Credit Facility

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Credit Facility

NOTE 6 - CREDIT FACILITY

The Partnership maintains a senior secured revolving credit agreement, as amended (the “Credit Facility”). The Credit Facility has an aggregate maximum credit amount of $1.0 billion and terminates on November 1, 2022. The commitment of the lenders equals the lesser of the aggregate maximum credit amount and the borrowing base. The amount of the borrowing base is redetermined semi-annually, usually in October and April, and is derived from the value of the Partnership’s oil and natural gas properties as determined by the lender syndicate using pricing assumptions that often differ from the current market for future prices. The Partnership and the lenders (at the direction of two-thirds of the lenders) each have discretion to request a borrowing base redetermination one time between scheduled redeterminations. Effective October 23, 2019 the borrowing base redetermination reduced the borrowing base from $675.0 million to $650.0 million and, effective May 1, 2020, the borrowing base was further reduced to $460.0 million.

Outstanding borrowings under the Credit Facility bear interest at a floating rate elected by the Partnership equal to an alternative base rate (which is equal to the greatest of the Prime Rate, the Federal Funds effective rate plus 0.50%, or 1-month LIBOR plus 1.00%) or LIBOR, in each case, plus the applicable margin. The applicable margin for the alternative base rate ranges from 0.75% to 1.75% and the applicable margin for LIBOR ranges from 1.75% to 2.75%, depending on the borrowings outstanding in relation to the borrowing base.

The weighted-average interest rate of the Credit Facility was 3.22% and 4.05% as of March 31, 2020 and December 31, 2019, respectively. Accrued interest is payable at the end of each calendar quarter or at the end of each interest period, unless the interest period is longer than 90 days, in which case interest is payable at the end of every 90-day period. In addition, a commitment fee is payable at the end of each calendar quarter based on either a rate of 0.375% if the borrowing base utilization percentage is less than 50%, or 0.500% if the borrowing base utilization percentage is equal to or greater than 50%. The Credit Facility is secured by substantially all of the Partnership’s oil and natural gas production and assets.

The Credit Facility contains various limitations on future borrowings, leases, hedging, and sales of assets. Additionally, the Credit Facility requires the Partnership to maintain a current ratio of not less than 1.0:1.0 and a ratio of total debt to EBITDAX (Earnings before Interest, Taxes, Depreciation, Amortization, and Exploration) of not more than 3.5:1.0. As of March 31, 2020, the Partnership was in compliance with all financial covenants in the Credit Facility.

The aggregate principal balance outstanding was $388.0 million and $394.0 million at March 31, 2020 and December 31, 2019, respectively. The unused portion of the available borrowings under the Credit Facility were $262.0 million and $256.0 million at March 31, 2020 and December 31, 2019, respectively.