California Resources Corp. has formed a joint venture with L.A.-based investment firm Colony Capital Inc. to fund further development of CRC’s Elk Hills oil field in Kern County.

Colony has committed to provide at least $320 million for the project. The investment may be increased to $500 million upon the mutual agreement of CRC and Colony.

This money will cover development of about 275 oil wells in Elk Hills field over the next three years. Colony will fund 100 percent of the wells in exchange for a 90 percent working interest. When Colony achieves an agreed-upon return on its investment, CRC’s working interest will jump from 10 to 82.5 percent.

Colony will also receive the ability to purchase up to 1.25 million shares of CRC common stock with a $40 strike price.

“This is the largest joint venture capital commitment to date for CRC, and the terms reflect the sizable project inventory we have established at Elk Hills,” said Chief Executive Todd Stevens in a statement. “This partnership also provides additional flexibility to aid in our deleveraging efforts through growing our production and cash flow.”

Elk Hills is CRC’s biggest asset and the largest natural gas field in California, covering nearly 75 square miles west of Bakersfield. CRC is based in Chatsworth.

Shares of California Resources Corp. (CRC) closed Tuesday up 76 cents, or 5 percent, to $15.70 on the New York Stock Exchange.