Quarterly report pursuant to Section 13 or 15(d)

Note 2 - Long-term Debt

v3.19.2
Note 2 - Long-term Debt
6 Months Ended
Jun. 30, 2019
Notes to Financial Statements  
Long-term Debt [Text Block]
2.
Long-Term Debt
 
The components of our long-term debt are presented in the following table (in thousands):
 
   
June 30,
   
December 31,
 
   
2019
   
2018
 
Credit Agreement borrowings
  $
21,000
    $
21,000
 
                 
Senior Second Lien Notes:
               
Principal
   
625,000
     
625,000
 
Unamortized debt issuance costs
   
(11,585
)    
(12,465
)
Total Senior Second Lien Notes
   
613,415
     
612,535
 
                 
Total long-term debt
  $
634,415
    $
633,535
 
 
 
Credit Agreement
 
On
October 18, 2018,
we entered into the Sixth Amended and Restated Credit Agreement (the “Credit Agreement”), which matures on
October 18, 2022. 
The primary terms and covenants associated with the Credit Agreement are as follows, with capitalized terms defined under the Credit Agreement:
 
 
The borrowing base and lending commitment was
$250.0
million as of the filing date of this Form
10
-Q.
 
 
Letters of credit
may
be issued in amounts up to
$30.0
million, provided availability under the Credit Agreement exists.  As of
June 30, 2019,
and
December 31, 2018,
we had
$7.2
 million and
$9.6
million, respectively, of letters of credit issued and outstanding under the Credit Agreement.
 
 
The Leverage Ratio is limited to 
3.25
to
1.00
for the quarters ending
June 30, 2019
and
September 30, 2019;
and
3.00
to
1.00
for the quarters ending
December 31, 2019
and thereafter.  In the event of a Material Acquisition, the Leverage Ratio limit is
3.50
to
1.00
for the
two
quarters following a Material Acquisition.
 
 
The Current Ratio must be maintained at greater than
1.00
to
1.00.
 
Availability under the Credit Agreement is subject to semi-annual redeterminations of our borrowing base to occur on or before
May 15
and
November 14
each calendar year, and certain additional redeterminations that
may
be requested at the discretion of either the lenders or the Company.  The borrowing base has
not
changed from the initial amount.  The borrowing base is calculated by our lenders based on their evaluation of our proved reserves and their own internal criteria.  Any redetermination by our lenders to change our borrowing base will result in a similar change in the availability under the Credit Agreement.  The Credit Agreement’s security is collateralized by a
first
priority lien on substantially all of our oil and natural gas properties and certain personal property. The annualized interest rate on borrowings outstanding for the
six
 months ended
June 30, 2019
was
5.1%,
which excludes debt issuance costs, commitment fees and other fees.
 
9.75%
Senior Second Lien Notes Due
2023
 
On
October 18, 2018,
we issued
$625.0
million of
9.75%
Senior Second Lien Notes due
2023
(the “Senior Second Lien Notes”), which were issued at par with an interest rate of
9.75%
per annum and mature on
November 1, 2023,
and are governed under the terms of the Indenture of the Senior Second Lien Notes (the “Indenture”).  The estimated annual effective interest rate on the Senior Second Lien Notes is
10.3%,
which includes amortization of debt issuance costs.  Interest on the Senior Second Lien Notes is payable in arrears on
May 1
and
November 1
of each year.
 
The Senior Second Lien Notes are secured by a
second
-priority lien on all of our assets that are secured under the Credit Agreement.  The Senior Second Lien Notes contain covenants that limit or prohibit our ability and the ability of certain of our subsidiaries to: (i) make investments; (ii) incur additional indebtedness or issue certain types of preferred stock; (iii) create certain liens; (iv) sell assets; (v) enter into agreements that restrict dividends or other payments from the Company’s subsidiaries to the Company; (vi) consolidate, merge or transfer all or substantially all of the assets of the Company; (vii) engage in transactions with affiliates; (viii) pay dividends or make other distributions on capital stock or subordinated indebtedness; and (ix) create subsidiaries that would
not
be restricted by the covenants of the Indenture.  These covenants are subject to exceptions and qualifications set forth in the Indenture.  In addition, most of the above described covenants will terminate if both S&P Global Ratings, a division of S&P Global Inc., and Moody’s Investors Service, Inc. assign the Senior Second Lien Notes an investment grade rating and
no
default exists with respect to the Senior Second Lien Notes.
 
Covenants
 
 
As of
June 
30,
2019,
we were in compliance with all applicable covenants of the Credit Agreement and the Indenture.
 
Fair Value Measurements
 
 
For information about fair value measurements of our long-term debt, refer to Note
3.