5. Long Term Debt

12 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

5. Long Term Debt

On December 21, 2012 the Company entered into a $25 million senior secured revolving bank credit facility (the “Credit Facility”) with the Bank of Oklahoma (the “Bank”).  The initial borrowing base on the Credit Facility was $6 million.  The maturity date of the Credit Facility is December 21, 2017 and provides for a borrowing base subject to redetermination semi-annually each June and December and for certain unscheduled redeterminations.  The Credit Facility is secured by mortgages on primarily all of the Company’s properties and an assignment of all the proceeds from severed and extracted hydrocarbons from the properties described in the mortgages.  Until further notice, the Bank has suspended their right to receive the proceeds directly.

Effective September 10, 2013, the Company entered into a Waiver and First Amendment to Credit Agreement (the “Amended Credit Facility”) with the Bank in connection with a semiannual redetermination of the borrowing base.  The redetermination resulted in an increase in the borrowing base from $6 million under the initial Credit Facility to $12 million under the Amended Credit Facility, which amount is subject to redetermination.  The Company’s ability to remain in compliance with the financial covenants may be affected by events and other factors beyond the Company’s control, including market prices for the Company’s oil and gas and the rate at which the operators of projects drill in which the Company participates. Any future inability to comply with these covenants, unless waived by the Bank, could adversely affect the Company’s liquidity by rendering the Company unable to borrow further under the Amended Credit Facility.

The Credit Facility contains negative covenants that limit the Company's ability, among other things, to pay any cash dividends, incur additional indebtedness, sell assets, enter into hedging contracts, change the nature of its business or operations, merge, consolidate or make investments.  In addition, the Company is required to maintain a ratio of debt to EBITDAX (as defined in the credit agreement) of no greater than 4.0 to 1.0 and a current ratio (as defined in the credit agreement) of no less than 1.0 to 1.0.  As of March 31, 2014, the Company was in compliance with all of the financial covenants under the Credit Facility. Should our Exchange Agreement with Oak Valley close we would require the consent of the Bank.

Payments of interest are due quarterly in arrears at prime plus 0.75% to 1.75% or LIBOR plus 1.75% to 2.75%, depending on the Company's level of borrowing and election at the date of borrowing.  Commitment fees on the unused amounts of the Credit Facility are due quarterly at rates from 0.35% to 0.50% on the unused amounts of the Credit Facility.  At closing, the Company paid a borrowing base fee of $30,000, or 0.5%, on the $6 million borrowing base.  An additional borrowing base fee of $30,000, or 5%, on the increase in borrowing base of $6 million under the Amended Credit Facility was paid by the Company during the year ended March 31, 2014.  These costs have been recorded as deferred financing costs and will be amortized over the term of the facility.  Deferred financing fees in the amount of $34,000 related to legal expenses and other costs to originate the Credit Facility and the Amended Credit Facility have been recorded.  These costs will be amortized over the term on the facility.  Amortization of deferred financing fees in the amount of $13,000 was recorded during the year ended March 31, 2014.  Additional borrowing base fees may be payable upon future increases in the borrowing base, if any.  As of March 31, 2014, the Company had an outstanding balance under the Credit Facility of $9 million.