Note 7 – Monetary Production Payment

Our monetary production payment liability, net of repayments, consisted of the following at March 31, 2014 and December 31, 2013:



		March 31,		December 31,
		2014		2013

Monetary production payment	$	161,666	$	166,667

Less: current portion		(120,833)		(74,167)

Long-term monetary production payment	$	40,833	$	92,500

During 2013, we entered into various monetary production payment arrangements (collectively, the “Monetary Production Payments”) covering the proceeds of sale from a portion of EEUK’s entitlement to production from its interests in the certain fields located in the U.K. sector of the North Sea. Pursuant to the Monetary Production Payments, our obligations are repayable only out of production and will cease upon the earlier of the repayment of amounts outstanding or production from the applicable licences permanently ceasing. We issued the Monetary Production Payments in the following manner:

In March through May 2013, a total of $125.0 million, with an effective interest rate of 10.0%, associated with production from our interests in the Alba and Bacchus fields;

In August 2013, $25 million, with an effective interest rate of 8.75%, associated with production from our interests in the Alba and Bacchus fields; and

In December 2013, $25 million, with an effective interest rate of 9.75%, associated with production from our interests in the Rochelle field.

Principal and interest payments are payable within 20 days after the end of each calendar quarter. In January 2014, we made a principal payment of $5.0 million and payments for the next three quarters are expected to be $5.8 million each. In January and April 2015, the principal payments will be $51.7 million each. The final three payments range from $10 million to $18 million, with the final payment to be made in January 2016.

Our obligations under the Monetary Production Payments are secured by first priority liens over our interests in the applicable license and related joint operating agreements and sales proceeds accounts. Our obligations are also secured by second priority liens over certain of our other licenses, joint operating agreements and assets which are pari passu with the liens securing the Term Loan facility and the Combined Procurement Agreement.