Quarterly report pursuant to Section 13 or 15(d)

LONG-TERM DEBT

v3.20.2
LONG-TERM DEBT
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
LONG-TERM DEBT LONG-TERM DEBT
The Company’s long-term debt consists of the following:

(in thousands) June 30, 2020 December 31, 2019
Revolving Credit Facility $ 568,000    $ 580,000   
Second Lien Notes due 2023 297,287    417,733   
Unsecured VEN Bakken Note 130,000    130,000   
Total principal 995,287    1,127,733   
Unamortized debt discounts and premiums 2,615    4,860   
Unamortized debt issuance costs(1)
(8,731)   (14,432)  
Total debt 989,171    1,118,161   
Less current portion of long-term debt (65,000)   —   
Total long-term debt $ 924,171    $ 1,118,161   
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(1)Debt issuance costs related to the Company’s revolving credit facility of $8.8 million and $9.8 million as of June 30, 2020 and December 31, 2019, respectively, are recorded in “Other Noncurrent Assets, Net” on the balance sheets.
Revolving Credit Facility

On November 22, 2019, the Company entered into a Second Amended and Restated Credit Agreement (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto, which amended and restated the Company’s prior revolving credit facility that was entered into on October 5, 2018. The Revolving Credit Facility is scheduled to mature on November 22, 2024, provided that the maturity date shall be 91 days prior to the scheduled maturity date of the earlier of (i) the Second Lien Notes (defined below) if any Second Lien Notes remain outstanding on such date or (ii) the Unsecured VEN Bakken Note if any principal amount of the Unsecured VEN Bakken Note remains outstanding on such date.

The Revolving Credit Facility is subject to a borrowing base with maximum loan value to be assigned to the proved reserves attributable to the Company and its subsidiaries’ (if any) oil and gas properties. The borrowing base as of June 30, 2020 was $800.0 million. The borrowing base will be redetermined semiannually on or around April 1st and October 1st, with one interim “wildcard” redetermination available between scheduled redeterminations. The April 1st scheduled redetermination shall be based on a January 1st engineering report audited by a third party (reasonably acceptable by the Agent). The most recent redetermination was completed on July 8, 2020, with the borrowing base reduced to $660.0 million (see Note 12).

At the Company’s option, borrowings under the Revolving Credit Facility shall bear interest at the base rate or LIBOR plus an applicable margin. Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the agent bank’s prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted LIBOR rate for a one-month interest period plus 100 basis points. The applicable margin for base rate loans ranges from 100 to 200 basis points, and the applicable margin for LIBOR loans ranges from 200 to 300 basis points, in each case depending on the percentage of the borrowing base utilized.

The Revolving Credit Facility contains negative covenants that limit the Company’s ability, among other things, to pay dividends, incur additional indebtedness, maintain excess cash liquidity, sell assets, enter into certain derivatives contracts, change the nature of its business or operations, merge, consolidate, or make certain types of investments. In addition, the Revolving Credit Facility requires that the Company comply with the following financial covenants: (i) as of the date of determination, the ratio of total net debt to EBITDAX (as defined in the Revolving Credit Facility) shall be no more than 3.50 to 1.00, measured on a pro forma rolling four quarter basis, and (ii) the current ratio (defined as consolidated current assets including unused amounts of the total commitments, but excluding non-cash assets under FASB ASC 815, divided by consolidated current liabilities excluding current non-cash obligations under FASB ASC 815 and current maturities under the Revolving Credit Facility, the Second Lien Notes and the Unsecured VEN Bakken Note) shall not be less than 1.00 to 1.00. The Company is in compliance with these financial covenants as of June 30, 2020.

The Company’s obligations under the Revolving Credit Facility may be accelerated, subject to customary grace and cure periods, upon the occurrence of certain Events of Default (as defined in the Revolving Credit Facility). Such Events of Default include customary events for a financing agreement of this type, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of affirmative or negative covenants, defaults on other indebtedness of us or the Company’s subsidiaries, defaults related to judgments and the occurrence of a Change in Control (as defined in the Revolving Credit Facility).

The Company’s obligations under the Revolving Credit Facility are secured by mortgages on not less than 90% of the value of proven reserves associated with the oil and gas properties included in the determination of the borrowing base. Additionally, the Company entered into a Guaranty and Collateral Agreement in favor of the Agent for the secured parties, pursuant to which the Company’s obligations under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s assets.

Second Lien Notes due 2023

On May 15, 2018, the Company issued 8.500% senior secured second lien notes due 2023 (the “Second Lien Notes”) with an aggregate principal amount of $344.3 million (the “Original 2L Notes”) in exchange for certain previously outstanding 8.000% senior unsecured notes due June 1, 2020 (the “Unsecured Notes”). In October 2018, the Company issued an additional $350.0 million aggregate principal amount of Second Lien Notes (the “Additional 2L Notes”), the proceeds of which were used in connection with the retirement of the Company’s prior term loan credit agreement. In addition, as of and through June 30, 2020, the Company had issued another $4.3 million of additional aggregate principal amount of Second Lien Notes pursuant to the interest payment-in-kind provisions thereof.
During 2019, the Company repurchased and retired $10.1 million in aggregate principal amount of Second Lien Notes in open market transactions. In November 2019, the Company completed a cash tender offer to redeem and repay $200.0 million principal amount of Second Lien Notes. Also in November 2019, the Company redeemed and repaid $70.8 million principal amount of Second Lien Notes in exchange for Series A Preferred Stock. In the first quarter of 2020, the Company completed four independent, separately negotiated purchase agreements to repurchase and retire $76.7 million aggregate principal amount of Second Lien Notes in exchange for Series A Preferred Stock and cash. In the second quarter of 2020, the Company completed five independent, separately negotiated exchange agreements to retire $30.2 million aggregate principal amount of Second Lien Notes in exchange for 28.5 million shares of common stock. During the six months ended June 30, 2020, the Company repurchased and retired $13.5 million aggregate principal amount of Second Lien Notes in open market transactions.

The terms of the Second Lien Notes include those stated in the Indenture entered into on May 15, 2018 by the Company and Wilmington Trust, National Association, as trustee (the “Original 2L Indenture”), as amended by the First Supplemental Indenture, dated September 18, 2018 (the “First Supplemental 2L Indenture”), the Second Supplemental Indenture, dated October 5, 2018 (the “Second Supplemental 2L Indenture”), and the Third Supplemental Indenture, dated November 22, 2019 (the “Third Supplemental 2L Indenture” and, together with the Original 2L Indenture, the First Supplemental 2L Indenture, and the Second Supplemental 2L Indenture, the “2L Indenture”).

The Second Lien Notes are the senior secured obligations of the Company and rank equal in right of payment to all existing and future senior indebtedness of the Company and its subsidiaries. The Second Lien Notes are secured by second priority security interests in substantially all assets of the Company, subject to certain exceptions. The Second Lien Notes will be guaranteed by all of the Company’s direct and indirect subsidiaries that guarantee indebtedness under any other indebtedness for borrowed money of the Company or any of the Company’s subsidiary guarantors. As of June 30, 2020, the Company did not have any subsidiaries. The Second Lien Notes will mature on May 15, 2023.

Interest on the Second Lien Notes accrues at a rate of 8.500% per annum payable in cash quarterly in arrears on the first day of each calendar quarter. Additional interest may accrue depending on the Company’s total debt to EBITDAX ratio as of each December 31st and June 30th, provided that any such additional interest would be payable in kind (the “PIK Interest”). No PIK Interest will accrue so long as the Company’s total debt to EBITDAX ratio remains below 2.50 to 1.00 as of each applicable measurement date. PIK Interest of 1.00% per annum will accrue if the Company’s total debt to EBITDAX ratio is less than 2.75 to 1.00 but equal to or greater than 2.50 to 1.00. PIK Interest of 2.00% per annum will accrue if the Company’s total debt to EBITDAX ratio is less than 3.00 to 1.00 but equal to or greater than 2.75 to 1.00. PIK Interest of 3.00% per annum will accrue if the Company’s total debt to EBITDAX ratio is greater than or equal to 3.00 to 1.00. No PIK Interest has accrued since March 31, 2019. Default interest will be payable in cash on demand at the then applicable interest rate plus 3.00% per annum.

The Company may redeem all or a portion of any of the Second Lien Notes at the following redemption prices during the following time periods (plus accrued and unpaid interest on the Second Lien Notes redeemed): (i) from and after May 15, 2018 until May 15, 2021, 104%, (ii) on and after May 15, 2021 until May 15, 2022, 102%, and (iii) on and after May 15, 2022, 100%. Subject to the terms of an intercreditor agreement, the Company is also required to offer to prepay the Second Lien Notes with 100% of the net cash proceeds of asset sales, casualty events and condemnations in excess of $20.0 million not required to be used to pay down the loans under the Revolving Credit Facility, subject to customary exclusions and reinvestment provisions. Mandatory prepayment offers will be subject to payment of the make whole premium and redemption price set forth above, as applicable.

If a change of control occurs, the Company will be required to offer to repurchase the Second Lien Notes at the repurchase price of 101% of the principal amount of repurchased Second Lien Notes (subject to the prepayment provisions of the Revolving Credit Facility). The Second Lien Notes contain negative covenants that limit the Company’s ability, among other things, to pay cash dividends, incur additional indebtedness, sell assets, enter into certain derivatives contracts, change the nature of its business or operations, merge, consolidate, make certain types of investments, amend other debt documents, and incur any additional debt on a subordinated or junior basis to the Revolving Credit Facility and on a senior basis to the Second Lien Notes. The Second Lien Notes do not include any financial maintenance covenants.

The obligations of the Company under the Second Lien Notes may be accelerated upon the occurrence of an Event of Default (as such term is defined in the 2L Indenture). Events of Default include customary events for a capital markets debt financing of this type, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of affirmative or negative covenants, defaults on other indebtedness of the Company or its subsidiaries, bankruptcy or related defaults, defaults related to judgments and the occurrence of a Change of Control (as such term is defined in the 2L Indenture).
Unsecured VEN Bakken Note

On July 1, 2019, in connection with the completion of the VEN Bakken Acquisition, the Company issued the Unsecured VEN Bakken Note in the original principal amount of $130.0 million (see Note 3 above). Fifty percent (50%) of the original principal amount of the Unsecured VEN Bakken Note is required to be repaid by the Company on or before January 1, 2021, and the remaining unpaid principal amount is required to be repaid by the Company on or before July 1, 2022, in each case together with all accrued but unpaid interest thereon. Interest, at a rate of 6.0% per annum, is due quarterly in arrears on the first day of each calendar quarter, commencing on October 1, 2019. The Unsecured VEN Bakken Note does not include any financial maintenance covenants and is unsecured.
The obligations of the Company under the Unsecured VEN Bakken Note may be accelerated, subject to certain grace and cure periods, upon the occurrence of an event of default. Events of default include customary events, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of certain affirmative or negative covenants, defaults on other indebtedness of the Company, and bankruptcy or insolvency related defaults. The Unsecured VEN Bakken Note contains negative covenants that limit the Company’s ability, among other things, to pay dividends, repurchase equity, incur additional indebtedness, sell assets, terminate or unwind certain derivatives contracts, change the nature of its business or operations and merge or consolidate. In addition, the Unsecured VEN Bakken Note is subject to a mandatory prepayment offer in connection with a change of control.