8. LONG-TERM DEBT AND NOTES PAYABLE TO FOUNDER

Long-term debt consists of the following:


	September 30,		December 31,
	2011		2010
	(unaudited)
	(dollars in thousands)
Senior Debt — On November 13, 2008, we entered into a Fifth Amended and Restated Credit Agreement with a group of banks, which was replaced by the Sixth Amended and Restated Credit Agreement on May 13, 2010, as amended (“credit facility”). The credit facility matures on May 23, 2016 and is secured by substantially all of our oil and gas properties. The credit facility borrowing base is redetermined periodically and, as of September 30, 2011, the borrowing base under the facility was $260 million. As of November 7, 2011, the borrowing base was increased to $325 million. The credit facility bears interest at LIBOR plus applicable margins between 2.00% and 2.75% or a “Reference Rate,” which is based on the prime rate of Wells Fargo Bank, N. A., plus a margin ranging from 1.00% to 1.75%, depending on the utilization of our borrowing base. The rate was 2.615% as of September 30, 2011 and 2.875% as of December 31, 2010.	$	173,790	$	73,290
Senior Notes Payable — On October 13, 2010, we issued notes due October 15, 2018 with a face value of $300 million, at a discount of $2.1 million. The senior notes carry a face interest rate of 9 5/8%, with an effective rate of 9 3/4%; interest is payable semi-annually each April 15th and October 15th. The senior notes are secured by general corporate credit, and effectively rank junior to any of our existing or future secured indebtedness, which includes the credit facility. The senior notes are unconditionally guaranteed on a senior unsecured basis by each of our material subsidiaries. The balance is presented net of unamortized discount of $1.8 million and $2.0 million at September 30, 2011 and December 31, 2010, respectively.		298,181		297,986

Total long-term debt	$	471,971	$	371,276

The senior notes contain an optional redemption provision beginning in October 2013 allowing us to retire up to 35% of the principal outstanding under the senior notes with the proceeds of an equity offering, at 109.625%. Additional optional redemption provisions allow for retirement at 104.813%, 102.406%, and 100.0% beginning on each of October 15, 2014, 2015, and 2016, respectively.

On October 13, 2010, we entered into a registration rights agreement with the initial purchasers of the senior notes. Pursuant to the registration rights agreement, we filed a registration statement with the SEC to allow for registration of “exchange notes” with terms substantially identical to the senior notes. The exchange offer was consummated on August 12, 2011, with the tendered original senior notes exchanged for the exchange notes.

The credit facility and senior notes include covenants requiring us to maintain certain financial covenants including a current ratio, leverage ratio, and interest coverage ratio. At September 30, 2011, we were in compliance with the covenants. The terms of the credit facility also restrict our ability to make distributions and investments.

In addition, we have notes payable to our founder which bear simple interest at 10% with a balance of $20.6 million and $19.7 million at September 30, 2011 and December 31, 2010, respectively. The notes mature December 31, 2018. Interest and principal are payable at maturity. The notes are subordinate to all debt. Interest on the notes payable to our founder amounted to $897,000 and $890,000 for the nine months ended September 30, 2011 and 2010, respectively, and $297,000 and $300,000 for the three months ended September 30, 2011 and 2010, respectively. Such amounts have been added to the balance of the notes.