest recorded in mezzanine equity. See Note 6 Joint Ventures for more information.

(b) Includes $51 million in shares issued to Chevron in connection with our acquisition of Chevron's working interest in Elk Hills unit. See Note 7 Acquisitions and Divestitures for more information.

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

6

CALIFORNIA RESOURCES CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

June 30, 2018

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 within California. We were incorporated in Delaware as a wholly owned subsidiary of Occidental Petroleum Corporation (Occidental) on April 23, 2014 and remained a wholly owned subsidiary of Occidental until November 30, 2014. On November 30, 2014, Occidental distributed shares of our common stock on a pro-rata basis to Occidental stockholders (the Spin-off). We became an independent, publicly traded company on December 1, 2014. Occidental initially retained approximately 18.5% of our outstanding shares of common stock, which were distributed to Occidental stockholders on March 24, 2016.

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, and all references to ‘‘Occidental’’ refer to Occidental Petroleum Corporation, our former parent, and its subsidiaries.

Basis of Presentation

In the opinion of our management, the accompanying financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present our financial position as of June 30, 2018 and December 31, 2017 and the statements of operations, comprehensive income, cash flows and equity for the three and six months ended June 30, 2018 and 2017, as applicable. We have eliminated all significant intercompany transactions and accounts. We account for our share of oil and gas exploration and production 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 balance sheets, statements of operations and cash flows.

We have prepared this report pursuant to the rules and regulations of the United States (U.S.) Securities and Exchange Commission (SEC) 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 consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2017.

Certain prior year amounts have been reclassified to conform to the 2018 presentation. On the statements of operations, we reclassified interest cost, expected return on assets, amortization of prior service costs and settlements/curtailments, all associated with defined benefit pension plans, from general and administrative expenses to other non-operating expenses, net in accordance with new accounting rules. See Note 2 Accounting and Disclosure Changes for more information.

NOTE 2 ACCOUNTING AND DISCLOSURE CHANGES

Recently Issued Accounting and Disclosure Changes

In February 2016, the Financial Accounting Standards Board (FASB) issued rules requiring lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months and to include qualitative and quantitative disclosures with respect to the amount, timing, and uncertainty of cash flows arising from leases. In January 2018, the FASB issued an update to the lease standard providing an optional transition approach for land easements allowing entities to evaluate only new or modified land easements. These rules will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. We have completed a preliminary analysis of our leases and will be implementing processes to ensure compliance in the second half of the year. We expect the adoption of these rules to increase both our assets and liabilities by the same amount, which could be significant.

7

Recently Adopted Accounting and Disclosure Changes

In May 2014, the FASB issued rules on the recognition of revenue that created Topic 606 (ASC 606), superseded existing revenue recognition requirements under GAAP, and required an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The new rules required certain sales-related costs to be reported as other expense as opposed to being netted against oil and gas sales or other revenue. We adopted ASC 606 on January 1, 2018 using the modified retrospective method with no adjustments to opening retained earnings. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect prior to adoption. See Note 12 Revenue Recognition for more information.

In March 2017, the FASB issued rules requiring employers that sponsor defined benefit plans for pensions and postretirement benefits to present the service cost component of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers are required to present the other components of the net periodic benefit cost separately from the line item that includes the service cost and outside of any subtotal of operating income. We adopted these rules in the first quarter of 2018 with no significant impact on our financial statements. The interest cost, expected return on assets, amortization of prior service costs and settlements/curtailments have been reclassified from general and administrative expense to other non-operating expenses. We elected to use the amounts disclosed for the various components of net periodic benefit cost in the pension and postretirement benefit plans footnote as the basis of the retrospective application.

In May 2017, the FASB issued rules to simplify the guidance on the modification of share-based payment awards. The amendments provide clarity on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting prospectively. We adopted these rules in the first quarter of 2018 with no impact on our financial statements.

In February 2018, the FASB issued rules that give entities the option to reclassify this residual difference from AOCI to retained earnings. Components of accumulated other comprehensive income (AOCI) are recorded net of related taxes determined using prevailing rates when the components are initially recorded. When tax rates change, a difference can arise between tax amounts recorded to AOCI as compared to the expected tax amount. Our accounting policy is to remove such residual tax effects that may remain in AOCI when the related components are ultimately settled. The change in the U.S. federal corporate tax rate in December 2017 created a residual difference. We early adopted this accounting standard in the first quarter of 2018 without reclassifying this difference.

NOTE 3 OTHER INFORMATION

Cash at June 30, 2018 and December 31, 2017 included approximately $23 million and $5 million, respectively, which is restricted under our joint venture agreements.

Other current assets, net as of June 30, 2018 and December 31, 2017 consisted of the following:

	June 30,		December 31,
	2018		2017
	(in millions)
Amounts due from joint interest partners	$	86	$	76
Derivative assets from commodities contracts	59		23
Prepaid expenses	25		19
Asset held for sale	—		12
Other	2		—
Other current assets, net	$	172	$	130

In the second quarter of 2018, we divested a non-core asset that was held for sale in the prior period. See Note 7 Acquisitions and Divestitures for more information.

8

Accrued liabilities as of June 30, 2018 and December 31, 2017 consisted of the following:

	June 30,		December 31,
	2018		2017
	(in millions)
Derivative liabilities from commodities contracts	$	260	$	154
Accrued taxes other than on income	111		130
Accrued employee-related costs	77		86
Accrued interest	20		23
Other	95		82
Accrued liabilities	$	563	$	475

Other long-term liabilities included asset retirement obligations of $417 million and $403 million at June 30, 2018 and December 31, 2017, respectively.

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, 2018 and 2017. Interest paid, net of capitalized amounts, totaled approximately $212 million and $194 million for the six months ended June 30, 2018 and 2017, respectively. Non-cash financing activities in 2018 included 2.85 million shares of common stock (valued at $51 million) issued in connection with the Elk Hills transaction. See Note 7 Acquisitions and Divestitures for more on the Elk Hills transaction.

NOTE 4    INVENTORIES

Inventories as of June 30, 2018 and December 31, 2017 consisted of the following:

	June 30,		December 31,
	2018		2017
	(in millions)
Materials and supplies	$	60	$	53
Finished goods	3		3
Total	$	63	$	56

9

NOTE 5     DEBT

As of June 30, 2018 and December 31, 2017, our long-term debt consisted of the following credit agreements, second lien notes and senior notes:

	Outstanding Principal (in millions)				Interest Rate	Maturity	Security
	June 30, 2018		December 31, 2017
Credit Agreements
2014 Revolving Credit Facility	$	277	$	363	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	2,153		2,250		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	145		193		6%	November 15, 2024	Unsecured
Total	$	5,075	$	5,306

(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 on the 2017 Credit Agreement is outstanding at that time.

(b) The Second Lien Notes require principal repayments of approximately $340 million in June 2021 and $70 million each in December 2021 and June 2022.

Deferred Gain and Issuance Costs

As of June 30, 2018, net deferred gain and issuance costs were $265 million, consisting of $377 million of a deferred gain offset by $76 million of deferred issuance costs and $36 million of original issue discount. The December 31, 2017 net deferred gain and issuance costs were $287 million, consisting of $415 million of a deferred gain offset by $92 million of deferred issuance costs and $36 million of original issue discount.

2014 Revolving Credit Facility

As of June 30, 2018, we had approximately $550 million of available borrowing capacity, before taking into account a $150 million month-end minimum liquidity requirement. The borrowing base under this facility was reaffirmed at $2.3 billion in May 2018. Our 2014 Revolving Credit Facility also includes a sub-limit of $400 million for the issuance of letters of credit. As of June 30, 2018 and December 31, 2017, we had letters of credit outstanding of approximately $173 million and $148 million, respectively. These letters of credit were issued to support ordinary course marketing, insurance, regulatory and other matters.

10

Repurchases

In the first quarter of 2018, we repurchased $2 million in aggregate principal amount of our 8% senior secured second-lien notes due December 15, 2022 (Second Lien Notes) for $1.6 million in cash, resulting in a $0.4 million pre-tax gain. In the second quarter of 2018, we repurchased $95 million and $48 million in aggregate principal amount of our Second Lien Notes and 6% senior notes due November 15, 2024 (2024 Notes), respectively, for $118 million in cash, resulting in a $24 million pre-tax gain, net of a $1 million reduction for deferred issuance costs.

Fair Value

We estimate the fair value of fixed-rate debt, which is classified as Level 1, based on prices from known market transactions for our instruments. The estimated fair value of our debt at June 30, 2018 and December 31, 2017, including the fair value of variable-rate debt, was approximately $4.8 billion for both periods, compared to a carrying value of approximately $5.1 billion and $5.3 billion, respectively.

Other

At June 30, 2018, we were in compliance with all financial and other debt covenants.

All obligations under our 2014 Revolving Credit Facility, 2017 Credit Agreement and 2016 Credit Agreement (collectively, Credit Facilities) as well as our Second Lien Notes and Senior Notes are guaranteed both fully and unconditionally and jointly and severally by all of our material wholly owned subsidiaries.

Excluding our interest-rate derivative contracts, a one-eighth percent change in the variable interest rates on the borrowings under our Credit Facilities on June 30, 2018 would result in a $3 million change in annual interest expense.

For a detailed description of our Credit Facilities, Second Lien Notes and Senior Notes, please see our most recent Form 10-K.

NOTE 6 JOINT VENTURES

Noncontrolling Interests

The following table presents the changes in noncontrolling interests by joint venture partner, reported in equity and mezzanine equity on the condensed consolidated balance sheets, for the six months ended June 30, 2018 (in millions):

							Equity Attributable to Noncontrolling Interest			Mezzanine Equity - Redeemable Noncontrolling Interest
	Ares JV			BSP JV			Total			Ares JV
Balance, December 31, 2017	$	—		$	94		$	94		$	—
Net (loss) income attributable to noncontrolling interests	(6		)	(7		)	(13		)	43
Contributions from noncontrolling interest holders, net	33			49			82			714
Distributions to noncontrolling interest holders	(2		)	(17		)	(19		)	(22		)
Balance, June 30, 2018	$	25		$	119		$	144		$	735

11

Ares Management L.P. (Ares)

In February 2018, we entered into a midstream JV with ECR Corporate Holdings L.P. (ECR), a portfolio company of Ares Management L.P. (Ares). This JV (Ares JV) holds the Elk Hills power plant, a 550-megawatt natural gas fired power plant, and a 200 million cubic foot per day cryogenic gas processing plant. Through one of our wholly owned subsidiaries, we hold 50% of the Class A common interest and 95.25% of the Class C common interest in the Ares JV. ECR holds 50% of the Class A common interest, 100% of the Class B preferred interest and 4.75% of the Class C common interest. We received $750 million in proceeds upon entering into the Ares JV, before $3 million for transaction costs.

The Class A common and Class B preferred interests held by ECR are reported as redeemable noncontrolling interest in mezzanine equity due to an embedded optional redemption feature. The Class C common interest held by ECR is reported in equity on our condensed consolidated balance sheets.

The Ares JV is required to make monthly distributions to the Class B holders. The Class B preferred interest has a deferred payment feature whereby a portion of the monthly distributions may be deferred for the first three years to the fourth and fifth year. The deferred amounts accrue an additional return. Distributions to the Class B preferred interest holders are reported as a reduction to mezzanine equity on our condensed consolidated balance sheets. The Ares JV is also required to distribute its excess cash flow over its working capital requirements, on a pro-rata basis, to the Class C common interests.

We can cause the Ares JV to redeem ECR's Class A and Class B interests, in whole, but not in part, at any time by paying $750 million for the Class B interest and $60 million for the Class A interest, plus any previously accrued but unpaid preferred distributions and a make-whole payment if the redemption happens prior to five years from inception. We have the option to extend the redemption period for up to an additional two and one-half years, in which case the interests can be redeemed for $750 million for the Class B interest and $80 million for the Class A interest, plus any previously accrued but unpaid preferred distributions and a make-whole payment if the redemption happens prior to seven and one-half years from inception. If we do not exercise our option to redeem at the end of the seven and one-half year period, ECR can either sell its Class A and Class B interests or cause the sale or lease of the Ares JV assets.

Our condensed consolidated statements of operations reflect the full operations of our Ares JV, with ECR's share of net income reported in net income attributable to noncontrolling interests.

In the first quarter of 2018 and in connection with the formation of the Ares JV, an Ares-led investor group purchased approximately 2.3 million shares of our common stock in a private placement for an aggregate purchase price of $50 million.

Benefit Street Partners (BSP)

In February 2017, we entered into a joint venture with BSP (BSP JV) where BSP will contribute up to $250 million, subject to agreement of the parties, in exchange for a preferred interest in the BSP JV. BSP is entitled to preferential distributions and, if BSP receives cash distributions equal to a predetermined threshold, the preferred interest is automatically redeemed in full with no additional payment. BSP funded three $50 million tranches, before transaction costs, in March 2017, July 2017 and June 2018. The funds contributed by BSP are used to develop certain of our oil and gas properties.

The BSP JV holds net profits interests (NPI) in existing and future cash flow from certain of our properties and the proceeds from the NPI are used by the BSP JV to (1) pay quarterly minimum distributions to BSP, (2) pay for development costs within the project area, upon mutual agreement between members, and (3) make distributions to BSP until the predetermined threshold is achieved.

Our consolidated results reflect the full operations of our BSP JV, with BSP's share of net income being reported in net income attributable to noncontrolling interests on our condensed consolidated statements of operations.

12

Other

Macquarie Infrastructure and Real Assets Inc. (MIRA)

Our consolidated results include our working interest share in a joint venture we entered into with Macquarie Infrastructure and Real Assets Inc. (MIRA) in April 2017. Subject to the agreement of the parties, MIRA will invest up to $300 million to develop certain of our oil and gas properties in exchange for a 90% working interest in the related properties. MIRA will fund 100% of the development cost of such properties. Our 10% working interest increases to 75% if MIRA receives cash distributions equal to a predetermined threshold return. MIRA initially committed $160 million, which was intended to be invested over two years. In June 2018, the parties amended the joint development program to $140 million. The agreement provides for a commitment of up to 110% of the program amount. MIRA invested $58 million in 2017 and $28 million in the first half of 2018. MIRA expects to contribute the remaining $54 million for drilling projects in the second half of 2018 and through the first quarter of 2019.

NOTE 7    ACQUISITIONS AND DIVESTITURES

Acquisitions

On April 9, 2018, we acquired the remaining working, surface and mineral interests in the 47,000-acre Elk Hills unit from Chevron U.S.A., Inc. (Chevron) (the Elk Hills transaction) for approximately $518 million, including $5 million of liabilities assumed relating to asset retirement obligations and customary purchase price adjustments. We accounted for the Elk Hills transaction as a business combination. After the transaction, we hold all of the working, surface and mineral interests in the Elk Hills unit. The effective date of the transaction was April 1, 2018.

As part of the Elk Hills transaction, Chevron reduced its royalty interest in one of our oil and gas properties by half and extended the time frame to invest the remainder of our capital commitment on that property by two years, to the end of 2020. As of June 30, 2018, the remaining commitment was approximately $23 million. Any deficiency in meeting this capital investment obligation will be paid in cash. We expect to fulfill the capital investment requirement within the extended period. In addition, the parties mutually agreed to release each other from pending claims with respect to the Elk Hills field.

The following table summarizes the total consideration, including customary closing adjustments, and the allocation of the consideration based on the fair value of the assets acquired as of the acquisition date:

	At June 30, 2018
	(in millions)
Consideration:
Cash	$	462
Amounts due from Chevron	(2		)
Common stock issued (2.85 million shares)	51
Liabilities assumed	7
	$	518
Identifiable assets acquired:
Proved properties	$	435
Other property and equipment	77
Materials and supplies	6
	$	518

13

The results of operations for the Elk Hills transaction were included in our condensed consolidated financial statements subsequent to the closing date.

On April 2, 2018, we acquired an office building in Bakersfield, California for $48.4 million, which we believe is significantly less than the estimated replacement value of the property and the land. We currently have approximately 500 employees using eight different locations in Bakersfield across multiple leases. We expect that the new building will create significant value by bringing our Bakersfield employees together into a single location over the next 12 to 15 months, which will increase the efficiency, effectiveness and collaboration of these employees. This building was the only available office space in the Bakersfield area large enough to allow us to consolidate our workforce into a single location. For the initial eight months, a former owner of the building will occupy most of the space as a tenant, from which we expect to generate rental income of approximately $4 million in 2018. In December 2018, this tenant will downsize the space they are leasing, with a corresponding reduction in rent, until December 2022. The vacated space will be available to lease to other tenants to generate additional income. In addition, the unimproved land may be monetized in the future. Approximately $6 million of the purchase price was allocated to the in-place leases, which is included in other assets and will be amortized into other expenses, net.

Divestitures

During the six months ended June 30, 2018, we divested a non-core asset resulting in $13 million of proceeds and a $1 million gain.

During the six months ended June 30, 2017, we divested non-core assets resulting in $33 million of proceeds and a $21 million gain.

NOTE 8    LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES

We, or certain of our subsidiaries, 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, 2018 and December 31, 2017 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.

We, our subsidiaries, or both, have indemnified various parties against specific liabilities those parties might incur in the future in connection with the Spin-off, purchases and other transactions that they have entered into with us. These indemnities include indemnities made to Occidental against certain tax-related liabilities that may be incurred by Occidental relating to the Spin-off and liabilities related to operation of our business while it was still owned by Occidental. As of June 30, 2018, we are not aware of material indemnity claims pending or threatened against the company.

NOTE 9    DERIVATIVES

General

We use a variety of derivative instruments to protect our cash flow, operating margin and capital program from the cyclical nature of commodity prices. These derivatives are intended to help us maintain adequate liquidity and improving our ability to comply with the covenants of our Credit Facilities in case of price deterioration. We will continue to be strategic and opportunistic in implementing our hedging program as market conditions permit. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty.

14

Commodity Contracts

As of June 30, 2018, we did not have any derivatives designated as hedges. 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 necessarily accounted for as cash-flow or fair-value hedges. As part of our hedging program, we entered into a number of derivative transactions that resulted in the following Brent-based crude oil contracts as of June 30, 2018:

	Q3 2018		Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019		FY 2020		FY 2021
Sold Calls:
Barrels per day	6,127		16,086		16,057		6,023		991		961		503		—
Weighted-average price per barrel	$	60.24	$	58.91	$	65.75	$	67.01	$	60.00	$	60.00	$	60.00	$	—
Purchased Calls:
Barrels per day	—		—		2,000		—		—		—		—		—
Weighted-average price per barrel	$	—	$	—	$	71.00	$	—	$	—	$	—	$	—	$	—
Purchased Puts:
Barrels per day	6,922		1,851		34,793		31,733		11,676		1,623		1,506		574
Weighted-average price per barrel	$	61.31	$	51.70	$	62.77	$	66.21	$	62.79	$	49.58	$	47.97	$	45.00
Sold Puts:
Barrels per day	24,000		19,000		35,000		25,000		10,000		—		—		—
Weighted-average price per barrel	$	46.04	$	45.00	$	50.71	$	54.00	$	50.00	$	—	$	—	$	—
Swaps:
Barrels per day	48,000		29,000(1)		7,000(2)		—		—		—		—		—
Weighted-average price per barrel	$	60.35	$	60.50	$	67.71	$	—	$	—	$	—	$	—	$	—

Note: Additional hedges for 2019 were put in place after June 30, 2018 that are not included in the table above.

(1) Certain of our counterparties have options to increase swap volumes by up to 19,000 barrels per day at a weighted-average Brent price of $60.13 for the fourth quarter of 2018.

(2) Certain of our counterparties have options to increase swap volumes by up to 5,000 barrels per day at a weighted-average Brent price of $70.00 for the first quarter of 2019.

As of June 30, 2018, a small portion of the crude oil derivatives in the table above were entered into by the BSP JV, including all of the 2020 and 2021 hedges. This joint venture also entered into natural gas swaps for insignificant volumes for periods through May 2021.

The outcomes of the derivative instruments are as follows:

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

• Purchased calls – we receive 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.

From time to time, we may use combinations of these and other derivative instruments to increase the efficacy of our commodity hedging program.

15

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.  These 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.

Fair Value of Derivatives

Our derivative contracts are measured at fair value using industry-standard models with various inputs, including quoted forward prices, and are classified as Level 2 in the required fair value hierarchy for the periods presented. We recognize fair value changes on derivative instruments in each reporting period. The changes in fair value result from new positions and settlements that occurred during the period, as well as the relationship between contract prices or interest rates and the associated forward curves.

Commodity Contracts

The following table presents the fair values (at gross and net) of our outstanding commodity derivatives as of June 30, 2018 and December 31, 2017 (in millions):

June 30, 2018
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:
Other current assets	$	59		$	—	$	59
Other assets	7			—		7
Liabilities:
Accrued liabilities	(260		)	—		(260		)
Other long-term liabilities	(6		)	—		(6		)
Total derivatives	$	(200	)	$	—	$	(200	)

December 31, 2017
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:
Other current assets	$	39		$	(16	)	$	23
Other assets	1			—			1
Liabilities:
Accrued liabilities	(170		)	16			(154		)
Other long-term liabilities	(3		)	—			(3		)
Total derivatives	$	(133	)	$	—		$	(133	)

Interest-Rate Contracts

As of June 30, 2018, we reported the fair value of our interest rate derivatives of $8 million in other assets on our condensed consolidated balance sheets. For both the three and six months ended June 30, 2018, we reported a $1 million loss on these contracts in other non-operating expense on our condensed consolidated statements of operations.

16

NOTE 10    EARNINGS PER SHARE

We compute basic and diluted earnings per share (EPS) using the two-class method required for participating securities. Certain of our restricted and performance stock awards are considered participating securities because they have non-forfeitable dividend rights at the same rate as our common stock.

Under the two-class method, undistributed earnings allocated to participating securities are subtracted from net income attributable to common stock in determining net income available to common stockholders. In loss periods, no allocation is made to participating securities because participating securities do not share in losses. For basic EPS, the weighted-average number of common shares outstanding excludes outstanding shares related to unvested restricted stock awards. For diluted EPS, the basic shares outstanding are adjusted by adding all potentially dilutive securities.

The following table presents the calculation of basic and diluted EPS for the three and six months ended June 30, 2018 and 2017:

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
	(in millions, except per-share amounts)
Net (loss) income	$	(63	)	$	(47	)	$	(54	)	$	5
Net income attributable to noncontrolling interest	(19		)	(1		)	(30		)	—
Net (loss) income attributable to common stock	(82		)	(48		)	(84		)	5
Less: net income allocated to participating securities	—			—			—			—
Net (loss) income available to common stockholders	$	(82	)	$	(48	)	$	(84	)	$	5
Weighted-average common shares outstanding - basic	48.2			42.4			46.3			42.4
Basic EPS	$	(1.70	)	$	(1.13	)	$	(1.81	)	$	0.12
Net (loss) income	$	(63	)	$	(47	)	$	(54	)	$	5
Net income attributable to noncontrolling interest	(19		)	(1		)	(30		)	—
Net (loss) income attributable to common stock	(82		)	(48		)	(84		)	5
Less: net income allocated to participating securities	—			—			—			—
Net (loss) income available to common stockholders	$	(82	)	$	(48	)	$	(84	)	$	5
Weighted-average common shares outstanding - basic	48.2			42.4			46.3			42.4
Dilutive effect of potentially dilutive securities	—			—			—			0.3
Weighted-average common shares outstanding - diluted	48.2			42.4			46.3			42.7
Diluted EPS	$	(1.70	)	$	(1.13	)	$	(1.81	)	$	0.12
Weighted-average anti-dilutive shares	3.0			2.7			2.9			1.8

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NOTE 11    PENSION AND POSTRETIREMENT BENEFIT PLANS

The following table sets forth the components of the net periodic benefit costs for our defined benefit pension and postretirement benefit plans:

	Three months ended June 30,
	2018					2017
	Pension Benefit			Postretirement Benefit		Pension Benefit			Postretirement Benefit
	(in millions)
Service cost	$	—		$	1	$	—		$	1
Interest cost	1			1		1			1
Expected return on plan assets	(1		)	—		(1		)	—
Recognized actuarial loss	—			—		1			—
Settlement loss	2			—		—			—
Total	$	2		$	2	$	1		$	2

	Six months ended June 30,
	2018					2017
	Pension Benefit			Postretirement Benefit		Pension Benefit			Postretirement Benefit
	(in millions)
Service cost	$	—		$	2	$	—		$	2
Interest cost	1			2		1			2
Expected return on plan assets	(1		)	—		(1		)	—
Recognized actuarial loss	1			—		1			—
Settlement loss	4			—		3			—
Total	$	5		$	4	$	4		$	4

We contributed $1 million to our defined benefit pension plans in each of the three-month periods ended June 30, 2018 and 2017. We contributed $2 million and $5 million, respectively, to our defined benefit pension plans in the six months ended June 30, 2018 and 2017. We expect to satisfy minimum funding requirements with contributions of $2 million to our defined benefit pension plans during the remainder of 2018. The 2018 and 2017 settlements were associated with early retirements.

NOTE 12    REVENUE RECOGNITION

We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018, using the modified retrospective method, which was applied to all contracts that were not completed as of that date. Prior period results were not adjusted and continue to be reported under the accounting standards in effect for the prior period. The new standard did not affect the timing of our revenue recognition and did not impact net income; accordingly, we did not record an adjustment to the opening balance of retained earnings.

We derive substantially all of our revenue from sales of oil, natural gas and natural gas liquids (NGLs), with the remaining revenue generated from marketing activities related to storage and managing excess pipeline capacity and sales of power.

The following is a description of our principal activities from which we generate revenue. Revenues are recognized when control of promised goods is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods.

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Commodity Sales Contracts

We recognize revenue from the sale of our oil, natural gas and NGL production when delivery has occurred and control passes to the customer. Our commodity contracts are short term, typically less than a year. We consider our performance obligations to be satisfied upon transfer of control of the commodity. In certain instances, transportation and processing fees are incurred by us prior to control being transferred to customers. These costs were previously offset against oil and gas sales. Upon adoption of ASC 606, we are recording these costs as a component of other expenses, net on our condensed consolidated statements of operations.

Our commodity sales contracts are indexed to a market price or an average index price. We recognize revenue in the amount that we have a right to invoice once we are able to adequately estimate the consideration (i.e., when market prices are known). Our contracts with customers typically require payment within 30 days following invoicing.

Electricity

The electrical output of our Elk Hills power plant that is not used in our operations is sold to the grid through wholesale power marketing entities and to a utility under a power purchase and sales agreement, which includes a capacity payment. Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally, this occurs upon delivery of the electricity. We report electricity sales as other revenue on our condensed consolidated statements of operations. Revenue is measured as the amount of consideration we expect to receive based on average index pricing with payment due the month following the delivery of our product. Capacity payments are based on a fixed annual amount per kilowatt hour and monthly rates vary based on seasonality, which is consistent with how we earn the capacity payment. Capacity payments are settled monthly. We consider our performance obligations to be satisfied upon delivery of electricity or as the contracted amount of energy is made available to the customer in the case of capacity payments.

Marketing

Marketing revenues represent our activities associated with storing and transporting our production and other marketing revenue. With respect to our NGLs, we may enter into contracts, typically with durations of one year or less, for refrigerated storage services that assist us in managing the seasonality of our products.

To transport our natural gas, we have entered into firm pipeline commitments. Depending on market conditions, we may have excess capacity, in which case we may enter into natural gas purchase and sale agreements with third parties. We consider our performance obligations to be satisfied upon transfer of control of the commodity.

We report our marketing activities on a gross basis with purchases and costs reported in other expenses, net and sales recorded in other revenue on our condensed consolidated statements of operations.

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Disaggregation of Revenue

The following table provides disaggregated revenue for the three and six months ended June 30, 2018 (in millions):

	Three months ended June 30, 2018			Six months ended June 30, 2018
Oil and gas sales:
Oil	$	553		$	1,019
NGLs	61			124
Natural gas	43			89
	657			1,232
Other revenue:
Electricity	21			45
Marketing	38			85
Interest income	—			1
	59			131
Net derivative loss from commodity contracts	(167		)	(205		)
Total revenues and other	$	549		$	1,158

The impact of the adoption of ASC 606 on our condensed consolidated statements of operations for the three and six months ended June 30, 2018 was as follows (in millions):

	Three months ended June 30, 2018								Six months ended June 30, 2018
	As Reported ASC 606			Previous U.S. GAAP			Change		As Reported ASC 606			Previous U.S. GAAP			Change
REVENUES AND OTHER
Oil and gas sales	$	657		$	652		$	5	$	1,232		$	1,220		$	12
Net derivative loss from commodity contracts	(167		)	(167		)	—		(205		)	(205		)	—
Other revenue	59			28			31		131			65			66
Total revenues and other	549			513			36		1,158			1,080			78
COSTS AND OTHER
Production costs	231			231			—		443			443			—
General and administrative expenses	90			90			—		153			153			—
Depreciation, depletion and amortization	125			125			—		244			244			—
Taxes other than on income	37			37			—		75			75			—
Exploration expenses	6			6			—		14			14			—
Other expenses, net	49			13			36		110			32			78
Total costs and other	538			502			36		1,039			961			78
OPERATING INCOME	11			11			—		119			119			—
NON-OPERATING (LOSS) INCOME
Interest and debt expense, net	(94		)	(94		)	—		(186		)	(186		)	—
Net gain on early extinguishment of debt	24			24			—		24			24			—
Gain on asset divestitures	1			1			—		1			1			—
Other non-operating expenses	(5		)	(5		)	—		(12		)	(12		)	—
LOSS BEFORE INCOME TAXES	(63		)	(63		)	—		(54		)	(54		)	—
Income tax	—			—			—		—			—			—
NET LOSS	(63		)	(63		)	—		(54		)	(54		)	—
Net income attributable to noncontrolling interests	(19		)	(19		)	—		(30		)	(30		)	—
NET LOSS ATTRIBUTABLE TO COMMON STOCK	$	(82	)	$	(82	)	$	—	$	(84	)	$	(84	)	$	—

20

The adoption of ASC 606 did not have an impact on our condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017.

NOTE 13    INCOME TAXES

For the three and six months ended June 30, 2018 and 2017, we did not provide any current or deferred tax provision or benefit. The difference between our statutory tax rate and our effective tax rate of zero for the periods presented is primarily related to an increase in our valuation allowance based on the expectation of a tax loss for each year. Given our recent and anticipated future earnings trends, we have recorded a full valuation allowance against our net deferred tax asset. However, the amount of the net deferred tax assets considered realizable could be adjusted if estimates change.

The Tax Cuts and Jobs Act was signed into law on December 22, 2017 and included significant changes to corporate tax provisions such as a reduction in the corporate tax rate, limitations on certain corporate deductions and favorable capital recovery provisions. The California Franchise Tax Board released its summary of Federal Income Tax Changes for 2017 on April 19, 2018, which identified how these U.S. federal changes interact with California law. California law was not conformed to the corporate provisions that are the most significant to our business.

NOTE 14    CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Our Credit Facilities, Second Lien Notes and Senior Notes are guaranteed both fully and unconditionally and jointly and severally by our material wholly owned subsidiaries (Guarantor Subsidiaries). Certain of our subsidiaries do not guarantee our Credit Facilities, Second Lien Notes and Senior Notes (Non-Guarantor Subsidiaries) either because they hold assets that are less than 1% of our total consolidated assets or because they are not considered a "subsidiary" under the applicable financing agreement. The following condensed consolidating balance sheets as of June 30, 2018 and December 31, 2017 and the condensed consolidating statements of operations and statements of cash flows for the six months ended June 30, 2018 and 2017 reflect the condensed consolidating financial information of our parent company, CRC (Parent), our combined Guarantor Subsidiaries, our combined Non-Guarantor Subsidiaries and the elimination entries necessary to arrive at the information for CRC on a consolidated basis.

The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the Guarantor Subsidiaries operated as independent entities.

21

Condensed Consolidating Balance Sheets
	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
As of June 30, 2018	(in millions)
Total current assets	$	14		$	468		$	85		$	(8	)	$	559
Total property, plant and equipment, net	22			5,761			551			—			6,334
Investments in consolidated subsidiaries	5,625			141			—			(5,766		)	—
Other assets	9			24			14			—			47
TOTAL ASSETS	$	5,670		$	6,394		$	650		$	(5,774	)	$	6,940
Total current liabilities	102			788			11			(8		)	893
Long-term debt	5,075			—			—			—			5,075
Deferred gain and issuance costs, net	265			—			—			—			265
Other long-term liabilities	155			454			8			—			617
Amounts due to (from) affiliates	862			(862		)	—			—			—
Mezzanine equity	—			—			735			—			735
Total equity	(789		)	6,014			(104		)	(5,766		)	(645		)
TOTAL LIABILITIES AND EQUITY	$	5,670		$	6,394		$	650		$	(5,774	)	$	6,940

As of December 31, 2017
Total current assets	$	13		$	464		$	12	$	(6	)	$	483
Total property, plant and equipment, net	24			5,580			92		—			5,696
Investments in consolidated subsidiaries	5,105			606			—		(5,711		)	—
Other assets	—			27			1		—			28
TOTAL ASSETS	$	5,142		$	6,677		$	105	$	(5,717	)	$	6,207
Total current liabilities	122			613			3		(6		)	732
Long-term debt	5,306			—			—		—			5,306
Deferred gain and issuance costs, net	287			—			—		—			287
Other long-term liabilities	154			445			3		—			602
Amounts due to (from) affiliates	87			(87		)	—		—			—
Total equity	(814		)	5,706			99		(5,711		)	(720		)
TOTAL LIABILITIES AND EQUITY	$	5,142		$	6,677		$	105	$	(5,717	)	$	6,207

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

For the three months ended June 30, 2017
Total revenues and other	$	18		$	515	$	4		$	(21	)	$	516
Total costs and other	54			439		3			(21		)	475
Non-operating (loss) income	(88		)	—		—			—			(88		)
NET (LOSS) INCOME	(124		)	76		1			—			(47		)
Net loss attributable to noncontrolling interest	—			—		(1		)	—			(1		)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCK	$	(124	)	$	76	$	—		$<