Debt

Short-Term Debt:

Short-Term Borrowing - TOTSA Advances

In May 2016, the Company received $4.7 million as an advance under a prepayment agreement with TOTSA Total Oil Trading SA ("TOTSA")(the “May Advance”). Interest accrued on the May Advance at the rate of the 60-day LIBOR plus 5% per annum. Repayment of the May Advance was made from proceeds received from the June crude oil lifting.

In August 2016, the Company received $6.0 million as an advance under a prepayment agreement with TOTSA (the “August Advance”). Interest accrued on the August Advance at the rate of the 60-day LIBOR plus 5% per annum. Repayment of the August Advance was made from proceeds received from the August crude oil lifting.

Short-Term Note Payable

In June 2016, the Company borrowed approximately $0.5 million under a 30-day Promissory Note agreement entered into with a Nigerian bank (the “2016 Short-Term Note”), and had a facility flat fee of 2.5%. The 2016 Short-Term Note was renewed for another 30 days in July 2016 at a flat fee facility rate of 2.5%, and was fully repaid in July 2016.

Long-Term Debt- Term Loan Facility:

In September 2014, the Company, through its wholly owned subsidiary EPNL, entered into the Term Loan Facility (as amended or modified, the “Term Loan Facility”) with Zenith Bank PLC ("Zenith"). 90.0% of the Term Loan Facility was available in U.S. dollars, while the remaining 10% was available in Nigerian Naira. U.S. dollar borrowings under the Term Loan Facility currently bear interest at the rate of 11.1%. The obligations under the Term Loan Facility include a legal charge over the OMLs and an assignment of proceeds from oil sales. The obligations of EPNL have been guaranteed by the Company and rank in priority with all its other obligations. Proceeds from the Term Loan Facility were used for the further expansion and development of the Oyo field offshore Nigeria.

In June 2016, the Term Loan Facility was modified contingent upon the signing of a loan agreement, which was signed in August 2016. The modification put in place a twelve month moratorium on principal payments and extended the term of the Term Loan Facility until February 2021. Additionally, it reduced the funding requirement of the debt service reserve account (“DSRA”) to an amount equal to one quarter of interest until the price of oil exceeds $55 per barrel, at which time an amount equal to two quarters of interest will then be required.

Upon executing the Term Loan Facility, the Company paid fees totaling $2.6 million. Upon modification of the Term Loan Facility, additional fees of $1.4 million were incurred. These fees were recorded as debt issuance cost and are being amortized over the life of the Term Loan Facility using the effective interest method. As of September 30, 2016, $2.5 million of the debt issuance costs remained unamortized.

Under the Term Loan Facility, the following events, among others, constitute events of default: EPNL failing to pay any amounts due within thirty days of the due date; bankruptcy, insolvency, liquidation or dissolution of EPNL; a material breach of the Term Loan Facility by EPNL that remains unremedied within thirty days of written notice by EPNL; or a representation or warranty of EPNL proves to have been incorrect or materially inaccurate when made. Upon any event of default, all outstanding principal and interest under any loans will become immediately due and payable. Further, Zenith has the right to review the terms and conditions of the Term Loan Facility.

During the nine months ended September 30, 2016, the Company made payments of $0.9 million and $5.6 million for the principal repayment of the Naira portion of the loan and for the U.S. dollar principal, respectively.

As of September 30, 2016, the Company recognized an unrealized foreign currency gain of $4.4 million on the Naira portion of the loan, reducing the balance under the Term Loan Facility to $86.2 million, net of debt discount. Of this amount, $78.1 million was classified as long-term and $8.1 million as short-term. Accrued interest for the Term Loan Facility was $0.7 million as of September 30, 2016. Scheduled principal repayments on the outstanding balance on the Term Loan Facility are as follows (in thousands):



Scheduled payments by year	Principal
2016	$	—
2017	13,388
2018	19,636
2019	21,421
2020 and thereafter	34,284
Total principal payments	88,729
Less: Unamortized debt issuance costs	2,513
Total Term Loan Facility, net	$	86,216

Long-Term Debt – Related Party:

As of September 30, 2016, the Company’s long-term related party debt was $129.0 million, consisting of $24.9 million owed under a 2011 Promissory Note, $50.0 million owed under a 2014 Convertible Subordinated Note, $47.7 million, net of discount, owed under a 2015 Convertible Note, and $6.4 million owed under a 2016 Promissory Note.

Allied, a related party, is the holder of each of the 2011 Promissory Note, the 2014 Convertible Subordinated Note, and the 2015 Convertible Note (collectively the "Allied Notes"). Each of the Allied Notes contains certain default and cross-default provisions, including failure to pay interest and principal amounts when due and default under other indebtedness. As of September 30, 2016, the Company was not in compliance with certain default provisions of the Allied Notes with respect to the payment of quarterly interest. Further, the risk of cross-default exists for each of the Allied Notes if the holder of the Term Loan Facility exercises its right to terminate the Term Loan Facility and accelerate its maturity. Allied has agreed to waive its rights under all default provisions of each of the Allied Notes through December 2017.

2011 Promissory Note

The Company has a $25.0 million borrowing facility under a Promissory Note (the “2011 Promissory Note”) with Allied. Interest accrues on the outstanding principal under the 2011 Promissory Note at a rate of the 30-day LIBOR plus 2% per annum, payable quarterly. In November 2016, the 2011 Promissory Note was amended to extend the maturity date to December 31, 2017. The stock of the Company’s subsidiary that holds the exploration licenses in The Gambia and Kenya were pledged as collateral to secure the 2011 Promissory Note, pursuant to an Equitable Share Mortgage arrangement. The entire $25.0 million facility amount can be utilized for general corporate purposes. As of September 30, 2016, the outstanding principal and accrued interest under the 2011 Promissory Note were $24.9 million and $1.4 million, respectively.

2014 Convertible Subordinated Note

As partial consideration in connection with the February 2014 acquisition of the Allied Assets, the Company issued a $50.0 million Convertible Subordinated Note in favor of Allied (the “2014 Convertible Subordinated Note”). Interest on the 2014 Convertible Subordinated Note accrues at a rate per annum of one-month LIBOR plus 5%, payable quarterly in cash until the maturity of the 2014 Convertible Subordinated Note five years from the closing of the Allied Transaction.

At the election of the holder, the 2014 Convertible Subordinated Note is convertible into shares of the Company’s common stock at an initial conversion price of $4.2984 per share, subject to anti-dilution adjustments. The 2014 Convertible Subordinated Note is subordinated to the Company’s existing and future senior indebtedness and is subject to acceleration upon an Event of Default (as defined in the 2014 Convertible Subordinated Note). The following events, among others, constitute an Event of Default under the 2014 Convertible Subordinated Note: the Company failing to pay interest within thirty days of the due date; the Company failing to pay principal when due; bankruptcy, insolvency, liquidation or dissolution of the Company; a material breach of the 2014 Convertible Subordinated Note by the Company that remains unremedied within ten days of such material breach; or a representation or warranty of the Company proves to have been incorrect or materially inaccurate when made. Upon any event of default, all outstanding principal and interest under any loans will become immediately due and payable. As of September 30, 2016, the Company owed $7.2 million in interest under the 2014 Convertible Subordinated Note.

The Company may, at its option, prepay the 2014 Convertible Subordinated Note in whole or in part, at any time, without premium or penalty. Further, the 2014 Convertible Subordinated Note is subject to mandatory prepayment upon (i) the Company’s issuance of capital stock or incurrence of indebtedness, the proceeds of which the Company does not apply to repayment of senior indebtedness or (ii) any capital markets debt issuance to the extent the net proceeds of such issuance exceed $250.0 million. Allied may assign all or any part of its rights and obligations under the 2014 Convertible Subordinated Note to any person upon written notice to the Company. As of September 30, 2016, the outstanding principal under the 2014 Convertible Subordinated Note was $50.0 million.

2015 Convertible Note

In March 2015, the Company entered into a new borrowing facility with Allied in the form of a Convertible Note (the “2015 Convertible Note”), allowing the Company to borrow up to $50.0 million for general corporate purposes. In March 2016, the maturity date of the 2015 Convertible Note was extended to December 2017. Interest accrues at the rate of LIBOR plus 5%, and is payable quarterly.

The 2015 Convertible Note is convertible into shares of the Company’s common stock upon the occurrence and continuation of an event of default, at the sole option of the holder. The number of shares issuable upon conversion is equal to the sum of the principal amount and the accrued and unpaid interest divided by the conversion price, defined as the volume weighted average of the closing sales prices on the NYSE MKT for a share of common stock for the five complete trading days immediately preceding the conversion date.

During the nine months ended September 30, 2016, the Company borrowed an additional $0.5 million under the 2015 Convertible Note and issued to Allied warrants to purchase approximately 48,291 shares of the Company's common stock with an exercise price of ranging from $2.00 to $2.13 per share with a total fair value of approximately $0.1 million.

As of September 30, 2016, the Company had borrowed $48.5 million under the note and issued to Allied warrants to purchase approximately 2.7 million shares of the Company’s common stock at prices ranging from $2.00 to $7.85 per share. The total fair market value of the warrants amounting to $5.0 million based on the Black-Scholes option pricing model was recorded as a debt discount, and is being amortized using the effective interest method over the life of the note. As of September 30, 2016, the unamortized balance of the discount was $0.8 million.

Additional warrants are issuable in connection with future borrowings, with the per share price for those warrants determined based on the market price of the Company’s common stock at the time of such future borrowings. As of September 30, 2016, the outstanding balance of the 2015 Convertible Note, net of discount, was $47.7 million. Accrued interest on the 2015 Convertible Note was $4.1 million as of September 30, 2016.

2016 Promissory Note

In March 2016, the Company borrowed $3.0 million under a short-term Promissory Note agreement entered into with an entity related to the Company's majority shareholder, which accrued interest at a rate of the 30-day LIBOR plus 7% per annum.

In April 2016, the Company borrowed an additional sum of $1.0 million from the same lender, under another short-term Promissory Note, which also accrued interest at a rate of the 30-day LIBOR plus 7% per annum.

In May 2016, the Lender of the two Promissory Notes agreed to combine both notes into a $10.0 million borrowing facility (the "2016 Promissory Note"). Interest accrues at a rate of the 30-day LIBOR plus 7% per annum.

During May and June 2016, the Company had additional drawings under the 2016 Promissory Note totaling $1.7 million.

During July and August 2016, the Company had additional drawings under the 2016 Promissory Note totaling $0.7 million.

As of September 30, 2016, the outstanding balance under the 2016 Promissory Note was $6.4 million. Accrued interest on the 2016 Promissory Note was $0.2 million as of September 30, 2016. In November 2016, the maturity date of the 2016 Promissory Note was extended to December 2017.