Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.20.2
Long-Term Debt
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
The following table summarizes our debt obligations as of the dates presented:
September 30, 2020 December 31, 2019
Principal
Unamortized Discount and Deferred Issuance Costs 1, 2
Principal
Unamortized Discount and Deferred Issuance Costs 1, 2
Credit facility $ 324,400  $ 362,400 
Second lien term loan 200,000  $ 5,542  200,000  $ 7,372 
Totals 524,400  $ 5,542  562,400  $ 7,372 
Less: Unamortized discount 2
(1,814) (2,415)
Less: Unamortized deferred issuance costs 1, 2
(3,728) (4,957)
Long-term debt, net $ 518,858  $ 555,028 
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1     Excludes issuance costs of the Credit Facility, which represent costs attributable to the access to credit over its contractual term, that have been presented as a component of Other assets (see Note 10) and are being amortized over the term of the Credit Facility using the straight-line method.
2 Discount and issuance costs of the Second Lien Facility are being amortized over the term of the underlying loan using the effective-interest method.
Credit Facility
In April 2020, we entered into the Borrowing Base Redetermination Agreement and Amendment No. 7 to Credit Agreement (the “Seventh Amendment”). The Seventh Amendment, which became effective on April 30, 2020, provides a $1.0 billion revolving commitment and initially provided for a $400 million borrowing base, including a $25 million sublimit for the issuance of letters of credit. The borrowing base decreased to $375 million in accordance with the terms of the Seventh Amendment effective July 1, 2020 and, effective October 1, 2020, availability under the Credit Facility is further limited to a maximum of $350 million until the next redetermination of the borrowing base. During the nine months ended September 30, 2020, we incurred and capitalized approximately $0.1 million of issue and other costs associated with the Seventh Amendment and wrote-off $0.9 million of previously capitalized issue costs due to the decrease in the borrowing base associated with the Seventh Amendment. Availability under the Credit Facility may not exceed the lesser of the aggregate commitments or the borrowing base, provided that effective October 1, 2020, availability under the Credit Facility is limited to a maximum of $350 million. The borrowing base under the Credit Facility is redetermined semi-annually, generally in the Spring and Fall of each year. The Fall 2020 borrowing base redetermination is in process. Additionally, we and the Credit Facility lenders may, upon request, initiate a redetermination at any time during the six-month period between scheduled redeterminations. The Credit Facility is available to us for general corporate purposes, including working capital. We had $0.4 million in letters of credit outstanding as of September 30, 2020 and December 31, 2019.
The Credit Facility is scheduled to mature in May 2024; provided that on June 30, 2022, unless we have either extended the maturity date of the Second Lien Facility described below to a date that is at least 91 days after May 7, 2024 or have repaid our Second Lien Facility in full, the maturity date of the Credit Facility will be June 30, 2022.
The outstanding borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin ranging from 1.50% to 2.50%, determined based on the utilization level under the Credit Facility or (b) a Eurodollar rate, including LIBOR through 2021, plus an applicable margin ranging from 2.50% to 3.50%, determined based on the utilization level under the Credit Facility. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on Eurodollar borrowings is payable every one, three or six months, at the election of the borrower, and is computed on the basis of a year of 360 days. As of September 30, 2020, the actual weighted-average interest rate on the outstanding borrowings under the Credit Facility was 3.41%. Unused commitment fees are charged at a rate of 0.50%.
The Credit Facility is guaranteed by us and all of our subsidiaries (the “Guarantor Subsidiaries”). The guarantees under the Credit Facility are full and unconditional and joint and several. Substantially all of our consolidated assets are held by the Guarantor Subsidiaries. There are no significant restrictions on our ability or any of the Guarantor Subsidiaries to obtain funds through dividends, advances or loans. The obligations under the Credit Facility are secured by a first priority lien on substantially all of our assets.
The Credit Facility requires us to maintain (1) a minimum current ratio (as defined in the Credit Facility, which considers the unused portion of the total commitment as a current asset), measured as of the last day of each fiscal quarter of 1.00 to 1.00 and (2) a maximum leverage ratio (consolidated indebtedness to adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses, both as defined in the Credit Facility), measured as of the last day of each fiscal quarter of 3.50 to 1.00.
The Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, weekly cash balance reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends, and transactions with affiliates and other customary covenants. In addition, the Credit Facility contains certain anti-cash hoarding provisions, including the requirement to repay outstanding loans and cash collateralize outstanding letters of credit on a weekly basis in the amount of any cash on the balance sheet (subject to certain exceptions) in excess of $25 million.
The Credit Facility contains events of default and remedies. If we do not comply with the financial and other covenants in the Credit Facility, the lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Credit Facility.
As of September 30, 2020, and through the date upon which the Condensed Consolidated Financial Statements were issued, we were in compliance with all of the covenants under the Credit Facility.
Second Lien Facility
On September 29, 2017, we entered into the Second Lien Facility. We received net proceeds of $187.8 million from the Second Lien Facility net of an original issue discount (“OID”) of $4.0 million and issue costs of $8.2 million. The proceeds from the Second Lien Facility were used to fund a significant acquisition and related fees and expenses. The maturity date under the Second Lien Facility is currently September 29, 2022. In connection with the anticipated closing of the Transactions, the maturity of the Second Lien Facility will be extended to September 2024 (see the discussion in Note 2 for further detail with respect to the amendment to the Second Lien Facility dated November 2, 2020).
The outstanding borrowings under the Second Lien Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate based on the prime rate plus an applicable margin of 6.00% or (b) a customary LIBOR rate, with a floor of 1.00%, plus an applicable margin of 7.00%. As of September 30, 2020, the actual interest rate of outstanding borrowings under the Second Lien Facility was 8.00%. Amounts under the Second Lien Facility were borrowed at a price of 98% with an initial interest rate of 8.34%, resulting in an effective interest rate of 9.89%. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on eurocurrency borrowings is payable every one or three months (including in three-month intervals if we select a six-month interest period), at our election and is computed on the basis of a 360-day year. We have the right, to the extent permitted under the Credit Facility and an intercreditor agreement between the lenders under the Credit Facility and the lenders under the Second Lien Facility, to prepay loans under the Second Lien Facility at any time, subject to customary “breakage” costs with respect to eurocurrency loans.
The Second Lien Facility is collateralized by substantially all of the Company’s and its subsidiaries’ assets with lien priority subordinated to the liens securing the Credit Facility. The obligations under the Second Lien Facility are guaranteed by us and the Guarantor Subsidiaries.
The Second Lien Facility has no financial covenants, but contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends and transactions with affiliates and other customary covenants.
As illustrated in the table above, the OID and issue costs of the Second Lien Facility are presented as reductions to the outstanding term loans. These costs are subject to amortization using the interest method over the five-year term of the Second Lien Facility.
As of September 30, 2020, and through the date upon which the Consolidated Financial Statements were issued, we were in compliance with all of the covenants under the Second Lien Facility.
[1]
[1] ssuance costs of the Credit Facility, which represent costs attributable to the access to credit over its contractual term, that have been presented as a component of Other assets (see Note 10) and are being amortized over the term of the Credit Facility using the straight-line method.