Long-Term Debt

9 Months Ended

Sep. 30, 2011

Long-term Debt, Unclassified [Abstract]

Long-term Debt [Text Block]

LONG-TERM DEBT

The table below presents the carrying amounts and approximate fair values of our debt obligations. The carrying amounts of our revolving bank credit facility borrowings approximate their fair values due to the short-term nature and frequent repricing of these obligations. The approximate fair values of our convertible debt securities are determined based on market quotes from independent third party brokers as they are actively traded in an established market.

	September 30, 2011				December 31, 2010
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(in thousands)
Revolving bank credit facility(1)	$	30,350	$	30,350	$	92,000	$	92,000
5.00% Convertible Senior Notes due February 2013	70,298		59,655		116,365		105,258
4.50% Convertible Senior Notes due May 2015	76,883		52,613		75,238		63,825
11.375% Senior Notes due February 2019	193,982		148,000		—		—
Joint venture financing(2)	1,306		1,306		1,366		1,366
Total	$	372,819	$	291,924	$	284,969	$	262,449

 __________________

(1) Maturity date of January 1, 2013 and collateralized by all assets of the Company.

(2) Non-recourse, no interest rate.

Revolving Bank Credit Facility

On February 2, 2011, the Company entered into a Fifth Amended and Restated Loan Agreement among the Company, as borrower, Capital One, National Association, as administrative agent, arranger and bookrunner, BNP Paribas, as syndication agent, and the lenders named therein (the “Restated Loan Agreement” or “revolving bank credit facility”). The Restated Loan Agreement became effective after specified conditions had been satisfied, as amended on February 3, 2011, including (i) the completion of an equity offering of at least $75.0 million of common stock and an offering of senior unsecured notes in a principal amount of at least $175.0 million, on terms specified, in each case on or before February 28, 2011, (ii) the deposit of at least $50.0 million of the proceeds from the common stock and senior unsecured notes offerings in a restricted account with the agent on or before the closing date, for use solely for the purpose of retiring a portion of the Company’s 5.00% convertible notes, such that the principal of such notes will be no more than $75.0 million within 45 days after the effective date of the Restated Loan Agreement (with such restricted account and remaining funds continuing as collateral under the Restated Loan Agreement if such debt is not retired to such outstanding balance at such time), and (iii) no advances, unpaid fees or other borrowings are outstanding under the prior loan agreement, excluding letters of credit that will be transferred to be outstanding under the Restated Loan Agreement.

The Restated Loan Agreement will mature on January 1, 2013; provided, that if our 5.00% convertible notes have been repurchased and no longer remain outstanding, the maturity date will be extended automatically to December 31, 2013, assuming we are in compliance with all covenants under the amended revolving bank credit facility.

The Restated Loan Agreement provides for a line of credit of up to $100.0 million (the “commitment”), subject to a borrowing base (“borrowing base”). The initial borrowing base availability under the Restated Loan Agreement is $60.0 million. The amount of loans available at any one time under the Restated Loan Agreement is the lesser of the borrowing base or the amount of the commitment. The borrowing base will be subject to semi-annual redeterminations (approximately April 1 and October 1) during the term of the loan, commencing October 1, 2011, and is based on evaluations of our oil and gas reserves. The Restated Loan Agreement includes a letter of credit sublimit of up to $10.0 million. See Note I, Subsequent Events, for information on the redetermination of our borrowing base.

On March 14, 2011, the Company entered into an amendment to Restated Loan Agreement, dated effective as of March 31, 2011, which amended certain provisions of the Restated Loan Agreement to (i) extend the period during which GMXR may issue additional shares of its 9.25% Series B Cumulative Preferred Stock under its at-the-market offering program; (ii) increase the maximum aggregate liquidation preference of such issuances to up to $62.0 million; and (iii) permit the Company to use the cash proceeds from such issuances for general corporate and working capital purposes.

As a result of the Restated Loan Agreement and a decrease in the commitment, we recorded a loss on the extinguishment of debt of $1.9 million, which relates to the write-off of the original debt transaction costs in proportion to the decrease in commitment in the Restated Loan Agreement.

The loans under our Restated Loan Agreement bear interest, at the Company's election, at a base rate which is based on the prime rate, LIBOR or federal funds rate plus margins ranging from 1% to 4% depending on the base rate used and the amount of loans outstanding in relation to the borrowing base. We may voluntarily prepay the loans without premium or penalty. If and to the extent the loans outstanding exceed the most recently determined borrowing base, the loan excess will be mandatorily pre-payable immediately after notice. Otherwise, any unpaid principal or interest will be due and payable at maturity. The Company is obligated to pay a facility fee equal to 0.5% per annum of the unused portion of the borrowing base, payable quarterly in arrears beginning March 31, 2011.

Loans under the Restated Loan Agreement are secured by a first priority mortgage on substantially all of our oil and natural gas properties, a pledge on the Company’s ownership of equity interests in its subsidiaries, a guaranty from Endeavor Pipeline, Inc. and any future subsidiaries of the Company and a security interest in certain of our and the guarantors’ assets.

Our revolving bank credit facility contains various affirmative and restrictive covenants. These covenants, among other things, prohibit additional indebtedness, sales of assets, mergers and consolidations, dividends and distributions, and changes in management and require the maintenance of various financial ratios. On August 2, 2011, we entered into an amendment to our revolving bank credit facility to amend the EBITDA to interest expense ratio as defined in the credit agreement to be greater than or equal to 2.00 to 1.00 for the period between July 1, 2011 and December 31, 2011. Beginning January 1, 2012, the required EBITDA to interest expense ratio will return to be greater than or equal to 2.50 to 1.00. During any period between July 1, 2011 and December 31, 2011 in which the Company's EBITDA to interest expense ratio is below 2.50 to 1.00, the applicable LIBO rate margin and applicable prime rate margin will increase by 1.50%. This amendment also increases the unused facility fee by 0.5% to 1.0% per annum when the Company's EBITDA to interest expense ratio is less than 2.50 to 1.00 (or as otherwise provided in the credit facility). The Company paid a fee equal to 1% of the borrowing base in connection with this amendment.

The required and actual financial ratios as of September 30, 2011 are shown below:

Financial Covenant	Required Ratio	Actual Ratio
Current ratio(1)	Not less than 1 to 1	1.33 to 1
Ratio of total senior secured debt to EBITDA(2)	Not greater than 2.50 to 1	0.45 to 1
Ratio of EBITDA (as defined in the revolving bank credit facility agreement) to cash interest expense, including preferred dividends payable under our Series B cumulative preferred stock(3)	Not less than 2.00 to 1	2.36 to 1

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(1) Current ratio is defined in our revolving bank credit facility as the ratio of current assets plus the unused and available portion of the revolving bank credit facility ($29.7 million as of September 30, 2011) to current liabilities. The calculation will not include the effects, if any, of derivatives under FASB Accounting Standards Codification ("ASC") 815, "Derivatives and Hedging." As of September 30, 2011, current assets included derivative assets of $21.6 million. In addition, the 5.00% convertible senior notes due 2013 (the “5.00% convertible notes”) and the 4.50% convertible senior notes due 2015 (the “4.50% convertible notes”) are not considered a current liability unless one or more of such convertible notes have been surrendered for conversion and then only to the extent of the cash payment due on the conversion of the notes surrendered. As of September 30, 2011, none of the 5.00% convertible notes and the 4.50% convertible notes had been surrendered for conversion.

(2) EBITDA is a non-GAAP number that is defined in our revolving bank credit facility and is calculated and reconciled as follows from the GAAP amount of net loss for the twelve months ended September 30, 2011 (amounts in thousands):

Net loss	$	(276,416	)
Plus:
Interest expense	28,499
Impairment of oil and natural gas properties	271,444
Depreciation, depletion and amortization	53,439
Non-cash compensation and other expenses	(2,435		)
Income tax provision	2,596
Less:
Gain on extinguishment of debt	35
EBITDA	$	77,162

(3) Cash interest expense is defined in the revolving bank credit facility as all interest, fees, charges, and related expenses payable in cash for the applicable period payable to a lender in connection with borrowed money or the deferred purchase price of assets that is considered interest expense under GAAP, plus the portion of rent paid or payable for that period under capital lease obligations that should be treated as interest. For the twelve months ended September 30, 2011, cash interest expense included fees paid related to bank financing activities and other loan fees of $1.4 million. As of September 30, 2011, non-cash interest expense of $8.0 million was deducted from interest expense to arrive at the cash interest expense used in the debt covenant calculation. Non-cash interest expense primarily relates to the amortization of debt issuance costs and convertible debt discount. Capitalized interest of $5.5 million was added to interest expense.

As of September 30, 2011, the Company was in compliance with all financial covenants under the revolving bank credit facility.

5.00% Convertible Senior Notes

As of September 30, 2011 and December 31, 2010, the net carrying amount of the 5.00% convertible notes was as follows (amounts in thousands):

	September 30, 2011			December 31, 2010
Principal amount	$	72,750		$	122,750
Less: Unamortized debt discount	(2,452		)	(6,385		)
Carrying amount	$	70,298		$	116,365

The 5.00% convertible notes bear interest at a rate of 5.00% per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning August 1, 2008. As a result of the amortization of the debt discount through non-cash interest expense, the effective interest rate on the 5.00% convertible notes is 8.7% per annum. The amount of the cash interest expense recognized with respect to the 5.00% contractual interest coupon for the three and nine months ended September 30, 2011 was $0.9 million and $3.2 million, respectively, and $1.6 million and $4.7 million for the three and nine months ended September 30, 2010, respectively. The amount of non-cash interest expense related to the amortization of the debt discount and amortization of the transaction costs for the three and nine months ended September 30, 2011 was $0.6 million and $2.0 million, respectively, and $0.9 million and $2.7 million for the three and nine months ended September 30, 2010, respectively.

As of September 30, 2011, the unamortized discount is expected to be amortized into earnings over 1.3 years. The carrying value of the equity component of the 5.00% convertible notes was $3.9 million as of September 30, 2011.

On January 28, 2011, the Company announced the commencement of a tender offer for up to $50 million aggregate principal amount of the outstanding 5.00% convertible notes. The tender offer expired March 11, 2011 and the Company retired $50 million aggregate principal amount of the 5.00% convertible notes. This transaction was accounted for under ASC 470-20-40. Under this guidance, the consideration transferred was allocated to the extinguishment of the liability and reacquisition of the original equity component resulting in a gain on extinguishment of debt of $2.1 million and a charge to additional-paid-in-capital of $5.2 million. The gain on the extinguishment of debt in this transaction was offset by the loss on the extinguishment of our revolving bank credit facility noted above plus transactions costs incurred to extinguish the debt, which resulted in a total loss on extinguishment of debt of $0.2 million, presented in our consolidated statements of operations. As of December 31, 2010, unamortized debt issue costs were approximately $9.1 million, with $4.8 million included in other assets and $4.3 million included in current prepaid expenses and deposits. As of September 30, 2011, unamortized costs were $12.1 million, with all costs classified within other assets.

4.50% Convertible Senior Notes

As of September 30, 2011 and December 31, 2010, the net carrying amount of the 4.50% convertible notes was as follows (amounts in thousands):

	September 30, 2011			December 31, 2010
Principal amount	$	86,250		$	86,250
Less: Unamortized debt discount	(9,367		)	(11,012		)
Carrying amount	$	76,883		$	75,238

The 4.50% convertible notes bear interest at a rate of 4.50% per year, payable semiannually in arrears on November 1 and May 1 of each year, beginning May 1, 2010. As a result of the amortization of the debt discount through non-cash interest expense, the effective interest rate on the 4.50% convertible notes is 9.09% per annum. The amount of the cash interest expense recognized with respect to the 4.50% contractual interest coupon for the three and nine months ended September 30, 2011 was $1.0 million and $3.0 million, respectively, and $1.1 million and $3.0 million for the three and nine months ended September 30, 2010, respectively. The amount of non-cash interest expense related to the amortization of the debt discount and transaction costs for the three and nine months ended September 30, 2011 was $0.7 million and $2.0 million, respectively, and $0.6 million and $1.9 million for the three and nine months ended September 30, 2010, respectively. As of September 30, 2011, the unamortized discount is expected to be amortized into earnings over 3.6 years. The carrying value of the equity component of the 4.50% convertible notes was $8.4 million as of September 30, 2011.

11.375% Senior Notes

On February 9, 2011, the Company successfully completed the issuance and sale of $200 million aggregate principal amount of 11.375% Senior Notes due 2019 (the “11.375% senior notes”). The 11.375% senior notes are jointly and severally, and unconditionally, guaranteed (the “guarantees”) on a senior unsecured basis initially by two of our wholly-owned subsidiaries, and all of our future subsidiaries other than immaterial subsidiaries (such guarantors, the “Guarantors”). The 11.375% senior notes and the guarantees were issued pursuant to an indenture dated as of February 9, 2011 (the “Indenture”), by and among the Company, the Guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., a national banking association, as trustee (the “Trustee”). As of September 30, 2011, the net carrying amount of the 11.375% senior notes was as follows (amounts in thousands):

	September 30, 2011
Principal amount	$	200,000
Less: Unamortized debt discount	(6,018		)
Carrying amount	$	193,982

The 11.375% senior notes bear interest at a rate of 11.375% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning August 15, 2011. As a result of the amortization of the debt discount through non-cash interest expense, the effective interest rate on the 11.375% senior notes is 12.00% per annum. The amount of the cash interest expense recognized with respect to the 11.375% contractual interest coupon for the three and nine months ended September 30, 2011 was $5.7 million and $14.7 million, respectively. The amount of non-cash interest expense for the three and nine months ended September 30, 2011 related to the amortization of the debt discount and transaction costs was $0.3 million and $0.9 million, respectively. As of September 30, 2011, the unamortized discount is expected to be amortized into earnings over 7.4 years.

The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of its subsidiaries to:

• incur additional indebtedness;

• issue preferred stock;

• pay dividends or repurchase or redeem capital stock;

• make certain investments;

• incur liens;

• enter into certain types of transactions with its affiliates;

• limit dividends or other payments by the Company’s restricted subsidiaries to the Company; and

• sell assets, or consolidate or merge with or into other companies.

These limitations are subject to a number of important exceptions and qualifications.

Upon an Event of Default (as defined in the Indenture), the Trustee or the holders of at least 25% in aggregate principal amount of the 11.375% senior notes then outstanding may declare the entire principal of all the notes to be due and payable immediately.

At any time on or prior to February 15, 2014, the Company may, at our option, redeem up to 35% of the 11.375% senior notes, including additional notes, with the proceeds of certain public offerings of our common stock at a price of 11.375% of their principal amount plus accrued interest, provided that: (i) at least 65% of the aggregate principal amount of the notes originally issued remains outstanding after the redemption; and (ii) the redemption occurs within 90 days after the closing of the related public offering.

At any time on or prior to February 15, 2015, the Company may, at its option, redeem the 11.375% senior notes at a redemption price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium.

On or after February 15, 2015, the Company may, at its option, redeem some or all of the 11.375% senior notes at any time at the redemption prices set forth below, plus accrued and unpaid interest, if any, to the redemption date:

Year	Percentage
2015	108.531	%
2016	105.688	%
2017	102.844	%
2018 and thereafter	100.000	%

If the Company experiences certain kinds of changes of control, holders of the 11.375% Senior Notes will be entitled to require us to purchase all or a portion of the 11.375% senior notes at 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase.

The purchase price for the 11.375% senior notes and guarantees was 96.833% of their principal amount. The net proceeds from the issuance of the 11.375% senior notes were approximately $187.2 million after discounts and underwriters’ fees.