Debt

6 Months Ended

Jun. 30, 2020

As of the dates indicated, long-term debt and financing leases consisted of the following:


	June 30, 2020		December 31, 2019
8.75% Senior Notes due 2023	$	300,000	$	300,000
Credit facility	225,000		130,000
Installment note payable	—		371
Financing lease obligations	1,442		1,653
Unamortized debt issuance costs	(4,154)		(10,038)
Total debt, net	522,288		421,986
Less current portion	521,292		594
Total long-term debt, net	$	996	$	421,392

Chapter 11 Cases and Effect of Automatic Stay. On August 16, 2020, 2020, the Debtors filed for relief under the Bankruptcy Code. The commencement, through the Chapter 11 Cases, of a voluntary proceeding in bankruptcy constituted an immediate event of default under the Credit Agreement and the Indenture, resulting in immediate acceleration of outstanding amounts under these financing arrangements. Any efforts to enforce payment obligations related to the Company’s debt, including the acceleration thereof, have been automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. As a result of the acceleration, we have classified the amounts outstanding under the Credit Agreement and Senior Notes as current liabilities on our condensed consolidated balance sheet as of June 30, 2020. For more information on the Chapter 11 Cases and related matters, refer to the “Note 1: Nature of operations and summary of significant accounting policies” and “Note 11: Subsequent events.”

Credit Agreement

Pursuant to our Credit Agreement with Royal Bank of Canada, as administrative agent and issuing bank, and the additional lenders party thereto, we have a $750,000 credit facility that is collateralized by our oil and natural gas properties and is scheduled to mature on December 21, 2022. Availability under our credit facility is subject to the financial covenants discussed below and a borrowing base based on the value of our oil and natural gas properties and set by the banks semi-annually on or around May 1 and November 1 of each year. Our borrowing base under the credit facility as of June 30, 2020, was $175,000 with no availability (see discussion of Borrowing Base Deficiency below).

As of June 30, 2020, our outstanding borrowings were accruing interest at the Adjusted LIBO Rate (as defined in the Credit Agreement, as defined below), plus the Applicable Margin (as defined in the Credit Agreement), which resulted in a weighted average interest rate of 3.19%.

The Credit Agreement contains financial covenants that require, for each fiscal quarter, us to maintain: (1) a Current Ratio (as defined in the Credit Agreement) of no less than 1.0 to 1.0, and (2) a Ratio of Total Debt to EBITDAX (as defined in the Credit Agreement) of no greater than 4.0 to 1.0 calculated on a trailing four-quarter basis.

The Credit Agreement contains covenants and events of default customary for oil and natural gas reserve-based lending facilities. Our Credit Agreement and Senior Notes include cross default provisions wherein a default on one instrument may cause default on the other. Please see “Note 8: Debt” in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of the material provisions of our Credit Agreement.

On April 1, 2020, we borrowed $15,000, and on April 2, 2020, we provided notice to our lenders to borrow an additional $90,000 (the latter herein referred to as the “Borrowing”) which increased the total amount outstanding under the Credit Agreement to $250,000. The Borrowing was made by the Company as a precautionary measure in order to increase its cash position and thereby provide for flexibility in the current challenging business environment and associated uncertainties. Subsequent to the Borrowing, we were notified that our lenders had exercised their right to make an interim redetermination of the Company’s borrowing base. The lenders’ redetermination notice stated that the Company’s borrowing base was decreased from $325,000 to $175,000, effective April 3, 2020. Our lenders subsequently reaffirmed the borrowing base at the same level on May 5, 2020, in conjunction with our scheduled semi-annual redetermination process. As a result of the April 3, 2020 borrowing base redetermination, the Borrowing, once funded, created a borrowing base deficiency in the amount of $75,000 under the Credit Agreement (the “Borrowing Base Deficiency”). In accordance with the Credit Agreement the Company is allowed to eliminate such Borrowing Base Deficiency by repaying the amount of the Borrowing

Base Deficiency in six equal monthly installments. During the second quarter, we made two such payments totaling $25,000 plus interest between May 1 to June 1, 2020. A third payment of $12,500 was made in early July 2020. No premium or penalty was charged with respect to those repayments. We did not make the fourth installment payment of $12,500 that was due on August 3, 2020 (the “August Deficiency Payment”), which subsequently resulted in an event of default under the Credit Agreement and under the Indenture, as discussed further below.

On July 15, 2020, the Company entered into a Limited Forbearance Agreement with the lenders under its Credit Agreement (the “Lenders”). The Limited Forbearance Agreement included, among other things, a requirement that the Company terminate all of its outstanding commodity hedges and to apply a certain portion of the proceeds thereof toward partial repayment of the outstanding amount under the Credit Agreement. The Limited Forbearance Agreement was amended effective as of July 24, 2020, by the First Amendment to Limited Forbearance Agreement (the “First Amendment”) and was further amended effective July 29, 2020 by a Second Amendment (the “Second Amendment” and, as amended, such Limited Forbearance Agreement, the “Lender Forbearance Agreement”).

The forbearance period under the Lender Forbearance Agreement began on July 15, 2020 and was scheduled to expire on July 29, 2020, unless terminated earlier in accordance with the terms thereof. The Second Amendment extended the scheduled termination date to August 9, 2020, unless terminated earlier in accordance with the terms of the Forbearance Agreement. However, the Second Amendment permitted an extension of the scheduled termination date by mutual agreement of the Administrative Agent and the Company to any date up to and including August 14, 2020. The Administrative Agent and the Company agreed to extend the termination date to August 14, 2020. Subsequently, on August 14, 2020, the Lender Forbearance Agreement was further amended by a Third Amendment (the “Third Amendment” and, as amended, such Lender Forbearance Agreement, the “Final Lender Forbearance Agreement”), which, among other things, extended the scheduled termination date to August 17, 2020, unless terminated earlier in accordance with the terms of the Final Lender Forbearance Agreement.

Pursuant to the Final Lender Forbearance Agreement, the Lenders agreed, during the forbearance period, to forbear from exercising any remedies under the Credit Agreement for any default or event of default resulting from any failure by the Company or any of its subsidiaries to make all or any part of the required interest payment due on July 15, 2020 with respect to the Company’s Senior Notes (including the failure to make such payment during the 30-day grace period therefor), as discussed further below. Even though the indenture for the Senior Notes provides for a 30-day grace period before an event of default occurs under the indenture, the failure to make the interest payment on the due date constituted an event of default under the cross-default provisions of the Credit Agreement. The Company did not make the required interest payment of $13,125 on the due date or within the 30-day grace period. The Final Lender Forbearance Agreement also includes forbearance for the Company’s failure to timely pay the August Deficiency Payment under the Credit Agreement and the failure to timely deliver the quarterly financial statements for the period ended June 30, 2020 and the required accompanying officer’s certificate.

Pursuant to the Limited Forbearance Agreement with the lenders under our Credit Agreement, we terminated all our outstanding derivatives contracts on July 27, 2020 and applied a certain portion of the proceeds thereof toward partial repayment of the outstanding amount under the Credit Agreement, which we discuss in “Note 11: Subsequent events.”

Senior Notes

On June 29, 2018, we completed the issuance and sale at par of $300,000 in aggregate principal amount of our Senior Notes in a private placement under Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Senior Notes bear interest at a rate of 8.75% per year beginning June 29, 2018 (payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2019) and will mature on July 15, 2023.

The Senior Notes are the Company’s senior unsecured obligations and rank equal in right of payment with all of the Company’s existing and future senior indebtedness, senior to all of the Company’s existing and future subordinated indebtedness and effectively subordinated to all of the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

The Indenture contains customary covenants, certain mandatory redemption provisions and events of default. Please see “Note 8: Debt” in “Item 8. Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2019, for a discussion of the material provisions of our Senior Notes.

On July 15, 2020, the Company elected not to make the $13,125 interest payment on the Senior Notes due on that day. Under the Indenture, the Company has a 30-day grace period to make the interest payment before that non-payment constitutes an event of default. The 30-day grace period expires on August 14, 2020. However, as discussed above, the failure to make that interest payment on the Senior Notes constituted an event of default under cross-default provisions of the Credit Agreement.

Effective as of July 30, 2020, the Company and the holders of at least 75% of the principal amount of outstanding Senior Notes (the “Initial Consenting Noteholders”) entered into a Forbearance and Waiver Agreement (the “Noteholder Forbearance Agreement”). Pursuant to the Noteholder Forbearance Agreement, the Initial Consenting Noteholders agreed, during the forbearance period, to forbear from exercising certain remedies under the Indenture (including acceleration) for any default or event of default resulting from any failure by the Company to pay the August Deficiency Payment under the Credit Agreement on or before August 3, 2020. In addition, under the Noteholder Forbearance Agreement, subject to the occurrence of such an event of default, the Initial Consenting Noteholders have waived any such event of default and the consequences thereof under the Indenture. The forbearance period under the Noteholder Forbearance Agreement began on July 30, 2020 and was scheduled to expire on August 14, 2020. On August 14, 2020, the Company and the Initial Consenting Noteholders amended and restated the Noteholder Forbearance Agreement (such amendment and restatement, the “Amended and Restated Noteholder Forbearance Agreement”). Pursuant to the Amended and Restated Noteholder Forbearance Agreement, the Initial Consenting Noteholders agreed to extend the forbearance period to August 17, 2020 and to additionally forbear from exercising certain remedies under the Indenture (including acceleration) for any default or event of default resulting from any failure by the Company to make the required interest payment of $13,125 within the 30-day grace period described above.

Please see “Note 11: Subsequent events” for a discussion of the restructuring support agreement and the related proposed plan of reorganization.

As discussed above, our filing of the Chapter 11 Cases triggered an event of default on our Senior Notes. The event of default effectively allows the lender to demand immediate repayment, thus shortening the life of our Senior Notes to the current period. As a result, we wrote off the remaining balance of unamortized issuance costs in the amount of $4,420.